Photographer: Mark Kauzlarich / Bloomberg
Photographer: Mark Kauzlarich / Bloomberg
Citigroup Inc. has begun informing bank regulators about how it incorrectly sent nearly $ 900 million in payments to The lenders of Revlon Inc. are too bad in a fight between the cosmetics company and creditors.
The bank is in contact with watchdogs including the Office of the Comptroller of the Currency and the Federal Reserve about the situation, according to people familiar with the matter, who asked not to be identified as private. Citigroup told Revlon lenders last week that the payments were linked to a clerical error.
The roughly $ 900 million – an amount equal to the full principal value of the loan, plus interest accrued – entered the lenders’ bank accounts last week. While some have opted to return the funds to Citigroup, others – including Brigade Capital Management, Symphony Asset Management and HPS Investment Partners – have at least initially refused to return the money. That dispute played out in court Monday with Citigroup prosecuting Brigade.
Read more: Citigroup sues Brigade Capital over misappropriation
Citigroup, the third largest U.S. bank, has not provided a public statement on how the ‘operational error’, as its lawsuit called it, happened. While mistakes are irreversible in a sector that moves trillions of dollars every day, the massive overpayments have paid off on Wall Street and raised questions about protections in the firm’s franchise that has syndicated loans.
Bank regulators will not really regulate the fight over cash. Rather, their focus will be on making sure that any declines at the company in New York cannot be repeated and that they do not reveal deeper problems that are a stability threat.
Citigroup was in the process of dismissal as a governing body on the loan prior to the error. Representatives of the bank and regulators declined to comment.
Citigroup is convinced that, even if it is issued in other areas, it will erode internal systems and oversight. Amid the coronavirus pandemic, the company has said it is focusing on investments to improve the bank’s security and health.
“We will continue to manage this with a sharp emphasis on our risk management,” Chief Executive Officer Michael Corbat said last month. “We continue to invest in our infrastructure to improve our safety, health and controls to ensure we have an indisputably strong and stable institution.”
(Updates with the bank’s lawsuit and background on its third-party checks.)
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