US regulator may ask Citi's Vikram Pandit to go

05 June 2009

Frustrated with the pace of restructuring and the inability of the top management of Citigroup to clean up the bank's balance sheet faster, US banking regulator Federal Deposit Insurance Corp (FDIC) may ask Citi Group CEO Vikram Pandit to go.

Citing people familiar with the matter, The Wall Street Journal reported that FDIC chairman Sheila Blair is out to shake up the top management of the bank, jeopardising Pandit's job.

Blair is rumoured to have asked the US Federal Reserve to lower Citi's stress test results in April, in order to have more control over the bank, since the government has pumped in more than $300 billion in a loss-sharing agreement with Citi.

Last month, the government conducted stress tests on many US banks in order to identify individual strengths of the financial institutions and to see how well they were positioned to ride out the slump.

The results showed that Citigroup might need to raise as much as $5.5 billion in new capital (See: Citigroup may require $10 billion more in new capital: report) although the Federal Reserve estimated that in the worst-case scenario, the bank could face $104.7 billion in loan losses through 2010.

It also reported that despite the loan provision of over $4 billion for credit cards, auto and other unsecured loans, that Citigroup had made in the December quarter, it might be faced with nearly $20 billion in losses in its credit-card business as borrowers were finding it difficult to repay their credit card and other loan outstandings.