In an op-ed piece published in the St. Louis Post-Dispatch April 10, NCUA Chairman Debbie Matz laid out her reasons for keeping big banks in their current form, noting these reasons are spelled out in the Dodd-Frank Act.

Matz wrote that breaking up big banks is not the right answer, given the current economic climate. Breaking up big banks puts the progress made by the Financial Stability Oversight Council and other federal regulators at risk, she argued.

Through the Dodd-Frank Act, regulators were given new powers to monitor the health of financial institutions, she said. Those powers aimed to reduce threats to the financial system by raising capital requirements for big banks, as well as restricting certain high-risk practices and unwinding failing institutions.

She added that it's hard to see how arbitrarily capping bank size would further reduce risks. Focusing on size alone might introduce new risks, creating instability within the financial system – the very problem that Congress designed Dodd-Frank to prevent, she noted.

Matz stated that by doing so, it would be possible to get a handful of new firms lurking just below the asset cap, instead of many new small institutions. Those firms would likely develop strategies to circumvent the size limit in substance while adhering to it in form, she said.

“If that happens, we'll end up with a system that has more risks and less transparency,” she said.

Addressing critical and practical questions on how to break up the big banks, she asked several pointed questions in the piece on what would happen financially as well as to consumers should big banks be broken up.

She also said as a failsafe, Dodd-Frank already gives regulators the power to force big banks and other systemically important institutions to divest assets if they pose a grave threat to the financial stability of the United States. Used appropriately, this regulatory tool is more effective than imposing an arbitrary cap on bank size, she noted.

While she also pointed to the necessity for large banks to prepare living wills as a result of the Dodd-Frank Act, the House Financial Services Committee is considering a bill for markup on April 13 that would repeal that portion of the act. Several bills have been moved out of the committee to weaken the very bill that Matz praised in her article.

“Let's continue our regulatory progress,” Matz concluded. “Let's ensure that all Americans have access to safe, secure financial services. Let's guarantee that taxpayers never again have to bail out our banking system. Reform, not revolution, is what gets us there safely.”

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Matz: Don&rsquo;t Break Up Big Banks

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Matz: Don’t Break Up Big Banks