Last month, Japan’s financial regulator ordered the closure of the group’s private bank and the suspension of underwriting Japanese government bonds over violations of banking laws.
After Mr Prince requested an independent review by former US regulator Eugene Ludwig, the three executives – Sir Deryck, Thomas Jones, head of investment management, and Peter Scaturro, head of Citigroup’s private bank – were deemed to have shared some responsibility for the Japanese affair and were asked to leave. They are not expected to be replaced.
Mr Prince’s strong response to the problem is seen as an important part of enforcing the highest ethical standards and rebuilding Citigroup’s reputation, which has suffered from a variety of scandals and incidents recently. The group was heavily criticised over the recent €11bn sale of eurozone sovereign paper on the EuroMTS electronic trading platform (The Banker, September 2004, p42).
After a year as chief executive, Mr Prince is gradually introducing management changes and adjusting the structure that he inherited from his predecessor, Sandy Weill, now chairman. In November, for example, chief financial officer Todd Thomson and Smith Barney head Sallie Krawcheck will swap jobs. Citigroup’s management is in transition, with about 30 of the 51-person management committee reported to be new to their jobs in the past three years.
Despite Citigroup’s global reach, senior management is seen to be becoming far more US-centric than in the past. The axing of Sir Deryck Maughan removes yet another senior manager with extensive experience outside the US. With few acquisitions outside the US in recent years (a clear exception being the purchase of Koram Bank in Korea in the first half of this year), Citigroup is adopting a different style under Mr Prince, but it still remains extremely profitable: third quarter net income rose 13% to $5.3bn, the highest quarterly earnings ever recorded by the company.
