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Government may take big chunk in Citigroup

Staff Reporter 1 minute read

The US government may increase its ownership in Citigroup to up to 40 per cent in a bid to keep the troubled lender from insolvency.

The government’s ownership of 40 per cent of the bank’s common stocks would be the largest government investment in a financial institution since its 80 per cent investment in ailing insurer AIG in September, The Australian Financial Review reported today.

As concerns once again mount regarding the health of American banks, US regulators have stressed that they stand “firmly behind” the banking system and are willing to boost banks’ capital reserves to ensure credit is available to restore economic growth.

In a joint statement released by regulators including the US Treasury and Federal Reserve, the bodies announced the implementation of a Capital Assistance Program which will evaluate financial institutions’ capital needs and offer a government buffer should it be required.

The regulators said the scheme, which kicks off tomorrow, would be “available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers”.

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