tyb's
what a faggit
Citi’s $900 Million Misfire Happened in Midst of Software Switch
For years Citigroup Inc. has been an anomaly among big banks, relying on an obscure piece of software it helped develop to manage loan payments. Just as the bank tried to replace it, things went terribly wrong. The saga began emerging in court this week as the firm blamed human errors for mistakenly sending $900 million to a fleet of hedge funds reluctant to return it. But the backdrop, according to people with knowledge of what happened, is a tale of arcane technology stretching back to the 1990s. It culminates with the bank’s decision last year to replace software with the industry standard. That rollout is still underway, adding to upheaval at a time when employees are working from home.
An internal review at the bank found humans manually operating the old software were ultimately at fault, and that their remote locations weren’t the problem, one person said, asking not to be named discussing confidential matters. Yet a global pandemic is, at the least, an awkward time to embark on such a complex transition.
“If you want to switch from one provider to another, it’s a very big project,” said Marc Victory, manager in the financial services practice at the consultancy Sia Partners. “Changes in providers are very cumbersome and very hard.” The incident happened at a Citigroup unit that serves as the administrative agent for loans, collecting and distributing interest payments and providing other housekeeping services. The borrower in this case, cosmetics giant Revlon Inc., was locked in a battle with lenders who wanted their money back.
After Revlon repurchased part of the debt, a Citigroup employee was supposed to manually adjust the share of the loan the remaining lenders still owned ahead of interest payments scheduled to be sent out this month. But the employee didn’t select the correct system options – instead allowing the loan to be repaid in full with interest. Colleagues who are supposed to catch such errors didn’t.
“Unfortunately, the manual checks of that selection also failed to detect the mistake,” Citigroup wrote in its court filing.
Though the bank soon recovered hundreds of millions of dollars from recipients, a group that received most of the money has refused to send it back, forcing the firm to launch an embarrassing legal battle.
https://www.bloomberg.com/news/articles/2020-08-25/citi-s-900-million-misfire-happened-in-midst-of-software-switch