Tarullo's suggested "presumption of denial" for banks listed as systemically important by a non-U.S. committee is not only unnecessary because of the deliberate process that regulators are now taking for large merger approvals, it risks making large U.S. banks much less competitive in a shrinking financial world.
Citigroup, for example, drew 58% of its total second-quarter operating revenue from outside the United States, excluding the Citi Holdings runoff subsidiary and excluding credit and debit valuation adjustments. With the bailouts behind us and the mortgage credit mess winding down, why have a "presumption of denial" against Citigroup expanding its international business?
Why have a "presumption of denial" for any U.S. bank expanding its international operations, for that matter?
"Rochdale Securities analyst Richard Bove late on Wednesday summed up the argument against a "presumption of denial" for acquisitions by the largest financial players by saying "any action to limit these banks size and flexibility would be a direct attack on the United States economy and its standing as a world power in the global financial system. If a governor of the People's Bank of China had suggested capping the size of these banks and limiting their operating flexibility, it would have been seen as a direct threat to the United States position in the world - which it is."
The enhanced capital requirements and greatly strengthened supervision of the large U.S. banks, along with the "case-by-case approach" that the Federal Reserve is already taking when considering large-bank acquisitions is enough. There's no need for a "presumption of denial" for deals.
The big banks were bailed out. We get it. The bailout is over. The irresponsible risk concentrations that led to the bailout are being addressed in a major way. It's time to encourage our big banks to compete internationally.
Written by Philip van Doorn in Jupiter, Fla.