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Thursday, April 18, 2013

Fed Governor Stein Weighs In on TBTF

Federal Reserve Board Governor Jeremy Stein said yesterday that while much has been done to address too-big-to-fail, there is more to do. “We’ve made considerable progress with respect to SIFIs [systemically important financial institutions] since the financial crisis. And we’re not yet at a point where we should be satisfied,” he said.

Stein compared two approaches to addressing TBTF: limiting the size of banks versus applying Basel III and related systemic capital rules to the largest banks. He concluded that applying the capital rules being worked on -- including the planned SIFI surcharge for the largest banks -- is the better approach.

Referring to the opinions of those favoring size caps on banks, Stein said: “My own view is somewhat different. While I agree that we have a long way to go, I believe that the way to get there is not by abandoning the current reform agenda, but rather by sticking to its broad contours.”

Read the speech.

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