Bloomberg News

Citigroup Credit-Default Swaps Increase After Fed’s Stress Tests

March 13, 2012

The cost to protect Citigroup Inc.’s debt from default for five years climbed after the Federal Reserve said the third-largest U.S. bank failed to meet minimum capital requirements in a stress test.

Credit-default swaps tied to Citigroup increased to as much as 215 basis points from 200 basis points before the Fed assessment, according to broker Phoenix Partners Group. The contracts, which typically rise as investor confidence deteriorates, eased to 210 basis points as of 4:56 p.m. in New York, Phoenix data show.

A basis point equals $1,000 annually on a contract protecting $10 million of debt. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

The firm’s projected Tier 1 common capital ratio fell to 4.9 percent, below the central bank’s minimum requirement of 5 percent, in a test estimating the effects of a severe economic slump, according to Fed results released today. Capital plans can include dividend payouts, stock repurchases and share sales. New York-based Citigroup plans to submit a revised capital plan to the Federal Reserve, the bank said in an e-mailed statement.

To contact the reporter on this story: Mary Childs in New York at

To contact the editor responsible for this story: John Parry at

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