The Federal Reserve Board on Wednesday approved the merger of Citicorp and Travelers Group Inc., a combination that would create the world's largest financial-services company, subject to the divestiture of some key insurance activities within five years.
The Fed action removes the last obstacle to the merger and allows for the deal to be completed by early next month. The Justice Department also announced Wednesday that it had no antitrust problems with the merger, which would create a new company, to be called Citigroup, with assets of $751 billion and operations in banking, brokerage and insurance businesses.The Fed will also require Citigroup to divest itself of a number of businesses within the next two years in order to comply with the 1956 Banking Holding Company Act. A bill to overturn that 1956 law, which would allow Citi-group to be created with very few divestitures, is now wending its way through Congress.
If that bill is not approved, Citigroup would be faced with having to sell the Travelers insurance-underwriting operations - along with its real-estate management and investment operations, the trading of physical commodities and its oil and gas exploration business.
The Fed, however, did agree to allow Salomon Smith Barney, the securities arm of Travelers, to continue many of its securities activities for two years.