Citigroup Inc said on Friday that new accounting rules for securitisation trusts may prevent the bank from funding some of its assets with a top debt rating. The rules could lift Citigroup's borrowing costs, which have already risen since 2007 amid the financial crisis.
Citigroup packages billions of dollars of assets into bonds and sells them to investors every year. It uses funding vehicles to do so. These vehicles were often not included in the company's main balance sheet, but new accounting rules will force them to be consolidated with the rest of Citigroup's assets and liabilities.
The result should be an addition of about $154 billion to Citigroup's assets, based on September 30 figures, the bank said on Friday. If the Federal Deposit Insurance Corp does not change the rules regarding how it treats debt from these vehicles when a bank collapses, rating agencies may downgrade the vehicles' debt.
And the vehicles may not be able to issue the top-rated triple-A securities they tend to rely on, Citigroup said in its quarterly filing with regulators on Friday. In fact, new debt could potentially be rated no higher than Citigroup's ratings, the bank said. That would likely lift the bank's borrowing costs when funding, for example, new credit card loans.