WASHINGTON - The Federal Reserve Board has given Citigroup Inc. an extra year to divest a few subsidiaries that financial holding companies may not own under current law.
The Fed approved the merger of Citicorp and Travelers Group in 1998 on condition that the resulting company, Citigroup, would have to sell off its insurance underwriting and nonfinancial businesses, which bank holding companies were barred from owning at the time.
Since then, financial reform was enacted that permits diversified companies such as Citigroup to become financial holding companies and engage in a broader range of activities, including insurance underwriting. That law, the Gramm-Leach-Bliley Act of 1999, allows Citigroup to keep most of the business that it was originally under order to jettison.
The Fed said Thursday that it had determined that a few Citigroup subsidiaries - which represent less than 2% of the company's assets - handle activities that still do not qualify as "financial in nature" or closely related, and must be sold. These include a physical commodities unit, foreign investment advisers and money managers, and limited partnerships for crude-oil gathering and pipeline distribution.
However, Citigroup has been unable to divest those businesses yet, so the Fed granted it an extra year, until Oct. 8, 2001, to comply.
In an unrelated matter, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have extended until Oct. 18 the public comment period on Citigroup's deal to buy Associates First Capital Corp. Critics of Associates, which is under Justice Department investigation for predatory lending practices, want regulators to block the merger.