NEW YORK (TheStreet) -- It's too early to tell whether the banking reforms that stemmed from the financial crisis of 2008 will be enough for financial safety, according to Sir Mervyn King, the former Bank of England governor.
The bank's capital ratios are now much higher, while leverage ratios are much lower. The system is certainly safer, but only time will truly tell if it's safe enough, he said. Bank managers are now much more aware of the systematic risks that exist, so hopefully they will be less likely to make the same mistakes again.
King stressed that complex banking methods and derivative trading instruments continue to weigh on many U.S. and European banks. And while he acknowledged that there isn't much risk currently present with these products, they have the potential to wreak havoc, just like they did just several years ago.
The question remains, how much longer will these banks be able to do standard banking -- such as lending and accepting deposits -- while also holding larger and riskier assets, such as complex derivative products?
That raises the next question: when do big banks become too big?