Citigroup Inc. (C), the biggest U.S. bank to have regulators reject its capital plan this year, dismantled a board committee created during the credit crisis to police the disposal of toxic and unwanted assets.
About $200 billion of such assets remained when directors broke up the Citi Holdings oversight panel last month under new Chairman Michael O’Neill. Shannon Bell, a spokeswoman for New York-based Citigroup, confirmed the move.
Assets in Citi Holdings have shrunk from $600 billion since Chief Executive Officer Vikram Pandit, 55, created the unit after the bank almost collapsed in 2008. The division, which has posted losses of $19 billion since its inception, still holds Spanish and Greek loans, overdue U.S. mortgages, bonds worth a fraction of their face value and a consumer-finance lender that Pandit has yet to sell.
“To remove the focus now on bad assets of any sort is simply a risky decision,” said Gerald Hanweck, a former Federal Reserve economist who’s now a finance professor at George Mason University in Fairfax, Virginia. “The board would want to have more focused monitoring on these kinds of assets, not be happy that you got rid of $400 billion of them.”
Scrutiny of how Wall Street directors oversee risk intensified earlier this month after New York-based JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, reported a $2 billion loss tied to the trading of illiquid credit derivatives. None of the directors on JPMorgan’s risk committee had worked at a bank or as a financial risk manager.
The Citi Holdings committee members had two roles, according to its charter: monitor Pandit’s strategy to dispose of assets and meet with executives to check on the unit’s “risk exposures.”
O’Neill, 65, a former CEO of Bank of Hawaii Corp., led the panel until he succeeded Richard Parsons, 64, as chairman of the parent company in April. The committee also included Rockefeller Foundation President Judith Rodin, 67, ex-Wells Fargo & Co. (WFC) Vice Chairman Robert Joss, 70, and Timothy Collins, 55, CEO of New York-based buyout firm Ripplewood Holdings LLC, Citigroup’s proxy statement shows.
Directors now will oversee Citi Holdings through the risk- management and finance committee, which monitors risk control for the bank, Bell said. Anthony Santomero, 65, a former president of the Federal Reserve Bank of Philadelphia and a Citigroup director since 2009, is chairman of that four-member panel. Citigroup, the third-biggest U.S. lender, had $1.94 trillion in assets as of March 31 and has operations in more than 100 countries, Bloomberg reported.
