3. CitiBank
• Citibank was founded in 1812, as the city bank of New
York.
• Citibank has retail banking operations in more than 100
countries around the world.
4. CitiBank Japan
Yokohama in 1902
Maintained its presence without offering full-scale services.
Citibank in Japan provide services to:
1. Corporate
2. Consumer
3. Investment banking
4. Brokerage operations and credit cards businesses
5. Consumer Finance
Consumer finance has to do with the lending process that
occurs between the consumer and a lender.
How is it different than pawnbrokers or banks?
(Question addressed to the audience)
6.
7.
8. Defaulting Loans
Always been a problem, though not urgent due to Citi CFJ’s
financial backup from Citi group in the U.S.
Improving economy results in less personal bankruptcy and
therefore less defaulting loans.
9.
10. Lowering of Cap Rate
Possibility of a law lowering the interest cap to 25% (CSL)
All the loans with higher interest rate would decrease
revenue earned
Administrative reconstruction
Arguably not a big issue due to the financial backup from
Citi group in the US
11.
12. “Grey Zone”-interest
2 Laws, ILL and CSL
ILL dictates 15-20% (depending on loan size) addressing
banks
CSL dictates 29.2% addressed for Consumer Finance
Companies
13. Requirements for CSL
• Registered lender
• Loans deemed voluntarily
• Lenders delivered printed documents that fulfill specific
requirements of loan.
14. Problems occur when lawyers argue that the third
requirement is not fulfilled when lending through ATMs
and/or internet.
15.
16. Lawsuits
Two lawsuits affecting Citi:
1.Obligating lenders to disclose transaction history if
requested by borrowers.
2.Loans charging “Grey Zone”-interest that does not fulfill the
requirements is technically illegal.
17.
18. Repayment of Excess Interest
Ruling deciding whether or not Aiful needs to pay out excess
interest. (Pending)
If ruling is against Aiful it is highly likely that Citi CFJ will
have to repay all excess interest that has been charged on
loans with an interest rate in the “Grey Zone”-area that
was deemed not “Grey Zone”
Up to ten years back on any loan applicable
19. Example:
• A one million yen loan with a cap of 29.2%(CSL) is
deemed unfulfilling because of lacking documents and
should therefore be caped 15% resulting in Citi being
deemed to repay 14.2% of excess interest for a possible
period of 10 years.
24. Management Style
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• 1980: major consumer finance companies entered Japan
• Support by Japanese government
• Failed to adapt
• Debt counseling & historical repayment record
• 1986: all U.S. CLC’s except Associates left the market
• Associates’ half Japanese CEO & employees
33. Ethical dilemma
Good vs. bad
Positive life quality vs. negative
Help vs. take advantage
UTILITARIANISM: the greatest good for the
greatest number of individuals
Profit vs. charity
35. Conclusion
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• Citi constantly needs to adapt to customer needs, reinforced by the process of
acquisition and the maintenance of transparency. Additionally, they should be
aware of new trends such as the unmanned branches since they proved to
increase the risk of default and the threat of repaying overpaid interest.
• Smaller issues such as defaulting loans and lowering of cap rate is
insignificant due to low risk as well as low impact as a result of strong
financial backing. More importantly, the grey zones disputes end result;
namely the possibility of repayment of interest is of the highest priority. In
order to cope with this issue CITI needs to prepare for a potential huge
amount of lawsuits by stacking up cash and lawyer up.
Cultural differences did not only create opportunities for Citi but at the same
time it also accountable for a lot of challenges Citi needs to face. Culture
influences the image issue as well as the ethical dilemma, while the biggest
problem is remains as the instability of consumer lending. Citi needs to focus
on winning people’s trust and being prepared to adapt to the upcoming rapid
changes.
36. If we had more time...
we would like to look at:
1. Loan security
2. Lawsuits
Relevant for improving Citi’s Profit
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