Citigroup Inc (C) May Come Under ECB Radar
Regulators in Europe are monitoring happenings at Citigroup Inc (NYSE:C) in Europe after it emerged the bank was restructuring its operations. A move to combine Citigroup Europe Plc in Dublin and UK’ Citibank International Ltd is the subject of scrutiny from the European Central Bank.
Break of Asset Threshold
The Irish court approved the deal last month. Citigroup Inc (NYSE:C) says the merger will not in any way affect product and services offered in the two countries. London is to remain its operational hub for European consumer banking.
The decision to merge the units is not in any way related to the growing concerns that Britain may exit the European Union.
“We are combining these two legal entities as part of our global strategy to create a simpler, stronger and safer institution,” Emma Hynes, a spokeswoman
A proposed merger of the two banks would be a breach of the $32 billion asset threshold according to the ECB. Citigroup is reportedly planning to combine the two as part of an effort to simplify its legal framework in the region. However, the creation of a $57 billion entity is what is making officials at the ECB uneasy. A combined entity of such magnitude could pose big risk to the economy in case of a financial crisis.
Planned Stress Tests
The merger set for January 1st should be the subject of the ECB’s stress tests going forward. The tests will seek to examine the bank’s plans for severe economic conditions. Citigroup Inc (NYSE:C) cleared similar test in the US from the Federal Reserve having failed in earlier years.
The ECB as part of the stress test will vet the company’s board as well as the senior management team. The merger could also be subjected of capital buffers to find the amount of risk associated with the business.
Citigroup Inc (NYSE:C) has been under immense pressure having been bailed out of the financial crisis. It has already simplified its structure having also cut a number of its legal entities in a bid to reduce its exposure to risk.
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