One of Wall Street's top regulators on Thursday said he was not yet convinced by the arguments of some lawmakers and at least one fellow Federal Reserve official that breaking up banks that were too big to fail was the right way to protect the U.S. financial system.
New York Fed President William Dudley instead repeated his endorsement of so-called living wills for banks, but said those needed to be twinned with higher capital and liquidity requirements and incentives for bank management to act to stem problems when they first arise.
"I am not yet convinced that breaking up large, complex firms is the right approach," Dudley said in prepared remarks at New York University's law school.
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Doing so might harm the benefits of size that such banks are able to pass along to U.S. clients, he said.
"The costs incurred in breaking up such firms need to be considered," Dudley said, adding, "the breakup of such firms would not necessarily result in a significant reduction in overall systemic risk if the resulting component firms were still, collectively, systemic."