The collapse of MF Global Holdings Inc. is evidence that the financial industry needs more transparency on disclosure and derivatives, according to Citigroup’s chief executive Vikram Pandit.
Pandit spoke at a Securities Industry and Financial Markets Association conference recently, arguing that non-banks that engage in banking activities should be regulated the same way that banks are regulated, IndiaTimes.com reports.
Pandit blamed MF Global’s European exposures for ultimately sinking the firm and said it highlighted the need to put derivatives on clearinghouses and exchanges.
MF Global is considered a “shadow bank,” which is a financial firm that is not subjected to regulations applied to traditional banks.
"Shadow banking is really important and prudential regulation can't stop only at a few firms," Pandit said, according to IndiaTimes.com.
MF Global, the holding company for the broker-dealer led by Jon Corzine, the former Goldman Sachs co-chief executive officer, filed for bankruptcy protection at the end of Oct. after it made a $6.3 billion bet with the firm’s money on European sovereign debt.
Pandit said that the current economic environment has not fully recovered from the 2008 financial crisis and that the world is struggling to sort through what built up and caused the crash.
"We learned yet again what happened to the world when leverage rises to levels that are unsustainable," Pandit said, according to IndiaTimes.com. "We are still living through that. It does need capital and other oversight. If you want to be in the business that's the price you have to pay."