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Fed May Pressure Largest Banks to Slim Down

The Federal Reserve, mindful that some banks are still so big that their failure could weigh on the wider economy, said on Monday that it planned to increase the pressure on large financial firms to shrink.

Daniel K. Tarullo, the Fed governor who oversees regulatory policies, signaled the central bank’s intent in testimony that he is scheduled to give before the Senate Banking Committee on Tuesday. In particular, Mr. Tarullo said that the Fed would propose special capital requirements for the largest banks that will be even higher than those demanded under international banking regulations.

“We intend to improve the resiliency of these firms,” Mr. Tarullo said. “This measure might also create incentives for them to reduce their systemic footprint and risk profile.”  The speech sets out to update Congress on how much progress regulators have made with the Dodd-Frank Act, which was passed in 2010 to overhaul the financial system.

NY Times [1]

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