UPDATE 1-Citi CEO Pandit criticizes some Basel rules

* Pandit: Basel III rules could create more risk

* Capital ratios will keep system safe if no more increases

NEW YORK, Oct 25 (BestGrowthStock) – Citigroup Inc (C.N: ) Chief
Executive Vikram Pandit criticized new global capital rules on
Monday, saying that the “reforms are headed in the right
direction,” but in some cases “don’t go far enough” or even
make the problems that led to the financial crisis worse.

Citigroup supports the higher capital standards under the
so-called Basel III rules, which “will help keep the banking
system safer,” Pandit said in prepared remarks at The
Economist’s Buttonwood conference in New York on Monday.

But he cautioned that further increases in those capital
standards would have the opposite effect.

“There is a point beyond which ‘more’ is not necessarily
‘better’ — for the banking system, for consumers, or for the
economy,” he said.

Pandit, whose company is still about 12 percent-owned by
the U.S. government after three taxpayer-funded bailouts, also
said that increased capital requirements could impede the
economic recovery, “by raising the cost of credit precisely
when credit is needed the most” and preventing many potential
borrowers from qualifying for loans.

The proposed Basel III rules also encourage the creation of
another shadow banking system, by regulating banks but not
non-bank financial companies, Pandit said.

“Shifting risk into unregulated or differently regulated
sectors won’t make the banking system safer. On the contrary,
overall risk in the system could actually rise,” he said. “The
new rules don’t cast a wide enough net, and they create new
incentives to rebuild some of the worst features of the very
environment that led to the crisis.”

Pandit concluded by urging further, transparent debate on
the proposed Basel III rules. He pointed to the lawmaking
process that led to the enactment of the new U.S. Dodd-Frank
financial reform law, saying it was “relatively open,
transparent, and reported. Basel should be debated just like
Dodd-Frank — in the open.”
(Reporting by Maria Aspan; Editing by Steve Orlofsky)

UPDATE 1-Citi CEO Pandit criticizes some Basel rules