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Citigroup sued for $835m by Norwegian central bank

Wednesday 29 September 2010 - by Will Henley

Norway’s central bank is suing Citigroup for $835m (€613m) relating to losses incurred during the global financial crisis, it has been revealed.

Norges Bank, which looks after one of the largest sovereign wealth funds in the world, blames the banking giant for a writedown of $735m (€539m) Citi shares and “in excess of $100m (€73m)” on bonds and preferred shares.

In a complaint filed at the Southern District Court in Manhattan, New York, the Oslo-based bank says: “By mid-2007 as the United States housing market declined, Citi had accumulated a large portfolio of loans at a high risk of default, as well as bundles of [collaterised debt obligations] it could not sell.

“While other banks began to show signs of trouble, Citi touted its ability to withstand the downturn. Citi did not disclose that it had been unable to sell many tranches of the CDOs it had created, leaving it holding assets that were losing value as the housing market deteriorated.”

Norges Bank says that Citi made “untrue” statements between January 2007 and January 2009 and failed to reveal the “magnitude of the downside exposure” on investments held on its behalf.


Accusing Citi of “increasing willingness to take on risks for the sake of profit," the complaint adds: “Despite [a] steady trickle of bad news, Citi continued to insist that the company was strong."

Citi’s stock price fell almost 93 per cent, from $47.72 (€34.99) to $3.50 (€2.57) between October 2007 and January 2009, according to the court papers.

Norges Bank looks after the international investments of one of the largest sovereign wealth funds in the world, the Norwegian government’s global pension fund.

In a statement, a Citigroup spokeswomen said: “We believe the suit has no merit and will defend ourselves vigorously.”


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