Citigroup is undertaking drastic cutbacks on the amount of money it lends to private equity firms and other asset managers as big banks try to adhere to strict new regulations on capital.
The lending in question is what’s called subscription-line financing, the Financial Times (FT) reported Friday (Sept. 23). Citi is preparing to cut its lending from $65 billion to $20 billion in the months ahead.
Citi declined to comment Friday.
The bank’s actions come as several big banks are working to adhere to the Federal Reserve’s new capital requirements, set to go into effect Oct. 1.
“If a bank’s capital dips below its total requirement … the bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments,” the Fed said in a news release last month.
PYMNTS reported that the Federal Reserve was considering a host of new rules for regional banks and bigger banks. In the case of larger banks, those rules could include requirements that they boost their capital reserves.
Fed financial regulation head Michael Barr said earlier this month that the level of capital in the banking system is strong, but, “I think the question is, is it strong enough?”
Earlier this week, Citi announced it was ending its retail banking operations in the United Kingdom and moving its focus to its wealthiest clients, part of an ongoing shift away from retail banking.
“Citi has begun the process of collectively consulting with employees of its UK retail bank in more detail about the proposal,” Citi said in a statement. “No final decision can be taken until that process concludes.”
This year began with Citi announcing the closure of its Mexican retail banking arm, Citibanamex, and the sale of its consumer banks in Indonesia, Malaysia, Thailand and Vietnam to Singapore’s United Overseas Bank.
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