Citi Under Fire From FDIC; Fed More Sanguine, Unlikely To Move Spreads

Citigroup (C: A3/BBB+/A) being reported as getting a “failing grade” on its “living will” resolution plans. These plans have been problematic for a range of banks since their introductions and, for Citi, the Fed isn’t going to follow the FDIC’s lead this time – this should limit any credit impact, in our view.

• WSJ is reporting that the FDIC is preparing to downgrade Citi’s resolution plan to a “deficiency” from a “shortcoming”, specifically referring to its handling of data and, thereby, risk management. These have been subject to both Fed and OCC criticism before so is hardly a new item plus a range of banks have failed in the years since the financial crisis as they’ve come to grips with the requirements of these tests.
• For Citi, this appears unlikely to mean a change in capital requirements and shouldn’t really be a credit mover, especially as the Fed is apparently not going to issue a similar downgrade to the bank.