Citi Turns 200: Connecting the dots
October 19, 2012 09:00 AM
In celebration of Citigroup's 200th Anniversary, we are sharing stories from our rich history here on this blog. The 30th installation below covers how the bank's flourishing business helped provide processing and clearing for international customers. Read the 29th installment explaining how the bank dealt with financial panics in the early 1990s, here.
Connecting the dots
With the aid of Citi's global network, a flourishing business provides processing and clearing for international customers
From its beginnings, the City Bank of New York was involved in international transactions and finance. In 1902, according an industry observer of the time, it was the only bank that could pay out "any sum of money in any currency in any city in the world within hours." This meant that it had to establish effective transaction services. Like its peers, it had a front office where officers assessed risks and made loans, and it had a back office where transactions were cleared and settled, and all the paperwork was processed.
The bank's early focus on corporate clients with large foreign operations afforded it a unique perspective on the cash management and trade finance needs of international corporations such as Armour, Dupont, International Harvester, Standard Oil, W.R. Grace, and Nestlé. The bank took on the role of trusted adviser and business enabler to an expanding, global client base.
In the 1980s and 1990s, with the rise of outsourcing and offshore manufacturing, Citibank expanded its transaction services network. Branch operations were established to offer cash management and trade finance to clients as they entered new markets, set up foreign subsidiaries, or entered into joint ventures. As Citi became more locally embedded, the local currency deposits generated by this expanding business allowed the bank also to provide banking services to local clients. In turn, as these local clients from the emerging markets sought to grow beyond their domestic markets, they relied on Citi to facilitate their trade flows, optimize the flow of cash across their expanding operation, and integrate the financial operations of new businesses they acquired. Citi served financial institutions by providing access to local clearing, settlement, and custody services in countries where they did not have a presence, and consequently established the industry's largest proprietary network. This network was further leveraged as the investment industry expanded.
In the first decade of the 21st century, Citi acquired ABN AMRO's custody network, as well as Forum Financial and Bisys, to extend its suite of middle- and back-office capabilities in fund services. Asset managers and institutional investors across the Americas, Europe, and Asia rely on Citi for market access and core processing, accounting, performance management, and compliance-monitoring services that enable them to focus on growing their business.
Citi connects diverse counterparties and enables flows across a broad range of financial and non-financial transactions, from helping multinational corporations manage their working capital, to helping banks in Africa and Latin America efficiently connect with trade counterparties in Asia. In the United States, Citi processes some 13 million passport applications for the U.S. Department of State each year.
Today, Citi's clients across the corporate, financial, and public sectors rely on Global Transaction Services not only to "connect the dots" across their network of business entities and subsidiaries, but to deliver services that form a vital part of their financial operation.