Big banks don't need to be split up: Sandy Weill

Banks still don't know the rules: Weill
Banks still don't know the rules: Weill

The big banks don't have to be split if the "right regulation" is in place, Sandy Weill, former chairman and CEO at Citigroup, told CNBC on Tuesday, a year after he shocked the financial world by calling for the breakup of the investment banking and commercial banking operations.

But Weill added in a "Squawk Box" interview that if regulations prevent investment banking from operating in a constructive way within big banks, then they should decide on their own to "split if they figure that's the best way that they can provide their services."

(Read More: Hey Jamie, call me maybe: Sandy Weill)

He stressed that banks still don't know what the rules will be because regulations are not finalized, but he warned that the financial industry will be ineffective if new rules are too restrictive.

"A lot of the things we talked about [last time] have happened and even gotten worse. Like for example, the attack on anyone who's called a banker," Weill said.

Banks can't accomplish great things if they aren't allowed to make mistakes, he said.

Weill also told CNBC that he and his wife, Joan, are making an additional $100 million donation to Weill Cornell Medical College as a part of their $300 million fundraising effort.

(Read more: Philanthropy isn't just about money: Sandy and Joan Weill)

One year ago in a "Squawk Box" interview, the so-called father of the supermarket bank said, "What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that's not going to risk the taxpayer dollars, that's not too big to fail."

Scott Mlyn | CNBC

Reflecting on those comments a year later, Weill told CNBC, "I got a lot more positive reactions than I thought I might. I didn't get many reactions from Wall Street, which is very understandable."

Banks have done well recently because of the steep bond market yield curve, he said, but the current low-rate environment is not good for the nation in the long-term because it's squeezing savers.

Weill also commented on the job CEO Michael Corbat has done since taking the Citigroup helm in October. "I think he's terrific. I think he's the right person for the job at this time. I think he knows all of the businesses. I think the top people in the company respect him."

Corbat was at Citi when Weill was there. "I know him very well," Weill added. "I'm finally happy with Citi's management." But he made it clear he was no fan of Corbat's predecessor Vikram Pandit.

(Read more: Vikram Pandit: I Was Not Forced Out at Citigroup)

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. CNBC's hedge fund specialist Maneet Ahuja contributed to this article. Follow her on Twitter @WallStManeet.