Citi CEO Vikram Pandit made the following statement after Congressional conferees voted in support of comprehensive legislation to reform the U.S. financial regulatory system:
"Throughout the legislative process, Citi has fully supported efforts to strengthen regulations and protect consumers. I have been outspoken about the need for banks to be banks, focused on their clients and not speculating with their own capital; I have fully supported ending the phenomenon of 'too big to fail'; and I believe we must have a level playing field--the same rules for everybody and real transparency into financial transactions. Many of the reforms in the bill are consistent with these important principles.
"At the same time, we are working hard in the more than 100 countries where Citi operates to instill a culture of Responsible Finance by making sure our actions create economic value, are in our customers' interests, and are systemically responsible.
"Although there are aspects of the legislation which are different from what we would have preferred, we will be able to conduct a fuller assessment of its impact after the regulators issue new rules. That being said, it is our hope this agreement will provide direction and stability for the financial system going forward."
What provisions of the reform legislation did Citi's "Government affairs team" lobby against or do not support in its current form? What were the alternatives that Citi proposed? If the legislation is not modified according to Citi's preferences and results in extra taxes/fees for Citi, will Citi pass on the cost to its customers?
Citigroup has long supported the need for regulatory reform and advocated in support of many provisions in the new law. In fact, Citigroup CEO Vikram Pandit attending the ceremony when President Obama signed the bill into law.
There are aspects of the legislation which are different from what we would have preferred. As Citigroup operates in over 100 countries, we are always concerned about provisions that may put us, and other American banks, at a competitive disadvantage with foreign banks. As one example, the new reform law contains provisions on derivatives that could drive business from U.S. institutions to our competitors abroad. In this instance, Citigroup suggested that U.S. banks should be allowed to continue to engage in certain derivatives activities since they were not implicated in the financial crisis and allow banks to provide a full range of services to their clients.
Another aspect of the new law that concerns Citi is the increased costs we’ll shoulder on debit card fees, known as “interchange fees.” Currently, merchants pay for the benefit of accepting credit and debit card transactions from their customers. The new law shifts that cost for debit card transactions from the merchants to the banks and credit unions, thereby reducing our ability to offer benefits like reward programs or free checking accounts. At the same time, there is no evidence to indicate that retailers will pass their savings on to their customers. In this instance, Citigroup supported the current system, where interchange fees remain a cost that merchants face in exchange for the numerous benefits they receive from accepting debit cards.
That said, we will comply with all rules and regulations that will be drafted on behalf of the new law and hope it will provide the financial system with stability.