Citigroup CEO declares ‘this is not a credit crisis’ after U.S. bank failures

By Lananh Nguyen and Saeed Azhar

(Reuters) – Citigroup Inc (NYSE:) CEO Jane Fraser on Wednesday expressed confidence in U.S. banks after a series of closures rattled investors and fueled turmoil in global financial markets.

“The banking system is pretty sound,” and large and regional banks are well-capitalized, Fraser told the Economic Club of Washington D.C. on Wednesday.

“This is not a credit crisis. This is a situation where it’s a few banks that have some problems, and it’s better to make sure that we nip that in the bud,” she said.

In the past two weeks, two U.S. banks collapsed, Credit Suisse Group AG was taken over by Swiss rival UBS Group AG (SIX:) and America’s biggest banks agreed to deposit $30 billion in another ailing firm, First Republic Bank (NYSE:).

Citi, the fourth-largest U.S. lender, was one of 11 major banks that threw a lifeline to First Republic last week, in an effort to help it buy time for restructuring.

Fraser said Citi is not interested in buying First Republic and expects to get paid back the $5 billion of uninsured deposits her company contributed to the lender, which was intended as a mark of confidence.

The unprecedented action unified banking behemoths that are normally fierce competitors, she said.

“We usually try and kill each other in different deals that we’re trying to do,” Fraser said. “But in this instance, this is one where we’re in a strong position, we want to stop what could have been a problem.”

(This story has been refiled to insert a dropped word in paragraph 1)