In a strategic move to streamline operations and bolster regulatory compliance, Citigroup Inc. has initiated significant reductions in its technology workforce in China. This decision is part of a broader global restructuring effort aimed at enhancing risk management and data governance across the organization. The cuts come in the wake of regulatory penalties and a push to reduce reliance on external contractors.
Overview of Workforce Reductions
Citigroup plans to eliminate up to 200 information technology (IT) contractor roles in China, according to sources familiar with the matter. Approximately 100 contractors have already been notified of non-renewal, with another 100 expected to be affected in the near future. These contractors are employed by Citigroup Services and Technology China, a wholly-owned unit established in 2002, which supports the bank’s global operations.
Strategic Shift in Workforce Composition
The bank aims to reduce the proportion of external IT contractors from 50% to 20%, while simultaneously increasing its internal technology staff to 50,000 by the end of 2025. This shift is intended to strengthen internal capabilities and reduce dependency on third-party contractors, thereby enhancing control over critical technology functions.
Regulatory Pressures and Compliance
Citigroup’s decision follows a $136 million fine imposed by U.S. regulators in 2024 for insufficient progress in addressing data management issues. The bank’s move to internalize more of its IT operations is a response to these regulatory pressures, aiming to improve compliance and risk management frameworks.
Impact on Employees and Severance Packages
Affected contractors in China are being offered severance packages based on their years of service. Citigroup has stated that all decisions regarding non-renewal of fixed-term contracts will be made in compliance with applicable laws and regulations, and the bank is committed to supporting impacted employees during this transition.
Global Restructuring Efforts
Beyond China, Citigroup is undertaking a comprehensive global restructuring plan, which includes the reduction of approximately 20,000 jobs over the next two years. This initiative is part of a broader effort to streamline operations, eliminate bureaucratic layers, and improve profitability. The bank’s workforce is expected to decrease from 239,000 to around 180,000 employees by the end of 2026.
Financial Performance and Strategic Objectives
The restructuring comes after Citigroup reported a $1.8 billion net loss in the fourth quarter of 2023, its worst quarterly performance in 15 years. The bank attributes this loss to several one-time costs, including charges related to the regional banking crisis, losses in Argentina, and restructuring expenses. Despite these challenges, Citigroup aims to achieve long-term cost savings of approximately $2.5 billion through its restructuring efforts
Commitment to the Chinese Market
Despite the workforce reductions, Citigroup maintains its strategic commitment to the Chinese market. The bank is in the process of establishing a securities unit in China, signaling its continued investment and presence in the region. Citigroup has emphasized that the IT contractor cuts will not impact its business strategy or commitment to clients in China.
Industry-Wide Trends
Citigroup’s actions reflect a broader trend among global financial institutions to reduce reliance on external contractors and enhance internal capabilities. Other firms, such as Fidelity International, have also been reducing their tech operations in China due to rising costs and geopolitical uncertainties.
Citigroup’s reduction of tech roles in China is a strategic move aligned with its global restructuring objectives. By internalizing critical technology functions and reducing reliance on external contractors, the bank aims to strengthen its risk management and data governance frameworks. While these changes present challenges, Citigroup’s commitment to compliance and operational efficiency positions it for sustainable growth in the evolving financial landscape.
