Is Citi Cutting Risk Oversight?
Citigroup (NYSE:C) has done away with a committee the bank created during the credit crisis to get rid of unwanted assets, though the division still held Spanish and Greek loans, overdue U.S. mortgages and reduced bonds, and had made losses of $19 billion since its origin in 2009.
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The Citi Holdings oversight panel was dismantled while still being in charge of monitoring approximately $200 billion of these high risk and difficult-to-price assets. The group had been tasked with monitoring chief executive Vikram Pandit’s strategy to dispose of assets and check on “risk exposures.” Directors now will oversee Citi Holdings through the risk- management and finance committee.
“To remove the focus now on bad assets of any sort is simply a risky decision,” Gerald Hanweck, a former Federal Reserve economist, told Bloomberg.
Michael O’Neill had led the committee until he took over as chairman of the parent company in April. The panel also included Rockefeller Foundation President Judith Rodin, former Wells Fargo (NYSE:WFC) vice chairman Robert Joss, and Timothy Collins, chief of buyout firm Ripplewood Holdings.
Citigroup had $1.94 trillion in assets as of March 31, while the unit’s assets fell 28 percent to $225 billion last year. The loss at Citi Holdings grew to $1.03 billion in the first quarter from $1.02 billion a year earlier. The unit’s losses for the full year are expected to climb 10 percent from last year to $4.64 billion.
Citigroup has sold more than 60 subsidiaries since 2008 and reduced assets in Citi Holdings to 11 percent of the balance sheet as of March 31, a Citi spokeswoman told Bloomberg. “The vast majority of remaining assets represent non-operating businesses and we will continue to manage and reduce these assets in an economically rational manner,” Shannon Bell said.
One part of Citi Holdings contained the firm’s 49 percent stake in the brokerage firm Morgan Stanley Smith Barney, with Morgan Stanley (NYSE:MS) holding the rest.
Oversight on risky asset pools by investment firms has come under scrutiny after JPMorgan Chase (NYSE:JPM) reported a $2 billion loss tied to the trading of credit derivatives earlier this month.