Volcker says banks too big, doesn’t advocate big bank break-up

Paul Volcker

Former Federal Reserve chairman Paul Volcker said during a Senate Banking hearing on Wednesday that America’s big banks are too big but did not endorse the idea of breaking up the financial giants.

“If you ask me if I would prefer a banking system that’s more decentralized, of course I would,” Volcker said, according to CNN Money. “But, I think we can live with what we have.”

Following the 2008 financial collapse, big bank critics have often endorsed the idea of breaking up the largest U.S. financial institutions to reduce risk to the financial system.

The 2010 Dodd-Frank Act instituted financial reforms that ultimately raised capital requirements and provided the framework for the regulation of derivatives trading, CNN Money reports.

The Volcker Rule is also a provision of the financial overhaul that prohibits banks from engaging in proprietary trading — or risky investments with client money.

Volcker said that Dodd-Frank establishes enough regulatory framework to reduce risks to the economy, adding that such reforms were instituted long before America’s foreign counterparts, according to CNN Money.

Volcker did offer a solution to too-big-to-fail – equipping regulators with enhanced tools that would better allow those agencies to liquidate the financial giants. Volcker also said that U.S. regulators should work closely with the United Kingdom’s regulators to establish a process for resolving international banking issues, should one of America’s financial giants fail.

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