Oct 14 Citigroup Inc and State Street Corp
have been exploring ways in which they might impose
limits on the use of short-term treasury bills due in the coming
weeks as collateral, the Wall Street Journal reported, citing
people familiar with the matter.
Because of the uncertainty over U.S. finances, banks and
money market funds are already shunning some government
securities that are often used as collateral for short-term
loans and to facilitate many other transactions.
Citigroup and State Street have large clearing operations,
standing in between counterparties to guarantee trades in the
event of a default by one party.
Citi has started telling some clients that it may not accept
bills maturing Oct. 24 or Oct. 31 as collateral, the Journal
There was no set policy in place, but Citi was sounding out
certain clients about whether they could instead substitute
Treasurys that mature at a later date, the paper said.
Certain units of State Street have been discussing which
Treasury bills it may restrict as collateral for loans and
trades, the Journal said, citing a person familiar with the
A spokesman for State Street told the newspaper that the
company is monitoring negotiations in Washington and evaluating
ways to protect its clients, but had not implemented any changes
to its collateral policy.
Citigroup spokesman Mark Costiglio declined to comment on
the Journal report when contacted by Reuters.
State Street could not immediately be reached for comment by
Reuters outside of regular U.S. business hours.