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Fed’s Lacker: Big banks still seen as too-big-to-fail

Fed’s Lacker: Big banks still seen as too-big-to-fail

US financial regulators yet to adequately address issue, says regional central bank head


WASHINGTON, D.C., 8 July 2015 –  Richmond Federal Reserve President Jeffrey Lacker said on May 26 in a speech that U.S. financial regulators have yet to adequately deal with the problem of banks that are viewed as too-big-to-fail.

"Perceived guarantees thus encourage fragility, which induces interventions, which encourages further fragility," Lacker said in prepared remarks to the Louisiana State University Graduate School of Banking. "The ultimate result of this cycle is taxpayer-funded subsidies to financial firms that are widely viewed as deeply unfair."

Lacker concludes that regulation alone is unlikely to contain moral hazard and instead encourages the focus on solving the fundamental problem at the heart of too-big-to-fail, which requires restoring market discipline.​


Supervision; Regulation; Bank recovery and resolution