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The American economy can’t afford an unstable banking system. Our national debt now exceeds $20 trillion. That’s an unprecedented number and any kind of financial difficulty in the banking sector could make the situation worse.  Corporate and government partners need to work together to develop clear strategies to ensure that there’s transparency and trust in the system.

Long-term Consequences

In Citibank’s case, the news of its misleading tactics with student borrowers couldn’t have come at a worse time. The bank seemed to be making substantial progress in its return to respectability after the mortgage crisis. It has increased its core capital and its cash reserves significantly in the last few years. Its overall revenues did dip about 2% in 2016, but it remains profitable and there are encouraging signs that it’s poised for a major upturn in its fortunes. All of this positive progress is good news for Citibank’s investors, but news of the company having to pay fines for misleading practises will not sit well with them. Reputation is important in the banking industry and in a competitive field it doesn’t take much to convince an investor to jump ship. Citibank will have to work hard to recover from this damage. Student loans are no longer a major part of Citibank’s business. In fact, they sold most of their loans to Discover in 2009. The direct fallout will be minimal, but they will have to institute a clear policy of transparency moving forward if they’re going to encourage new investments. There will probably need to be a few changes in top positions at the bank to convince investors they’re making the right moves to clean up their act.

2018 and Beyond

The first quarter of 2018 will be critical for Citibank. With the right approach, they can survive and prosper, but it will require a change to their corporate culture. Other major corporations have gone through painful transitions and turned things around. There’s no reason to believe that one of America’s biggest banks can’t do the same, but they do have a relatively short period to work with. Positive steps need to begin immediately and they need to be highly visible.