Citigroup appoints new leadership as sub-prime losses rise
by Gill Montia
Citigroup, the world’s largest bank, has appointed Robert Rubin, the former US Treasury Secretary, as chairman.
Sir Win Bischoff, the head of Citigroup’s European operations, will take over as interim chief executive.
The appointments follow the revelation that the bank’s additional writedowns in relation to the US sub prime mortgage crisis could total $11 billion, over double the most recent estimate of $5 billion.
The news left Charles Prince, Citigroup’s former chairman and chief executive in an untenable position and he is reported as saying that “the only honourable course for me to take as chief executive officer is to step down.”
Citigroup estimates that additional losses from sub-prime related investments will be between $8 billion and $11 billion and the sheer scale of the losses has shocked the global the banking industry.
In addition, it is rumoured that the Securities and Exchange Commission, the US financial regulator, is will be conducting an investigation into the bank’s use of structured investment vehicles (SIVs).
Under the leadership of Charles Prince, Citigroup built up assets of around $80 billion in SIVs trading under names such as Beta, Centauri and Dorada.
These SIVs allowed the bank to use the short-term commercial paper market to raise money to back long-term investments, such as mortgages.
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