The Federal Reserve has rejected Citigroup's capital plan, saying it's too difficult to determine how parts of its global operations would weather an economic downturn, but some stock market observers said Thursday the bank was really just the Fed's "sacrificial lamb."
Citi was the biggest of five banks whose plans the Fed rejected as part of its so-called stress tests, an annual checkup of the nation's biggest financial institutions. The bank had requested permission for a quarterly dividend of 5 cents per share and a stock buyback program of $6.4 billion, but the Fed turned down the request over concerns about how it would handle another financial crisis.
Read MoreFed rejects Citigroup capital plan
"I think every year the Fed has a sacrificial victim in there. Last year it was Goldman and JPMorgan, which got a qualified pass. The year before it was Citi and SunTrust," said Chris Kotowski, a senior research analyst at Oppenheimer, on "Squawk on the Street."
The Fed had earlier raised concerns about Citi's risk management, Kotowski said. When the central bank's suggestions seemingly fell on deaf ears, though, it struck back with a failing grade, he alleged.
Not everyone is so sure the Fed had targeted Citi in such a manner, however.
"I don't think it's political at all. I think it's regulatory," said Benjamin Lawsky, superintendent of the New York state Department of Financial Services, on "Squawk on the Street."
"I don't think it's vindictive to say, 'We told you to fix something. You didn't fix it and now there are going to be consequences.'" Lawsky remarked. "That's just called being a regulator."
To Anna Krayn, an analyst at Moody's Analytics, Citi is really no different than any other big bank. All financial institutions are struggling to improve risk management, a tall order in an environment where the regulations only continue to get tougher, she noted.
"This is an industry challenge. The industry, historically, has underinvested in technology, in process and governance," Krayn said Thursday on "Squawk on the Street." "Whether you look at Citi as a sacrificial lamb or one of the largest banks in this country that had to improve dramatically over last year, what we see actually ... is that the requirements keep rising."