By VICTORIA MCGRANE And ALAN ZIBEL:
“In a Philadelphia speech, Fed governor Daniel Tarullo recommended curbing banks’ growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits. The idea takes direct aim at the biggest U.S. banks, including J.P. Morgan Chase & Co., Bank of America Corp., Goldman Sachs and Citigroup Inc., all of which rely heavily on such funding. Firms outside of this tier make much greater use of regular deposits…..”
Comment:~ Rather than placing a fixed size limit on too-big-to-fail banks, it may be more effective to raise capital adequacy ratios and/or leverage ratios for banks above a certain size — to discourage further growth. There may well be advantages, such as economies of scale, that enable large banks to deliver better pricing to their customers — and justify their size — but we need to guard against systemic risks. Rather than setting a size limit, higher ratios would ensure that large banks are well capitalized to withstand systemic shocks.
via Fed Governor Daniel Tarullo Calls for Cap on Bank Size – WSJ.com.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.