Citi’s latest reason to be free of U.S. government ownership is that it could be forced to sell off one of its most profitable businesses.
In Mexico the pressure is on, where it’s illegal for a foreign government to own a domestic bank. Citi’s stake in Mexico’s Banamex has fallen afoul of this law.
Citi now has to prove that its U.S. government ownership isn’t long-term or overly influential, else it could be forced to discard a Mexican business that generates 15% of the company’s worldwide profit.
Other U.S. financial companies could run into similar problems as well.
Financial Times: The case could also affect other banks operating in Mexico’s foreign-dominated banking sector that now have foreign governments as shareholders following the global financial crisis. The list includes AIG, Bank of America and Bank of New York Mellon, as well as European banks such as Royal Bank of Scotland.
But Banamex has attracted special attention. Its full name is Banco Nacional de Mexico and, having spent much of its recent history in state hands, it remains a potent symbol of Mexican nationalism.
In March, the finance ministry passed a ruling stating that Banamex’s status was acceptable because the US government’s stake was circumstantial and transitory. However, the senators say they want the Supreme Court to decide whether that ruling is constitutional. Experts say if the decision goes against the ministry – the court has 30 days to decide whether it will examine the case – it could ultimately end in legislation forcing Citi to sell a stake in Banamex or even all of it.
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