Citigroup Inc., the third-biggest U.S. lender, will close a proprietary-trading desk that makes bets with the firm’s own money and most of the unit’s staff will leave before rules banning the practice take effect.
Citigroup is shutting the Equity Principal Strategies business and most staff will leave the bank after Feb. 6, according to a memo by Derek Bandeen, head of equities for the New York-based bank, and obtained by Bloomberg News. Danielle Romero-Apsilos, a spokeswoman for Citigroup, confirmed the memo’s contents.
Citigroup Chief Executive Officer Vikram Pandit is closing the unit as regulators draft the so-called Volcker rule, which seeks to restrict banks that accept deposits from trading with shareholders’ money. The Citigroup team, led by former Morgan Stanley executive Sutesh Sharma, was partly responsible for equities-trading revenue plunging by $1.3 billion in 2011 compared with the prior year, the bank said last week.
“Pursuant to various regulatory initiatives and changes, we have made the strategic decision to exit the Principal Strategies business,” Bandeen said in the memo. “The team, led by Sutesh Sharma, have been aware of this for some time and have worked diligently to wind down the positions over the last few months.”
Sharma intends to form a hedge fund, two people familiar with the matter said in August. His Citigroup team managed about $2 billion, one of the people said.
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