Citigroup is planning to save $49 billion of structured investment vehicles (SIVs) in a move that places additional pressure on capital levels, Reuters reports.
The decision to move SIV assets to Citi’s balance sheet ties up the bank’s capital in assets and has the potential to further impair profitability.
A statement from Citi implies that it is still supporting a US Treasury-backed plan for a backup fund for SIVs, although the chances of it being established diminish without Citigroup’s vital assets.
“After considering a full range of funding options, this commitment is the best outcome for Citi and the SIVs,” says Vikram Pandit, CEO, citigroup, in an e-mailed statement reported by Bloomberg.
Writedowns of $6.5 billion have been posted in the third-quarter and Pandit will be hoping to prevent another $11 billion in writedowns occurring in the fourth quarter.
Shares in the US bank have fallen by 44% this year following concerns about their assets in the sub-prime market.
The decision to rescue the SIVs follows the news that Citigroup has appointed a new management team, led by Pandit.