Citigroup‘s chief executive, Vikram S. Pandit, likes to talk about transparency, and on Wednesday he repeated his call for new ways to compare the risks at different banks.
But there’s a crucial number that Citigroup doesn’t give out – and it’s one that is likely to help investors assess risks at the bank.
Taking questions at the Citi Financial Services Conference at the Waldorf-Astoria in New York, Mr. Pandit was asked whether the bank’s risk management had improved since the financial crisis. As part of his response, he reiterated his belief, stated in an opinion piece in The Financial Times in January, that banks and regulators could make new types of disclosures that would allow investors to compare risks across different banks. “Let’s make sure we get a level playing field and let’s get the information out in the market place so they can decide,” he said Wednesday.
That’s an admirable aim, but Citigroup could start by catching up with other big banks and releasing how much capital it has supporting its investment banking unit, called securities and banking. The unit had $894 billion of assets at the end of last year. Among American entities on Wall Street, only Goldman Sachs has more assets. But Goldman and Morgan Stanley disclose how much capital they have, allowing investors to judge whether their loss buffers are sufficient. JPMorgan Chase discloses capital for its investment banking unit, though it has been at $40 billion exactly for several quarters, raising questions about the number’s usefulness.
This doesn’t mean the securities and banking entity at Citigroup is skating on thin ice. Citigroup has raised its capital substantially over the last four years, and it presumably has some freedom to move more capital into units if they need it. But until investors get a better idea of the capital deployed at Citigroup’s units, they have reason to call on Mr. Pandit to first apply more transparency to his own bank.