Fed: US banks face choice on size

Author: Edward Price | Published: 15 Jun 2016

As US banks shrink, debate surrounds whether resizing is the intentional result of regulation. For Federal Reserve governor Jerome Powell, however, there’s a choice – and it’s for the banks to make.

At the annual Securities Industry and Financial Markets Association (Sifma) and The Clearing House (TCH) prudential regulation conference on June 2, Federal Reserve governor Powell was asked if he thought that policymakers had intended certain bank structural changes and downsizing to occur as a result of post-crisis regulation. 

In his response, Powell stressed how raising required capital, as a result of both the Comprehensive Capital Analysis and Review (CCAR) and the G-Sib surcharge, is inducing banks to ask themselves questions about how much capital they really want.

"You can either have substantially higher levels of capital, in which case you will be much less likely to fail, or you can take steps to reduce your...