Case Study: Sayonara citibank

*Picture taken from google images

Summary by Shaymaa Al Kharusi, Said Khalil, Neha Dutt, Sarah Rahman

Case study

Japan’s regulators ordered Citigroup to close its private banking offices in Japan because financial service agency “FSA” accused the private bank of selling securities and derivatives at unfair prices to its clients and Citibank ignored warnings to teach it’s salespeople better practices and for letting a client open an account that could be suspected of being associated with money laundering and for lending money to clients who used the proceeds to manipulate share markets. Finally, the bank had built a law evading sales system that ignores the law and regulations of Japan

Identifying the issues

• —  Selling securities and derivatives at unfair prices to its clients
• —  Citibank ignored to train their salespeople
• —  Opening accounts to clients who would be money laundering
• —  Giving loans to clients who used the proceeds to manipulate share markets

How Citigroup handle the issue

• —  Douglas Peterson, person in charge of Citigroup Japan, had to fix the bank’s practices and reputation
• —  They didn’t try to play the charges down
• —  The chief executive “Charles O Prince III” released/issued a memo to his employees highlighting the serious consequences of neglecting to comply with regulatory requirements and of violating their business standards (the bank standards).

The Consequences after the scandal:

• —  After financial service agency “FSA” statement, Citigroup could struggle in growing private banking markets in other Asian countries such as China and India
• —  Japanese clients would run away in response to Citigroup’s bad reputation
• —  The bank might attract scrutiny from regulators outside Japan, pressure from NY Head office

What happened to the bank after the crisis?

• —  The bank shares has been reduced to neutral from a buy, with a charge that “aggressive profit rewards are dominating judgment” and this aggressive charge created a “monster” beyond the control of the management.
• —  They had to create a culture with shared set values that guides employees behavior
• —  Analyst said they need a more aggressive approach and sending a memo wont fix anything
• —  There was a financial threat to the banks goals
• —  Mason said that Citi cant achieve their goals because they cant safeguard themselves from regulatory and reputation risk