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Auditing weakness led to Citi stress test failure

citigroup logoWeaknesses in auditing led to Citigroup Inc failing the U.S. Federal Reserve capital assessments, fueling fears that there is negligence in controls at the U.S. bank, the Financial Times reported on Friday citing executives and others sources familiar with the matter.

Executives at Citi are promising better auditing and anti-money laundering processes and will try to allay the concerns that led regulators to veto the bank’s plan to return more cash to shareholders, the newspaper reported.

There is also tension brewing among the bank’s management, the business daily said citing company sources.

Citigroup’s Chief Executive Officer Mike Corbat had shown himself to be “overconfident” that he had repaired the bank’s rickety relationship with regulators and had “mistaken a ‘not bad’ relationship for a good relationship,” the business daily reported citing a senior executive.

Citigroup investors will likely have to wait until at least 2015 to receive an increase in dividends or stock buybacks after the Federal Reserve rejected its plan to return more capital to shareholders, the Wall Street Journal reported.-Bloomberg