Citi Living Will Criticised by FDIC: Unlikely A Spread Mover

Citigroup (C: A3/BBB+/A) is now being reported by the FT as seeing its “living will” being hit with a “rebuff” at an FDIC meeting on 20-Jun. This was first reported by the WSJ on 18-Jun and our view then was that this is unlikely to have any meaningful credit impact.

• The WSJ reported (18-Jun) that the FDIC was set to reject Citi’s living will but the fact that the Federal Reserve wasn’t set to issue any similar censure meant we felt credit impacts should be very limited.
• Further, the specific shortcomings (data and risk management) had previously been criticised by both the Fed and the OCC so this was hardly new news. A range of banks have seen their living wills “failed” by US regulators since the rules were introduced over a decade ago. The complexity of the largest global banks remains a risk issue for the industry but CEO Fraser’s entire strategy is around simplification and streamlining of Citi to drive greater shareholder returns, in our view.