Keating criticizes calls to break up America’s largest banks

Frank Keating

Frank Keating, the president and CEO of the American Bankers Association, recently said that breaking up America’s largest financial institutions would be detrimental to the fragile economy and would force corporations into the arms of foreign competitors.

“None of the top five banks in the world are based in the U.S.—in fact, our country only has one in the top 10,” Keating said, according to The Weekly Standard. “Reducing the size of America’s largest financial institutions would severely diminish their capacity to serve our country’s largest businesses. And while small and regional banks remain the backbone of their communities, these institutions are in no position to finance the needs of our nation’s largest corporations.”

Keating also said that major corporations often require complex financial services that only America’s largest financial institutions can provide.

“If the U.S. banking industry can’t meet their needs, there are a number of countries that are ready—and willing—to step up to the plate,” Keating said, The Weekly Standard reports.

Additionally, Keating said that the problem with too-big-to-fail is that those parties at risk of losing money are protected by the government, adding that the solution is to ensure that equity owners take losses in the event of a bank failure.

“These important steps toward ending ‘too big to fail’ emphasize private sector responsibility while ensuring shareholders understand their principal is at risk—and they will not receive any taxpayer assistance in the event of a failure,” Keating said, according to The Weekly Standard. “Breaking up banks doesn’t deal with this fundamental problem at all, but surely would create many more difficulties in the meantime.”

Keating emphasized the careful consideration of proposals that could possibly damage the U.S. economy, adding that America’s largest banks employ a large number of individuals and provide critical financial services to major corporations.

“Assuming the worst and launching a preemptive strike that would cripple America’s competitive advantage is not the solution,” Keating said, The Weekly Standard reports. “Stringent ‘if you fail, you lose’ policies will assure the market doesn’t assume the best in a worst-case scenario. Let the [Federal Deposit Insurance Corp.’s] resolution strategy work if need be and allow America’s largest institutions to serve corporations here at home.”

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