What Citi Said That Goldman Didn’t

We’re starting to get a look at the new global banking landscape.

Yesterday, Citigroup released its Q2 earnings. Including some important snapshots of how the company stacks up under recently-introduced rules.

Particularly interesting was Citi’s calculation of its “Basel III” metrics. These are new banking rules approved earlier this month by U.S. regulators. Although Basel III doesn’t go into effect until 2014, Citi revealed how its accounts look under the new scheme.

And the results are not bad. Citi notes that its “leverage ratio” under Basel III is currently about 4.9%. That’s a measure of the firm’s capital against its trading assets. Basically, a computation of how much “rainy day” money the company has on hand in case we have another banking crisis.

U.S. Basel III regulators are targeting a minimum 5% leverage ratio for bank holding companies that don’t take deposits. So Citi is pretty close. The bank didn’t calculate a leverage ratio for its deposit-taking unit. That arm of the company would need to meet a tougher, 6% ratio.

This is generally good news for Citi. Any banks that come in below the leverage ratio requirements will be forced to raise more capital to be compliant. (Overnight, Singapore’s United Overseas Bank raised $670 million explicitly aimed at meeting its Basel III capital needs.)

It will be interesting to see how the other big banks look under new reporting. Goldman’s earnings report this morning didn’t include any mention of Basel III measures. It appears that unlike Citi, the bank isn’t going to reveal its position until it has to.

Here’s to bringing in the new,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

Add a Comment

Your email address will not be published. Required fields are marked *