Morgan Stanley chief James Gorman told CNBC on Thursday that elements of the Dodd-Frank Wall Street Reform Act need to be "curtailed," but he's not in favor of scrapping all the regulations, which were drawn up in the aftermath of the Great Recession.
"I'll be very clear about this, I'm not a fan of getting rid of Dodd-Frank," Gorman said in a wide-ranging interview on "Squawk Box" at the World Economic Forum in Davos, Switzerland.
The regulations were designed to prevent the too-big-to-fail scenario that put taxpayers on the hook to rescue troubled financial institutions.
As Donald Trump prepares to take the oath of office on Friday, his administration is expected to push deregulation across many industries, including banking.
"There are elements of Dodd-Frank that clearly need to be curtailed," Gorman said. "Parts of the Volcker Rule are unambiguously affecting market liquidity, and the Federal Reserve's own work has demonstrated that. "
The Volcker Rule is part of Dodd-Frank, originally proposed by former Federal Reserve Chairman Paul Volcker.
His namesake provision restricts U.S. banks, or an institution that owns a bank, from making certain kinds of speculative investments with their own money that could hurt their customers.
Gorman said the overall structure of Dodd-Frank is "great" — citing higher capital requirements on the front end, fail-safes on the bank end to mitigate systemic risks, "and in the middle having an annual health check."
The new administration should not broadly overhaul or eliminate Dodd-Frank, the Morgan Stanley chairman and CEO said. "Because the more change we make at this point, the more destructive it will be for the markets."
"The challenge is let's stop moving the ball," he said. "Let's absorb the regulation we've got. Let's accept the capital levels we have and are sufficient. Let's take away things that are causing liquidity to dry up in the markets."