The Federal Reserve Board has advised Citigroup not to do any big deals until its plan to bolster internal controls is properly executed.

Plagued by regulatory problems at its operations in Japan and Europe, Citigroup has made clear its desire to engage in some takeover bids. The Fed, however, feels that the financial services giant should not divert its attention from its efforts to improve compliance.

The Fed's warning is highly unusual for a bank the size and stature of Citigroup, which saw a wave of mergers and acquisitions deals in the 1990s under then-CEO Sandy Weill.

Weill's successor, Chuck Prince, has said no to "transformational" acquisitions, even as some analysts have stressed that that is just what the company needs to maintain high growth. Prince, instead, is more focused on growing the company from within, also known as organic growth.

Even as it discourages Citigroup from doing big deals, the Fed has given its nod to small deals such as Citigroup's recent purchase of First American Bank, a small Texas bank with only $3.5 billion in assets.

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