American Bankers Association President and CEO Frank Keating recently expressed disappointment in a statement by Dallas Federal Reserve President Richard Fisher that Dodd-Frank has failed to fix America’s “too big to fail” problem.
“Before we add another layer of new restrictions and corporate restructurings, it’s important to consider what Dodd-Frank actually instructs regulators—including the Fed—to do,” Keating said, citing stricter capital and liquidity requirements, annual bank stress tests, living wills and the establishment of the Financial Stability Oversight Council, all of which are designed to end “too big to fail,” according to The Wall Street Journal.
Keating said that solutions that appear to be simple may not be the answer to the problem, adding that a government-ordered restructuring does not work in a free-market society.
“[W]e have the strongest banking sector in the world with all-size banks connected in ways that are essential to our economy,” Keating said, The Wall Street Journal reports. “Breaking up large institutions would destroy these synergies and drive business to foreign competitors and shadow banks, ending our country’s status as a premier financial center. Let’s implement the mandates Congress enacted to end too-big-to-fail and enhance our financial system, not destroy it.”
Regulators have been slow in implementing Dodd-Frank, which contains nearly 9,000 pages of new regulations. Some banking industry participants have called for the break-up of large financial institutions to solve America’s “too big to fail” problem, though critics maintain that doing so would undermine the competitiveness of American financial institutions.