Citigroup challenged over 'opaque' lobbying at fiery meeting

Investors challenged Citigroup executives at the bank's annual shareholder meeting on Tuesday, expressing concerns over "opaque" lobbying efforts, which contributed last year to a watering down of post-crisis regulatory reforms.

The big US banks in December campaigned to change new rules on derivatives by adding a rider to a government funding bill. The amendment helped banks including Citi to exploit differences in credit ratings within their subsidiaries to reduce their capital requirements, and the amount of collateral needed to support derivatives trading. Derivatives were blamed by some on Capitol Hill for exacerbating the financial crisis, which led to tens of billions of dollars in taxpayer bailouts.

At an occasionally fiery meeting in New York's East Village, shareholders asked Citi to provide a detailed annual report on its lobbying activities, both direct and indirect. Citi discloses its spending on direct federal lobbying - $5.4m in 2014 - but does not reveal its memberships in, or payments to, trade associations, or the portions of such amounts used for lobbying.

The proposal was rejected, but almost 29 per cent of the votes were cast in favour.

ISS and Glass Lewis, two influential proxy advisory firms, had recommended that shareholders back the proposal, which was put by CtW Investment Group and opposed by Citi's board.

"We're very concerned that we're not being given the complete picture, so we're not fully evaluating the political risks involved," said Emma Bayes, a researcher at CtW, which is affiliated to a federation of unions representing 5.5m members and over $200bn in assets.

She noted that the amendment to the Dodd-Frank Act, the main piece of post-crisis legislation designed to make the banks safer, "led to a storm of criticism on social media sites" and a Senate-floor call to break up the big banks.

Aside from that controversy, last year was a rough one for the third-biggest US bank by assets, as it failed the Federal Reserve's stress test, paid billions of dollars in fines and revealed fraud in a Mexican subsidiary.

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Mr Corbat said that the Dodd-Frank amendment had put Citi on a level field with international peers, and noted that former Fed chairman Ben Bernanke, among others, had backed it. "We are not alone at all in this push," he said.

Citi's lobbying stance did not impress Bart Naylor, a former chief of investigations on the US Senate banking committee, who said after the meeting that he was heartened by the strong show of support for the CtW proposal.

"We want to know exactly where and how shareholders' money is being spent," he said.

Lobbyists wanted the Dodd-Frank provision "so bad that they were willing to shut down government to get it", he added, noting that Citi's direct expenses on lobbying may be much less than its support to bodies such as the Securities Industry and Financial Markets Association or the Financial Services Roundtable.

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