Here is a link to Citibank's Client Manual:
On page 23:
In some instances, we may refuse a request for a withdrawal or
transfer from an account. The following list includes, but is not
limited to, the most common reasons we might refuse such requests:
. . .
If we decide to require seven (7) days advance written notice and we
have not received such notice;
. . .
We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past.
Although Citi currently does not require 7 days notice before returning your money, they reserve the right to do so. This means that in the next round of the credit crunch / runs on the bank, when Citi has poor liquidity and is on the brink of insolvency again, they will enjoy a little extra wiggle room by exercising this 7 days advance notice right.
These kinds of rules aren't exercised in good times, they are exercised when the bank is challenged with heavy withdrawals and liquidity problems.
A quick refresher on modern banking: the money you deposit at the bank is a loan to the bank. The bank has a liability to you (owes you money), but does not actually have the money. When a depositor (you the lender) wants to withdraw, the bank (the borrower) has to produce the money it owes.
Because banks never actually have the cash to cover all the deposits, a large number of withdrawal requests can push a bank to the point where it can not produce/find enough cash to pay out those withdrawals. At this point, the bank is insolvent and collapses.
Citi's new rule lets the bank stall the customer's request to withdraw money. You should be aware that if the bank ever stalls your request to withdraw money, they are still repaying other loans and you are missing the chance to get your cash before the bank collapses. Let me make it clear: you always want to get your cash as quickly as possible.
Upon seeing this change to their rules, I would be concerned that Citi is closer to insolvency than is commonly believed. I would be concerned that they will be unable to return my money.
- Perpetual Bull