WASHINGTON, March 4 U.S. financial regulators
need time to demonstrate that their plans for ending
too-big-to-fail will work, although tougher measures could be
needed down the road, Federal Reserve Governor Jerome Powell
said on Monday.
In the wake of the bank bailouts of the 2007-2009 U.S.
financial crisis, regulators have been working on tough new
rules to shore up banks' safety, such as requiring them to meet
higher capital standards, and on plans for how to wind down
failed banks that are deemed too large to go through bankruptcy.
But critics have said the government should do more, with
many calling for regulators to break up the biggest banks.
Powell told an international banking conference that the new
rules, many of which are still being finalized by the Fed and
other bank regulators, should help reduce perceptions that the
U.S. government would again bail out a giant failed firm.
"My own view is that the framework of current reforms is
promising, and should be given time to work," he said. "In any
case, too-big-to-fail must end, even if more intrusive measures
prove necessary in the end."
Washington buzzed last summer about the possibility of
cracking down on bank size after former Citigroup chief
executive Sandy Weill said regulators should break up the
In recent weeks, politicians, industry groups and regulators
in Washington again have begun debating whether regulators have
done enough to make sure the biggest banks could fail without
destabilizing the financial system.
U.S. Senators Sherrod Brown, an Ohio Democrat, and David
Vitter, a Louisiana Republican, said last week that they planned
to introduce legislation that would tackle the issue.
Brown has previously proposed changes such as capping big
banks' non-deposit liabilities, an idea that has drawn support
from some current and former regulators.
Powell said such a cap on short-term liabilities could allow
firms to diversify activities while forcing them to rely on more
stable funding sources.
But he pushed back against others who have proposed breaking
up banks outright, which he said "would likely involve arbitrary
judgments, efficiency losses, and a difficult transition."