Which banks are taking on more risk with new rules?

Jul 12, 2021 Online Advertising

Citibank has agreed to join a growing list of banks and credit unions that are raising questions about the role of private equity firms and other investment firms in the global financial system.

In an announcement on Thursday, Citibanks said it will now join a coalition of “third party” institutions including Fidelity, Ally Financial, JPMorgan Chase, Morgan Stanley, TD Bank, Wells Fargo, and UBS.

The banks are asking the regulators to set stricter standards for such investment firms, which have increasingly taken a dominant role in recent years in the financing of risky activities, like mortgage securities and credit default swaps.

The announcement comes as the Federal Reserve is preparing to begin raising interest rates next week, which could put more pressure on the financial sector.

The Fed’s announcement is likely to come as an early warning shot to other financial institutions, who could see their investment activities fall behind the pace of their peers.

The central bank raised rates for the first time last week, in the face of rising tensions over climate change.

For decades, banks have increasingly relied on private equity and other hedge funds and other venture capital firms to help finance risky investments.

In a wide-ranging report released in November, the Institute for Policy Studies found that private equity funds made up a small fraction of the banks’ total investment portfolio.

But those firms have taken on greater risks in recent months, and regulators have tightened rules and policies to restrict their activities.

As a result, the number of private-equity firms in large U.S. banks has more than doubled in the past five years, from 6 percent to 27 percent, according to the Institute’s report.For more:

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