Citigroup arranged more than $7bn of collateralized loan obligations in the U.S. this year through September, three times as much as the same period last year and more than any other lender, according to data compiled by Bloomberg and Morgan Stanley.
The bank also caters to money-market funds, manages share sales in mortgage real estate investment trusts and runs a stable of internal credit funds.
All are part of a shadow-banking system that offers complex forms of credit and that led to billions of dollars in losses during the financial crisis. While regulators from Washington to Brussels say they’re scrutinizing this lending to prevent another calamity, banks including Citigroup, Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) are among its biggest enablers.
'I agree with Mr. Pandit that financial reform really hasn’t dealt with shadow banking', said Erik Gerding, a law professor at the University of Colorado in Boulder who specializes in banking regulation. 'But I disagree in that large financial institutions, large investment banks, are really key players in the shadow-banking network'.
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