The source said Citigroup is facing new regulations that will impact its will to live

(Reuters) – The five-member board of the Federal Deposit Insurance Fund plans to vote on Thursday to downgrade its rating of Citigroup’s data management systems from “deficiency” to “deficiency,” according to a government official familiar with the matter.

The US Federal Reserve and the FDIC in 2022 identified a gap in the so-called Citi’s living will, which details how the company will be dissolved in the event of bankruptcy. Escalating these concerns to a “deficiency” could trigger a process in which regulators would order the bank to make changes to its operations if both the Fed and FDIC agree.

However, the Fed is not expected to join the FDIC in escalating its concerns about the bank’s plan, the official said. The Wall Street Journal was the first to report this decision.

Spokesmen for the Fed and FDIC declined to comment.

Banking regulators said Citi’s data management issues could adversely affect Citi’s ability to generate timely and accurate data during a period of financial stress, and recommended the bank take urgent action to establish a resolution plan.

“We have rigorous, company-wide stress testing and resolution planning processes, and we are always working to improve and strengthen these capabilities,” Citi said in a statement.

“Our balance sheet and financial position remains strong, with high levels of capital, liquidity and reserves. We are still confident that Citi’s restructuring will be possible without using taxpayer funds and without a negative impact on the financial system,” the bank said.

(Reporting by Pritam Biswas in Bengaluru, Pete Schroeder in Washington and Tatiana Bautzer in New York Editing by Shilpi Majumdar and Matthew Lewis)