Citigroup CEO declares ‘this is not a credit crisis’ after US bank failures

March 22 (Reuters) – Jane Fraser, CEO of Citigroup Inc (CN), expressed confidence in US banks on Wednesday after a series of closures upset investors and fueled turmoil in global financial markets.

“The banking system is pretty healthy,” and major and regional banks are well capitalized, Fraser told the Economic Club of Washington DC on Wednesday.

“This is not a credit crunch. This is a situation where a few banks are having problems, and it’s better to make sure we nip that in the bud,” she said.

In the past two weeks, two US banks have collapsed, Credit Suisse Group AG (CSGN.S) has been acquired by Swiss rival UBS Group AG (UBSG.S), and America’s largest lenders have agreed to pour $30 billion into the beleaguered First Republic Bank (FRC). .N). Fraser’s public comments were among the first from a major bank CEO since the uproar began.

Citi, the fourth-largest lender in the US, was one of 11 major banks to throw a lifebuoy at First Republic last week in an effort to buy time for restructuring.

While Citi isn’t interested in buying First Republic, Fraser said, it has contributed $5 billion to the lender as a sign of confidence — and expects to be paid back.

The move to support First Republic was an unprecedented show of unity among banking giants that are normally fierce competitors, she said.

“We usually try to kill each other in various deals that we try to make,” Fraser said. “But in this case, this is one where we’re in a strong position, we want to stop what could have been a problem.”

The rescue efforts failed to halt a 15% plunge in First Republic shares on Wednesday.

Elsewhere, the takeover of another ailing lender, Credit Suisse, by rival UBS on Sunday was not surprising, Fraser said.

“I don’t think anyone fell off their chair that Credit Suisse ended up where it ended up, it was really a matter of time,” said Fraser. “It’s been a troubled institution for a long time,” she said, citing management instability and several crises.

Scottish-born Fraser also spoke about her life and career in an extensive interview with Carlyle Group Inc (CG.O) co-founder David Rubenstein. A travel enthusiast with two school-aged children, she is the first woman to lead a major Wall Street bank.

The only child of an accountant father, Fraser worked as a golf cad in her youth before attending Cambridge University and Harvard Business School. Fraser began her career at Goldman Sachs Group Inc, then became a partner at McKinsey & Co and held several leadership positions at Citi before taking the helm two years ago.

Fraser praised the swift action of US regulators to prevent the bank runs that toppled Silicon Valley Bank and Signature Bank earlier this month from spreading.

The Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation invoked “systemic risk exceptions” that allowed them to guarantee billions of dollars in uninsured client money.

“It’s very important to protect savers,” Fraser said. “The banking system around the world depends on trust, and that trust must be in the safety and security of deposits,” she said.

Reporting by Lananh Nguyen and Saeed Azhar; Edited by Sonali Paul and Stephen Coates

Our Standards: The Thomson Reuters Principles of Trust.


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