In an interview at the Fortune Global Forum in Cape Town, Citigroup Inc’s Non-Executive Chairman Richard Parsons said the Obama administration’s financial regulatory overhaul bill will make the U.S.’s largest banks bigger.
An article posted on Bloomberg.com quotes Parsons as saying,“They (the new regulations) will make it tougher for smaller competitors and the big are going to get bigger.”
Parsons went on to say the plans will lead to a “denser regulatory environment” and may not create any “material impediments” to Citigroup’s growth strategy, he said.
The Dodd-Frank act, that passed the House of Representatives last week contains what President Obama described as the “toughest financial reforms” since the Great Depression. The broadest changes affecting banks will regulate the $615 trillion over-the-counter derivatives market and mostly ban proprietary trading.
In Europe, banks like Citigroup and Deutsche Bank AG may face stress tests, while those with U.K. operations may be taxed more.
Group of 20 leaders, discussing global financial rules in Toronto, said banks need to have “significantly higher” capital, while giving lenders more flexibility to implement the changes. Countries should adopt the new standards by the end of 2012, and banks will be allowed to phase in capital increases during a transition period.
“I hope what comes out of the G-20 at least is that the leadership will agree that there will be some coordination,” said Maria Ramos, chief executive officer of Absa Group Ltd., South Africa’s third-largest bank by value. “The difficulty comes in when there are different announcements and uncertainty.”
Leaders said they will seek a final agreement at a summit in Seoul in November when the Basel Committee of Banking and Supervision, made up of international central bankers, will propose a road map. The U.S. pushed for stricter new capital rules while Europeans stressed the need for a phase-in period.
The Basel committee’s likely proposals on capital rules for lenders may be “restrictive,” Parsons said.
Parsons is in South Africa as part of Citigroup’s focus on expanding in emerging markets. Africa’s population of 1 billion creates a “sweet spot” for financial institutions, according to Parsons. The lender plans to fund more transactions in Africa, targeting growth in industries from oil and gas to mining and telecommunications. Nigeria and Angola provide “important” opportunities, he said.
Citigroup, which received a $45 billion government bailout in 2008, is the world’s ninth-largest bank by market value. The shares advanced 6 cents, or 1.5 percent, to $4 as of 11:43 a.m. in New York Stock Exchange composite trading.
