Citigroup, State Street gear up for possible US debt default - WSJ

Reuters

Oct 14 (Reuters) - Citigroup Inc and State Street Corp have been exploring ways in which they might imposelimits on the use of short-term treasury bills due in the comingweeks as collateral, the Wall Street Journal reported, citingpeople familiar with the matter.

Because of the uncertainty over U.S. finances, banks andmoney market funds are already shunning some governmentsecurities that are often used as collateral for short-termloans and to facilitate many other transactions.

Citigroup and State Street have large clearing operations,standing in between counterparties to guarantee trades in theevent of a default by one party.

Citi has started telling some clients that it may not acceptbills maturing Oct. 24 or Oct. 31 as collateral, the Journalsaid.

There was no set policy in place, but Citi was sounding outcertain clients about whether they could instead substituteTreasurys that mature at a later date, the paper said.

Certain units of State Street have been discussing whichTreasury bills it may restrict as collateral for loans andtrades, the Journal said, citing a person familiar with thematter. ()

A spokesman for State Street told the newspaper that thecompany is monitoring negotiations in Washington and evaluatingways to protect its clients, but had not implemented any changesto its collateral policy.

Citigroup spokesman Mark Costiglio declined to comment onthe Journal report when contacted by Reuters.

State Street could not immediately be reached for comment byReuters outside of regular U.S. business hours.

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