Last week, the Federal Reserve rejected the bank's request to spend
$6.4 billion buying back shares and boosting its dividend. Bank
executives are still reeling from that move, which Chief Executive
Officer Michael Corbat wrote in a memo to employees "is a call to
action for our firm."
McQuade had planned to retire as chief executive of Citibank NA, a
U.S. operating subsidiary, and be nominated to Citigroup's board.
Instead, McQuade will become vice chairman of Citigroup, reporting
to the CEO. Corbat cited the "importance of this effort and the
substantial time commitment required."
The Fed objected to Citigroup's request, saying the bank had not
sufficiently improved its risk management practices and could not
determine well enough how revenue and income would be hurt under
stressful scenarios around the world. It faulted the bank's internal
The rejection is a blow for Corbat, who became CEO in October 2012
when the bank's board grew frustrated with former CEO Vikram Pandit.
One source of frustration for board members, in particular Chairman
Michael O'Neill, was that the Federal Reserve in March 2012 rejected
Pandit's request to return more capital to shareholders.
In 2013, under Corbat, the Fed approved Citigroup's plan to buy back
$1.2 billion of shares, and to keep the bank's dividend at a penny a
share. This year the bank had hoped to boost buybacks and to lift
its quarterly dividend to 5 cents a share.
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McQuade will oversee the so-called CCAR application process to the
Fed for the next year, according to the memo. Citigroup finance and
risk executives will be accountable to McQuade on steps toward the
next application, Corbat said.
John Gerspach, Citigroup's chief financial officer, and Brian Leach,
head of franchise risk and strategy, had received extra pay for 2013
partly because of their work seeking approval of last year's plan,
directors said in a proxy statement to shareholders in early March.
Corbat said McQuade is now "fully empowered to do whatever is
necessary, and I will devote any resource required, to ensure our
next capital plan is not objected to."
Citigroup shares fell 1.2 percent on Thursday to $47.68.
(Reporting by David Henry in New York; editing by David Gregorio)
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