On the back of the resignation of Citigroup (NYSE: C) CEO Vikram Pandit, Moody’s has “affirmed all its ratings on Citigroup Inc. (senior at Baa2) and its major subsidiaries including Citibank N.A., (senior debt at A3) but changed those rating outlooks that were previously stable to negative.”
Although some experts see the move as a changing of the guard from a CEO who could not turn Citi entirely around to a chief executive, Michael Corbat, who might, the change can also been seen as destabilizing.
The negative outlook reflects the risk that this unexpected management change will negatively affect Citigroup’s ongoing efforts to install improved risk management practices throughout the firm. The financial crisis highlighted major risk management failures at Citigroup. The company has overhauled its risk management governance, and Moody’s believes Citigroup has been making progress in installing an improved risk culture. However, challenges remain considering the company’s commitment to global capital markets businesses, compounded by the size and complexity of the organization.
Moody’s said that negative rating actions could be taken if there were further departures of key senior management that could prove disruptive to Citigroup’s progress in enhancing its risk and control functions and culture. Negative rating pressure could also emerge if senior business leaders departed at a time when the company is implementing revised strategies within its major businesses of global capital markets, global consumer banking, and transaction and securities servicing.