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Breaking up (banks) is bad to do: Siegel

Wharton School of Business professor Jeremy Siegel put a new spin on an old song while discussing banks on Tuesday, saying, "breaking up is bad to do."

Siegel told CNBC's "Squawk Box" that firms want to work with big-name banks on an international basis. Those firms would take their business to financial institutions headquartered outside of the country, such as HSBC, if a breakup happened in the United States, he said.

While regulators and Congress are unlikely to require banks to break up, it's uncertain whether investors will continue to put money into big banks given that they must now hold more cash in reserve rather than using it to fund business operations, Dan Ryan, chairman of PriceWaterhouseCooper's financial services regulatory practice, recently told CNBC.

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New rules that could be set in 2015 include additional buffers for global systemically important banks, limits on credit exposure to other banks and a minimum long-term debt requirement for big banks.

Those rules would come under the umbrella of Dodd-Frank, the law that brought sweeping financial reform to the financial sector and governs how much capital banks must hold in reserve.

Banks have enough equity and reserves after the last round of quantitative easing, Siegel said.

Dodd-Frank should be scaled back, and banks should focus on building up equity layers, he said. Once banks have enough of an equity cushion, they can weather a financial crisis.

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"What you want to do is provide enough equity, or people that are going to be hurt if the bank over-levers and then, once you do that, there is no incentive to over-lever because trillions of dollars are going to be lost on equity capital, or preferred stock, or junior debt," he said.