After a financial collapse, Wachovia, UF's official banking partner, announced plans Monday to turn over all its banking operations to Citigroup - a move that would establish Citigroup as one of three giants in the banking industry.
The companies established that Citigroup would pay about $2.1 billion to Wachovia and assume the company's debts, according to a Wachovia press release.
The deal is expected to close by the end of the year.
Citigroup spokesman Rob Julavits said because the integration will happen gradually over the next two years, it is too early to tell what changes Wachovia customers will experience.
Julavits said Citigroup, which will have about 4,300 branches, will still be able to respond to the financial needs of its customers.
Ed Poppell, UF's vice president of business affairs, said though it's too early to know exactly what will happen, he did not expect the university or its students to be affected.
Poppell said he's not worried because UF never keeps a large sum of money with Wachovia for an extended period of time.
Every night, funds are transferred out of Wachovia and invested in the state treasury. Every morning, the university puts the money needed for the day back into the bank.
He said collateral, money in a bank's reserve required to match money invested in the bank, also protects the university's money.
"If something should go wrong, they're required to have my dollar protected," Poppell said.
But there are other concerns associated with the deal.
David Denslow, a UF economist, said that after acquiring Wachovia, Citigroup would become one of three superbanks - along with JPMorgan Chase and Bank of America - which he feared would discourage domestic competition.
Eventually, the superbanks would probably be able to compete with international banks, Denslow said.
One of the factors leading to Wachovia's collapse was its involvement in risky investments, he said.
Wachovia's acquisition of Golden West Financial, a mortgage lender in California, left the company with "questionable" mortgages that collapsed because of the unstable housing market, Denslow said.
"It would have been a very good acquisition if it wasn't for the financial collapse," he said.
Poppell said that despite a few bad decisions, Wachovia is a reliable banking partner for UF.
"Wachovia still does an excellent job and will continue to do an excellent job," he said.
