Citigroup names McQuade to lead new Fed application: memo
NEW YORK (Reuters) - Citigroup Inc (C.N) said on Thursday that Gene McQuade, a bank executive who was retiring to become a director, will lead a new push to win permission from the Federal Reserve to pay higher dividends and buy back stock.
The announcement came in a memo to employees from CEO Mike Corbat. Corbat said the Fed's rejection last week of Citigroup's plan to distribute capital "is a call to action for our firm."
Citigroup executives and investors were shocked by the Fed's March 26 rejection of the proposal because Citigroup has been building up capital and a year earlier had been approved to spend $1.2 billion on share buybacks.
This year the bank had asked to spend $6.4 billion buying back shares and to lift its quarterly dividend to 5 cents a share from 1 cent.
The Fed said it objected this year because Citigroup had not made enough improvements in its risk management practices and could not determine well enough how its revenue and income would be hurt under stressful scenarios around the world. It faulted the bank's internal examination process for considering how global crises could influence its broad number of businesses.
Corbat was named in October 2012 to replace Vikram Pandit, and made it a priority to win approval for returning capital to shareholders. Pandit had a plan of his rejected in March 2012.
Before the Fed objected to the plan, Citigroup had said McQuade would retire as chief executive of Citibank, the company's main operating subsidiary, and be nominated to the company's board of directors.
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."
(Reporting by David Henry in New York; Editing by David Gregorio)