All-Clear for Big Banks Raises Fears of a Return to Risk
In a statement on Wednesday, the chief executive of Citigroup, Michael Corbat,
said, “Today marks a significant milestone for Citi and our shareholders.”
The Fed’s assessment, he said, demonstrated that “Citi has the ability to withstand a severe economic scenario
and remain well capitalized, while also substantially increasing our level of capital return.”
Although President Trump has promised to roll back many of the rules imposed after the financial crisis while appointing regulators with a much lighter touch, many bank analysts say memories of 2008 and the penalties
that followed will also inhibit risk-taking in the future.
And as was the case following the crash of 1929, “the legislative and regulatory response was quite harsh.”
The 2008 crisis “forced the U. S. banking system to recognize its losses and recapitalize itself quickly,” Mr. Moszkowski said.
“Changing customer behavior, like use of mobile banking, has also enabled them to cut back on branches and staff.”
While bankers themselves might be more cautious about lending or blurring the distinction between traditional banking
and Wall Street-style trading, one element of the go-go years has made a comeback recently: big pay packages for top executives.
He noted that with the 10 largest American banks holding 80 percent of all banking assets, “this
concentrated financial power residing at the top banks should be carefully monitored.”
“Without regulators and cops in the corner, you will have incentives for banks to take excessive risks,” Mr. Williams added.