The head of Citigroup denied that there was a credit crisis despite three U.S. bank failures and the collapse of Credit Suisse this month.
Citigroup CEO Jane Fraser stated that she had sound confidence in American banking system after the series of closures caused investors to panic, sparking chaos in financial markets worldwide.
“The banking system is pretty sound” and that large and regional banks are still well capitalized, Fraser told the Economic Club of Washington, D.C., on March 22.
“This is not a credit crisis. This is a situation where it’s a few banks that have some problems, and it’s better to make sure that we nip that in the bud,” said Fraser, one the first major bank CEOs to make a public comment since the crisis began.
Major Banks Keep Smaller Rival Afloat for Now
Over the past two weeks, Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank (SBNY) collapsed, with the latter two being taken into receivership by the federal government.
SVB failed after making risky bets in the bond market, while SBNY and Silvergate Bank got too heavily involved in cryptocurrencies.
Soon after, Credit Suisse was taken over by its Swiss rival UBS, while America’s top lenders agreed to deposit $30 billion into First Republic Bank after its near collapse last week.
“I don’t think anyone was falling off their chair that Credit Suisse ultimately ended up where it did, it was really a question of time,” said Fraser, who said she wasn’t surprised.
“It’s been a troubled institution for a long time,” she explained, noting long-term problems with management and various crises.
Citi, the fourth-largest U.S. bank, was one of the 11 major banks which offered a lifeline to First Republic in an effort to help it buy more time for restructuring.
Fraiser said that although Citi has no intention in buying First Republic, the bank contributed about $5 billion as a sign of confidence in the troubled lender and expects to be paid back.
By Bryan Jung