Citigroup said Wednesday it has the capital to withstand the Federal Reserve’s stress test, clarifying the Fed objected to its proposed return of additional capital because it could result in a capital ratio below the established five percent minimum.
The Fed released results of its latest Comprehensive Capital Analysis and Review, or stress tests, late Tuesday.
The tests look at how the 19 biggest US banks would fare in a severe downturn, including an unemployment rate of 13 percent, a 21 percent decline in housing prices and a 50 percent drop in equity prices.
Four firms, including Citigroup, failed to meet at least one of the capital requirements under the hypothetical stress scenario.
Citi said in a blog post Wednesday its minimum capital ratio based on that test was 5.9 percent, but after its proposed return of additional capital was factored in, the Fed calculated its minimum capital ratio at 4.9 percent.
“Simply put, the Federal Reserve’s objection to our capital plan does not equate with ‘failing’ the stress test,” the bank said.
Citi plans to submit a revised capital plan to the Fed later this year.
Shares in Citi opened down more than three percent in New York.