The Comprehensive Capital Analysis and Review, or CCAR, said the reason for the denial of Citigroup's plans stemmed from "a number of deficiencies in its capital planning practices, including in some areas that had been previously identified by the supervisors as requiring attention, but for which there was not sufficient improvement."
The Board of Governors denied Citigroup's plans to repurchase $6.4 billion worth of common stock through the first quarter of 2015 and raise its dividend 500%, from $0.01 to $0.05 per share.
In addition to Citigroup, HSBC (NYSE:HSBC), RBS Citizens (NYSE:RBS), and Santander were all denied their capital plans as a result of qualitative measures. The release said that for HSBC and RBS Citizens, the deficiencies included questions surrounding their capital planning processes, which stemmed from "inadequate governance and weak internal controls around the process."
Santander had a litany of factors that resulted in its denial, including problems related to its governance, controls, and risk management.
The release pointed out that this was the first time these three institutions participated in the CCAR.
The Federal Reserve suggested that Citigroup's projection of revenue losses under the stressful scenario, as well as internal stress tests that "adequately reflect and stress its full range of business activities and exposures," were deficient. Although those in isolation were not enough to deny the dividend, the Federal Reserve suggested that those matters in combination resulted in "sufficient concerns," leading to the rejection of Citigroup's capital plans.
In an official statement: Citigroup CEO Michael Corbat said, "Needless to say, we are deeply disappointed by the Fed's decision regarding the additional capital actions we requested. The additional capital actions represented a modest level of capital return and still allowed Citi to exceed the required threshold on a quantitative basis."
The Federal Reserve said the companies were required to resubmit their capital plans as a result of the denial. Corbat said Citigroup didn't yet have an official decision on when it would resubmit its plan and concluded by saying that "we will continue to work incredibly hard to serve our clients and generate the returns our shareholders expect and deserve."