Citigroup Inc may need to raise as much as US$10 billion to meet the US government’s increased capital standards for banks outlined in its stress tests, according to a report.
The New York-based bank is negotiating with the Federal Reserve and may need less capital if it is able to convince regulators of its financial health, the Wall Street Journal said on its Web site.
The report cited people familiar with the matter.
A Citigroup spokeswoman said the bank had no comment on the Journal report.
On Friday, the US government pushed back its expected release date of the stress test results to Thursday from tomorrow, as regulators negotiate with the banks over the findings.
In addition to an overall snapshot of the health of the 19 large banks being assessed, the Fed will provide detail about individual banks, according to a government official, who spoke on condition of anonymity because of the sensitive nature of the matter.
The Fed will describe the resources banks would need to absorb losses on certain types of loans and investments under adverse economic conditions.
Last week, Fed officials said all 19 banks that underwent the stress tests will need to keep extra capital on hand beyond what’s now required in case losses on loans and other assets continue to climb. That was a signal some banks would have to raise more cash.
Initial results indicated that both Citigroup and Bank of America Corp would be among that group, sources told The Associated Press earlier this week.
Banks will have up to six months to raise money from private sources, Federal Reserve Chairman Ben Bernanke has said. If they can’t, the government would provide aid.
One option for help: Allow the government to sharply increase its stakes in banks.
That would be done by converting the government’s stock in banks from preferred to common shares.
It would not require any additional taxpayer money, although it would increase their risks.
Another option is having the government make a fresh capital infusion in a bank using taxpayer money from the US$700 billion financial bailout pot.
Citigroup has already received US$45 billion in federal funds.
The government, which will soon own a 36 percent stake in the bank, has also agreed to insure a pool of more than US$300 billion of its riskiest assets.
Earlier on Friday, Citigroup announced that it was selling its Japanese brokerage business to Sumitomo Mitsui Financial Group Inc for about US$5.6 billion. The troubled bank has been shedding businesses over the past year to slim down and raise cash.
Citigroup posted a first-quarter loss to common shareholders of US$966 million, or US$0.18 per share. The loss was smaller than analysts had forecast.
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