The Office of the Comptroller of the Currency fined Royal Bank of Canada subsidiary City National Bank $65 million Wednesday over gaps the regulator found in the bank’s risk management and internal controls.
City National, since December 2020, has allegedly violated an OCC guideline that established higher standards for certain large insured banks, in addition to the Bank Secrecy Act, according to the consent order the regulator issued.
The OCC also issued a cease-and-desist order mandating the $93.8 billion-asset bank improve its strategic plan, as well as its compliance risk management related to BSA/anti-money laundering and fair lending, investment management practices and deficiencies in reporting events that pose operational risks.
“To be clear, this was about policy and procedures and did not involve actual money laundering,” Diana Rodriguez, a spokesperson for City National, told Bloomberg. “City National, and our new executive management team, are committed to resolving the matters identified in the OCC’s order as quickly as possible.”
The Los Angeles-based lender hired former Fifth Third Bank CEO Greg Carmichael to become its executive board chair in October. City National then brought on fellow longtime Fifth Third executives Howard Hammond and Chris Doll to serve as CEO and CFO, respectively. Meanwhile, its outgoing CEO, Kelly Coffey, took the reins of the bank’s entertainment banking unit.
City National is “not issuing any personnel or leadership changes as a result of this,” Rodriguez told Bloomberg.
"Our focus will continue to be on both strengthening our infrastructure and systems to reflect a bank of our size and business model," the bank said in a statement seen by Bloomberg, Reuters and American Banker.
City National did not admit or deny the OCC’s findings, but the regulator said in announcing the penalty that the bank has pledged to take corrective actions and address the deficiencies "in the interest of cooperation and to avoid additional costs associated with administrative and judicial proceedings."
By all accounts, 2023 was a challenging year for City National. RBC infused the bank with at least $2.95 billion in an effort to boost its capital. Most of the infusion came with RBC purchasing debt securities and unrealized losses from its U.S. subsidiary.
City National began last year by agreeing to pay the Justice Department $31 million over allegations the bank avoided providing mortgage-lending services to majority-Black and Hispanic neighborhoods in Los Angeles County from 2017 to at least 2020.
In May, the bank signed an agreement with the OCC requiring it to take steps to comply with the Gramm-Leach-Bliley Act.