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Citigroup Revises Capital Ratio Target 

February 26, 2014
Zacks.com for Nasdaq

Citigroup Inc. recently lowered the set target for its Basel III Tier 1 common capital ratio from 10% to 9.5%. However, the targeted ratio remains above the minimum requirement by 50 basis points (bps). 

Despite dismal performances over the last two quarters, Citigroup continued to maintain healthy capital ratios. Considering this, does the downward revision of the stipulated target indicate anything wrong in the company's financials? 

Actually the decline does not indicate deterioration in Citigroup's balance sheet. Instead this follows an approval from the Federal Reserve that allows the bank to adopt Basel III "advanced approach" to estimate its Risk Weighted Assets (RWAs) with effect from second-quarter 2014. 

In accordance with the advanced approach, Citigroup has to increase its RWAs from $232 billion to $288 billion. An increase in RWAs will result in a decline in Tier 1 common capital ratios, foreseeing which the bank took the latest action. 

Read more: Nasdaq

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