Sept 24 The problem of banks being "too big to
fail" has not been resolved because regulators have not
adequately addressed systemic risk in nontraditional lending
markets, a senior Morgan Stanley executive said on
Colm Kelleher, head of Morgan Stanley's institutional
securities business, said that banks are still tightly connected
to one another in such markets, which might create a systemic
panic if one large bank were to get into trouble.
These markets, also known as "shadow banking," include
repurchase agreements, structured products and other
nontraditional financing vehicles.
"The biggest issue has not been resolved, which is 'too big
to fail,'" Kelleher said at a Bloomberg Markets conference.
Kelleher, who was speaking on a panel about whether the
financial system is safer five years after Lehman Brothers
collapsed, said regulators "haven't addressed the root issues"
of the crisis.
He later told reporters that the U.S. "living will"
provision that requires large banks to detail how they would be
liquidated if they were to fail would not prevent a crisis
because it does not address the domino effect that would occur
if a large bank were to fail.