March 22 (Portal) – Citigroup Inc (CN) CEO Jane Fraser on Wednesday expressed confidence in US banks after a series of closures unsettled investors and fueled turmoil in global financial markets.
“The banking system is pretty solid,” and large and regional banks are well capitalized, Fraser told the Economic Club of Washington DC on Wednesday.
“This is not a credit crunch. This is a situation where some banks are struggling and it’s better to make sure we nip this in the bud,” she said.
In the past two weeks, two US banks have collapsed, Credit Suisse Group AG (CSGN.S) has been taken over by Swiss rival UBS Group AG (UBSG.S) and America’s biggest lenders have agreed to invest $30 billion in the ailing First Republic Bank (FRC) to deposit .N). Fraser’s public statements were among the first by a major bank chief since the riots began.
Citi, the fourth-biggest US lender, was one of 11 big banks to throw a lifeline to First Republic last week to help it buy time to restructure.
Though Citi isn’t interested in buying First Republic, Fraser said it contributed $5 billion to the lender as a show of confidence — and expects a repayment.
The move to prop up First Republic is an unprecedented show of unity among banking giants, which are normally fierce competitors, she said.
“Usually we try to kill each other on different deals,” Fraser said. “But in this case we are in a strong position, we want to stop what could have been a problem.”
Bailout efforts failed to halt a 15% plunge in First Republic shares on Wednesday.
Elsewhere, the takeover of another troubled lender, Credit Suisse, by rival UBS on Sunday was not surprising, Fraser said.
“I don’t think anyone fell off their chair, that Credit Suisse ended up where they did, it really was a matter of time,” Fraser said. “It’s been a troubled institution for a long time,” she said, citing management instability and various crises.
Scottish-born Fraser also spoke about her life and career in a wide-ranging interview with Carlyle Group Inc (CG.O) co-founder David Rubenstein. She is a travel enthusiast and has two college-age children. She is the first woman to head a major Wall Street bank.
The only child of an accountant father, Fraser worked as a golf caddy in her youth before attending Cambridge University and Harvard Business School. Fraser began her career at Goldman Sachs Group Inc, then became a partner at McKinsey & Co and held several senior positions at Citi before taking the helm two years ago.
Fraser hailed the swift action taken by US regulators to stop the spread of the bank runs that brought down Silicon Valley Bank and Signature Bank earlier this month.
The Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation invoked “systemic risk exemptions” that allowed them to guarantee billions of dollars in uninsured customer funds.
“It’s very important to protect depositors,” Fraser said. “The banking system around the world depends on trust, and that trust must be in the safety of deposits,” she said.
Reporting by Lananh Nguyen and Saeed Azhar; Adaptation by Sonali Paul and Stephen Coates
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