Citigroup may require $10 billion more in new capital: report

02 May 2009

The US financial services company Citigroup may need to raise as much as $10 billion in new capital, based on leads from the recent stress tests conducted by the US government, said The Wall Street Journal yesterday.

Along with other financial institutions, Citigroup is negotiating with the Federal Reserve to accept the fact that its financial health is sound and in a best-case scenario, the group could have approximately $500 million cushion, more than what the government requires, the Journal reported citing sources.

Earlier this week, the WSJ had reported that after conducting the stress test, the US government found that both Citigroup Inc and Bank of America Corporation may need to raise more capital. (See: Citi, Bank of America told to boost capital: report)

The US government's stress test report is likely to be released on 7 May, which is expected to show that the banks would require raising billions of dollars of extra capital.

The US government had conducted stress tests on 19 major US banks to identify individual strengths of the financial institutions and to see how well they are positioned to ride out the slump.

In the meantime, the Federal Reserve has asked banks to estimate their losses based on several economic scenarios, in which GDP, unemployment and house prices fell by varying amounts.