BankThink Op-ed: Stop shaming the big banks

10 Mar 2020

This op-ed was featured in American Banker’s BankThink.

By Kevin Fromer

After a decade of significant progress, there’s a litany of evidence showing that the nation’s banks — both big and small — are strong, resilient and resolvable.

In particular, the largest banks maintain extremely robust capital and liquidity positions, undergo vigorous oversight and employ extensive risk-management processes. Advances in the past 10 years have led to a welcome and demonstrated decline in expectations that a large bank would require government assistance in times of major economic turmoil.

Current and former regulators have pointed to the tremendous progress made to address “too big to fail.”

A recent study from economists at Stanford and Australian National universities points to “a major decline of ‘too big to fail’” based on investor behavior. Annual stress tests have provided clear and public evidence of bank resilience.

And yet, there are some who choose to ignore the mountain of evidence and continue to push their false narrative. They also ignore the essential role that large, diversified banks play every day in supporting businesses and households in the $20 trillion American economy.

Large institutions offer benefits to their customers and the economy that smaller institutions simply cannot. The scale of larger institutions serves companies in the U.S. and globally, at reduced costs, ultimately benefitting consumers, small businesses and individual savers.

Additionally, large banks are a critical source of support to smaller institutions. They are a primary provider of security market-making and underwriting services that make it possible for smaller banks to efficiently buy and sell these securities. This allows smaller banks to in turn lend to customers and meet their investment needs, helping to promote the success of these smaller institutions.

The U.S. banking industry is incredibly diverse with over 5,000 banks contributing to the U.S. economy. Banks of all sizes are part of a cohesive economic system, contributing to the prosperity of Americans and a growing economy.

The banking industry and governments around the globe have made enormous strides during the past decade to ensure that banks are safe and sound and that no institution is too big to fail.

It’s important that we neither ignore the progress that has been made nor the essential role large financial institutions play in the economy.

Kevin Fromer is the President and CEO of the Financial Services Forum.