Citi's CIO Steve Randich explains how he transformed the bank's technology infrastructure since his arrival back in 2005
In just two short years-during which time the economy imploded and the government stepped in to bail out several major banks-Citi has clawed its way back from the brink. Steven Randich had more than a little to do with the resurgence of a bank whose IT was in disarray before he took the reins in 2005.
On the roof of Citigroup's 388 Greenwich Street office building in Manhattan’s posh SoHo district, there’s a massive, aged clock. It’s worn and busted, dating back to an era whose grandeur has long since been forgotten.
You could argue that Citigroup was a similarly rusted relic just a few years ago—at least when it came to technology on the capital markets side. It’s not Citi’s fault, really. The global behemoth had done such an effective job of expanding its footprint that it perhaps grew too fast for its technology to keep up. And that’s not to say that innovation was dead at the banking giant. Rather, while advancements were being made, those innovations were too disjointed and disorganized.
For all its scope, Citi had become the laggard on Wall Street.
But that all began to change five years ago when Steve Randich joined the company. He left Nasdaq, where he had been the exchange’s CIO, to become the CIO of Citi’s Institutional Clients Group. What drew him to Citi was its “globality” and breadth of products, he says.
But when Randich first got his feet under his new desk the feedback he got from clients and analysts was that Citi’s front-office systems were not as competitive as those of Morgan Stanley, JPMorgan and Credit Suisse. “We were kind of mediocre; we under-invested and didn’t spend a lot of technology investment between 2002 and 2005, and the result was that we got lame technology,” Randich says. “I focused on that in my first two-and-a-half years, and getting us from mediocre to being pretty good—and in some cases to maybe number one—but definitely out of the cellar.”
That also meant bringing in new talent. When Waters last sat down with Randich, he was still at Nasdaq. At the time, he was in the midst of a massive staff downsizing. The staffing challenge at Citi was a different beast. It wasn’t so much a case of downsizing as it was a case of bringing in new talent and making sure the talented people already inside the bank were in the right positions.
This examination of personnel led to significant turnover at the senior management level. Randich says that of all the positions held by his direct reports and the level below those direct reports, 90 percent have been changed over the last five years through promotions from within, reorganizations, lateral moves and hires from outside the organization.
“We’ve gone from being a middle-of-the-road IT organization to being, in many cases, best-in-class,” he says. “If you ask people on the Street they would acknowledge, at least on the institutional side, that Citi has come a long way. We’ve hired hundreds of talented people from across the Street—Morgan Stanley, JPMorgan, Lehman Brothers, Barclays, and Deutsche Bank. Hundreds of people have joined this organization over the last two or three years and are clearly helping us make a difference.”
We are sitting in a scenic corner office that overlooks the spot on the Hudson River where Captain C.B. “Sully” Sullenberger famously docked his Airbus A320 on a cold January morning a year ago. Much of our conversation this afternoon revolves around leadership and implementing a strategy that can tame the perils of running IT for a truly global institution.
Pre-2005, each country or region had autonomy to create a best fit for that market. With operations in a staggering 130-plus countries, this was good from a growth perspective, but it left the bank’s global IT a fragmented mess.
“My first major move was to build the technology organization from a product standpoint as opposed to Citi’s traditional regional and local country focus,” Randich says. “That was a significant political change because now people have to take their direction and leadership from product heads in New York and London.”
As a result of this change, Randich says that the bank has been able to more easily roll out new products and platforms. For example, Citi uses Oracle’s FlexCube Universal banking platform, which is now supporting 68 countries. Additionally, Citi FT, the firm’s global payments platform for its Global Transaction Services (GTS) unit, is “a great example of a platform that has been rolled out globally with more ease as a result of people taking direction from their product boss, as opposed to their country boss,” Randich says.
When Randich arrived at Citi there was an order-taking mentality. As he describes it, the revenue-generating side of the business would tell the developers to go build A, B and C, and A, B and C would get built even if they weren’t necessarily the right fit for Citi. The firm lacked individuals who could challenge their internal business partners, which is why nine out of 10 positions changed after Randich joined the bank.
The day before our early-October interview, Randich had interviewed three people for a number of senior leadership roles that had opened up at Citi. He’s been meeting with about eight prospects per week. This is a major part of what he does: go over organizational charts and tweak them to cover any holes and improve inefficiencies and redundancies. “I consider the most important part of my job to be making sure I’ve got the right leadership team and the right talent in the organization,” he says.
And while the decision-making comes down from New York and London, it doesn’t mean that Citi plans to lose touch with its staff in other, less celebrated regions. For example, one-third of Citi’s developers are located in India, and it has more than 700 developers in Ireland, where as of five years ago it had none, according to Randich.
The Burden of Regulation
Citigroup was hit harder than perhaps any surviving firm of the credit crisis. As a result, the US government stepped in and took an ownership stake in the company. With survival, though, came great regulatory pressure.
Randich says it’s hard for him to articulate how much his job has changed since the industry-wide financial meltdown and how being such a highly regulated institution has changed his daily routine. It’s a 180-degree change, though, from when he first joined the bank.
“What happened from 2007 and the 18 months thereafter—with the Troubled Asset Relief Program (TARP), the government ownership in Citi, and both the political and regulatory pressure put on Wall Street—has changed the equilibrium of our world,” he says. “We spend a lot more time engaging with members of the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Bank, and there’s greater scrutiny in the examinations. We have to demonstrate our effectiveness at managing enterprise-wide initiatives that are important to the regulators, such as anti-money laundering, the Basel II Accord and compliance with that, and ultimately the regulatory changes—whether it’s the Volcker Rule or over-the-counter (OTC) derivatives being mandated to be traded and cleared on exchanges and clearinghouses. These have significant impacts on the IT agenda.”
Randich points to two accomplishments that prove how effective the firm has been on the regulatory front. First, while many doubted whether a firm of Citi’s size could comply with the Basel II Accord, Randich says the bank did just that, and it achieved this feat ahead of schedule.
He is also proud of the fact that Citi went from ranking as one of the worst firms—from the standpoint of the Depository Trust and Clearing Corp. (DTCC) on OTC derivatives by measurements of timeliness and quality of the trade submissions—to now ranking at the top “on most critical categories,” he says. Citi has also managed to cut many operational losses associated with un-reconciled trades. Randich says the firm has reduced “by hundreds of millions” losses associated with operational errors thanks to globally connecting systems and by having controls in place to reduce the impact of human error.
Now, Citigroup is more in a position of anticipation than reaction as the institution wrestles with how to remain competitive in light of what may be down the pike in terms of government mandates. Randich points to changes in the trading of derivatives as a result of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Most derivatives will now have to be traded at a Swap Execution Facility (SEF) or an exchange, cleared through a central counterparty (CCP) and reported to the Swap Data Repository (SDR).
“The regulatory pressures on the big banks right now—given all the things that have happened and given the political climate—are unimaginable,” he says. “Now what’s happening is the regulatory changes are going to change the competitive equilibrium. Everything that has historically been a major profit for the big banks—derivatives—is now going to be completely changed in terms of the competitive landscape and the market structure. There’s uncertainty: What do we need to do to remain competitive? We want to end up ahead of where we are now—and certainly not behind—three years from now, when it all manifests itself.”
But that’s not to say that this is a bad thing. Rather, Randich says, these challenges make his job more fun.
Top of the List
When operating in an environment with over 55,000 full-time employees working in technology spread across more than 80 countries, there are literally hundreds of significant programs that are being worked on at any given time. So to boil that down to the largest initiatives can be daunting, but Randich gives it a shot.
Most importantly, he says, the firm has worked to improve its back-office functionality. While the first two-and-a-half years of Randich’s tenure was spent dealing with the front office, the last six months have been dedicated to addressing straight-through-processing (STP) concerns, from when the trade is booked all the way through to when it clears and settles, often days later.
“That process of streamlining our business and taking costs out involves consolidating systems and finishing the mergers of Citi, Salomon and Smith Barney that were bolted together,” he says. “Maybe they were consolidated at the front end but were bolted together on the back end, which caused operational inefficiencies and an inability to hide that complexity from our customers that have to deal with the post-trade activity. These acknowledgements from the DTCC of us moving from twelfth to first place are a direct result of that front-to-back focus; but that’s not just in our OTC products, it’s across all of our products.”
As volumes have peaked and data requirements have exploded, the need to remain efficient “front-to-back” has become a major focus for Citi. If you’re not in a position where the marginal cost of converting a trade is close to zero, you won’t be able to compete in the electronic space. “That is where capital markets are going; it’s a requirement for survival,” Randich says. “The last two-and-a-half years we have focused intensely on that, probably more than our competitors. And one could argue that we didn’t have that focus in the prior seven years; but now we do.”
In addition, Citi Velocity, the bank’s front-end customer portal, compliments the idea of a globally unified firm. In the past, each asset class—foreign exchange (FX) equities or fixed income—had its own portal. But as cross-asset trading has become an increasingly desired strategy, it has created a need for cross-product views where each desk is trading and mixing in new products. So to ensure that the firm is serving those clients with a common front-end platform, Citi is currently “aggressively” sending Velocity out to clients globally.
Single FX Platform
Over the next three to six months, Citi will finish rolling out its internal FX Single Name, which allows it to book all FX transactions into one system and one legal entity. The bank is in the process of consolidating all its FX trade bookings into the system. “This is something that we have been attempting for a couple decades and we are finally getting it done,” Randich says.
Finally—and this is relatively new focal point for Citi—Randich wants to focus more closely on middle-market clients in emerging markets. The bank has created a dedicated team that sits between the retail technology side of the business and the institutional technology group, responsible for ensuring that Citi produces a uniform platform that serves these clients. Initially, the team will be made up of only a handful of individuals, including Randich and a number of fellow CIOs from across the business. The team will focus on developing technology to address those mid-sized businesses, high-net-worth individuals and boutique firms that are bigger than retail customers but not as large as a multi-national company. “That client base hasn’t been well-served by our technology platforms,” Randich says.
As part of his task, he has made it his goal to visit at least one emerging market country every time he goes overseas. Over the last three months he has visited Poland, Turkey and Russia.
But even though traveling means being away from his family, he enjoys the building of relationships in these disparate regions. “Citi has identified a couple dozen countries that we are going to focus on in the future and most of them are emerging market countries,” he says. “So every time I go overseas I try to get to at least one emerging-market country. But despite the travel requirements, one of my favorite parts of the job is going out on the road.”
STEVE RANDICH: FUNDAMENTAL DATA
Management style: Randich is an imposing figure who is very direct—even blunt. While taking over a truly massive IT staff such as the one Citigroup employs, he first had to learn how to manage himself, then manage a couple of dozen people, then a department, then a couple of hundred, then a thousand ... and after that, he says, the number really doesn’t matter.
A former cover model: Several months before he was to leave for Citi, Waters put then-Nasdaq CIO Steve Randich on our May 2005 cover to discuss the exchange’s technology overhaul. At the time, Nasdaq was in the midst of integrating SunGard’s Brut ECN, moving a back-up datacenter 60 extra miles away from Washington, DC, and swapping Nasdaq Workstation II for a Web-based version. In addition, the exchange had pared down its technology staff from 800 at the turn of the century to just over 400 by 2005.
More than an investment bank CIO: In addition to his investment banking duties, Randich also oversees the commercial banking component of the old Citicorp Citibank, “which, in and of itself is a massive business,” he says.
Time management: Randich says he also spends less time than most CIOs speaking with vendors. Essentially, he takes the view that he will call them if he needs to, but don’t worry about calling him. He spends part of his week getting project and program updates and about three hours a week meeting with his peers on the Citi CIO council, which is made up of four members that collectively manage the entire IT organization. The council is headed by Jon Beyman.
The next big tech thing: “It used to be that you would add hardware or tweak the software to get improvements in throughput. Now it is much more the case where hardware accelerators—either on the network or in the actual chip technology—are going to become the means to stay ahead of the volume curve.”
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