> Let’s consider how this should likely play. The loss here of Citi isn’t materially that they lose the money. It would get rolled into a loan to Revlon at the same rates. Revlon still has to pay it, just Citi has to float the time.
Neither Citi or Revlon have agreed to lend/borrow money from each other. Citi isn’t party to any of the loans Revlon has taken out (other than as a financial administrator). So why would Citi suddenly just taken on this loan to Revlon?
It would like if your bank accidentally paid off your credit card (we’ll ignore how that might actually happen). You wouldn’t suddenly have a loan agreement with your bank.
How would that work? Neither party agreed any terms. What would the interest rate be, repayment period etc?
Your bank won’t even know what agreement you had with your credit card provider, so they would need to rely on you being honest about what you owed and the interest to pay. And no they couldn’t just ask your credit card provider, that would be a massive breach of privacy.
That’s ignoring the fact there’s no guarantee that your bank can support such a loan. Even if they have the cash, they might not be able to continue meeting their regulatory capital and liquidity requirements. Especially as it would be a high risk loan (both in your hypothetical scenario and in Citi’s real scenario).
In short there are many reasons why you can’t just go “oh it’s your loan and your problem now, good luck with the hot potato”.
> Let’s consider how this should likely play. The loss here of Citi isn’t materially that they lose the money. It would get rolled into a loan to Revlon at the same rates. Revlon still has to pay it, just Citi has to float the time.
Neither Citi or Revlon have agreed to lend/borrow money from each other. Citi isn’t party to any of the loans Revlon has taken out (other than as a financial administrator). So why would Citi suddenly just taken on this loan to Revlon?
It would like if your bank accidentally paid off your credit card (we’ll ignore how that might actually happen). You wouldn’t suddenly have a loan agreement with your bank.
How would that work? Neither party agreed any terms. What would the interest rate be, repayment period etc?
Your bank won’t even know what agreement you had with your credit card provider, so they would need to rely on you being honest about what you owed and the interest to pay. And no they couldn’t just ask your credit card provider, that would be a massive breach of privacy.
That’s ignoring the fact there’s no guarantee that your bank can support such a loan. Even if they have the cash, they might not be able to continue meeting their regulatory capital and liquidity requirements. Especially as it would be a high risk loan (both in your hypothetical scenario and in Citi’s real scenario).
In short there are many reasons why you can’t just go “oh it’s your loan and your problem now, good luck with the hot potato”.