Cap Markets

Led by veteran banker Stephen Gordon, Genesis Bank in Newport Beach, California, plans to use the funds pledged by private equity firms and other investors to roll up community banks in the Western U.S.

The muni market finances the "fabric of our nation, and now, because of Citi's exit, the cost of financing for state and local governments is going to go up," a sell-side source said.

After months of speculation, the firm confirmed it would "wind down" its municipal underwriting and market-making activities after a "broad-based review" of its muni business, according to a company memo.

Within the bank, Ed Emerson, , who leads the commodities-trading business, is known as a vocal critic of CEO David Solomon's leadership.

Proposed capital rules aimed at bigger institutions will force regional and larger community banks to consider ways to grow or seek an exit strategy, bankers and analysts predict.

The move gives stockholders a greater portion of recurring, predictable income as private equity asset sales stagnate due to higher interest rates and jitters over a potential recession. In exchange, the firms' dealmakers will get a bigger slice of the gains when their investments pay off.

U.S. regulators' swift action in March to ring-fence the banking sector after the collapse of Silicon Valley Bank might have had an unintended consequence of driving cash out of bond funds by enhancing the appeal of deposits, two New York Fed researchers say.

The Federal Reserve's vice chair for supervision noted that so-called basis trades by hedge funds are highly leveraged and use minimal haircuts. He added that much of this activity is concentrated among just a few funds.

The top five have more than $1.3 trillion in combined total assets as of March 31, 2023.

Financing buyouts with "payment-in-kind" loans can preserve cash, but cost more; banks are losing out to private lenders on some of these deals.