Citigroup shakes up compliance and risk

Citigroup is shaking up its organisational structure, as the retirement of a top executive allows it to scrap a two-year experiment in combining oversight of risk, audit and compliance.

The third-biggest US bank by assets said that Brian Leach, 56, would retire as head of strategy and risk, a role he had held since January 2013, when the former head of risk assumed responsibility for audit and compliance, in addition to corporate policy and strategy.

That souped-up role was a new one created by Mike Corbat, then newly arrived as chief executive officer, who said the move - made as part of a broad reshuffle of senior managers - was aimed at "achieving operational excellence and delivering results to our clients and stakeholders."

Yet after Mr Leach's retirement at the end of this month, the heads of the risk, audit and compliance functions, who used to report to Mr Leach, will report directly to Mr Corbat, meaning that the role will no longer exist.

The shake-up should be welcomed from a governance point of view, said Mike Mayo, an analyst at CLSA, as it should sharpen Mr Corbat's focus on risk. Last year was something of an annus horribilis for Citi, during which it failed the Federal Reserve's stress test, paid billions of dollars in fines and revealed fraud in a Mexican subsidiary.

"If you have three direct reports instead of one, by definition that means you are more involved," Mr Mayo said. "I'd rather a CEO get his hands dirty than not."

Mr Leach was known as an effective operator, able to speak fluently in public on risk and regulatory matters. Yet his spell at the top of Citi was marred by rejections of Citi's capital distribution plans by the Fed, which has become America's most powerful banking regulator in the aftermath of the crisis.

In 2012 Citi had its plan to raise dividends rejected, after the watchdog found that the bank's capital would drop below minimum levels in the event of a severe economic shock. In 2014 Citi flunked the stress test again, with the Fed flagging concerns over the "overall reliability" of its capital planning processes.

This year Citi passed the test, known as the Comprehensive Capital Analysis and Review (CCAR), allowing it raise its dividend for the first time since 2008.

"When I was named chief risk officer there were many questions about the future of our franchise that ultimately led us to a painful recapitalisation," Mr Leach wrote in an internal memo to his department on Thursday.

"Where we are today is exemplified by receiving no objection to our CCAR submission and the ability to begin to return capital to our shareholders."

Mr Leach, a Harvard MBA who joined Citi as chief risk officer from Old Lane, a hedge fund, in March 2008, said he had "no current plans" for what to do next.

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