Time for A Few Small Repairs?

A great opening 'graf from the FT:

Citigroup credited a client’s account with $81tn when it meant to send only $280, an error that could hinder the bank’s attempt to persuade regulators that it has fixed long-standing operational issues.

Yes, that is 81 trillion U.S. Dollars, which about says it all. The good news for Citi is that–this time–they managed to get the money back before the customer could withdraw it. The bad news, as that last sentence implies, is that this has happened before. In fairness, though, the last time we all heard about it, it was only US$15 million, which Citi sued to get back. The judge, unfortunately, followed common sense and the rule of law, allowing the customer to keep the funds.

One would have thought Payment Controls would have gotten more rigorous after that.

The part I cannot figure out is the system design that allows the transfer of $81,000,000,000,000.00. That’s fourteen (14) characters to the left of the decimal point (assuming no commas, or periods if you’re European). People certainly trade around 1/6,000th of that amount–especially in Japanese Yen, where FX players trade a “yard” (1 Billion Yen) frequently enough to standardize the term in the markets. Most systems won’t allow you to trade, pay, or receive more than about 100 billion–12 digits. Even that would certainly hits risk limits and other controls.

I cannot figure out the error-checking, either. Maybe their systems only validated the amount once, but that doesn’t seem the Way to Bet. Also, what account would have $81T available for transfer? Talk about Overdraft Protection! I’m not certain about UHNW accounts, but I can’t move more than $25 or $30K between accounts without it setting off all kinds of alarms–and that’s just on the front end, forget the SARs and back-office confirmations and validations. As the person who told me about the current snafu (acronym appropriate) said, they transferred “about 1.5 Musks.” Without anyone stopping, or even questioning, it.

2006-2008 brought on the Too Big to Fail world. Are we now in a world that is Too Failed to Be Small? I suspect the answer is yes, and am of two minds about it. My immediate reaction was that opening a DDA at Citi is more likely to be a Road to Riches than playing Mega Millions or Powerball. The Rational second thought, though, was that storing money in a mattress has suddenly become Macroprudential Risk Management, even in a positive-inflation environment.