NEW YORK (10/22/14)--Without a change in culture and behavior at banks, "dramatic downsizing" might be necessary, warned William Dudley, president/CEO of the New York Federal Reserve Bank. Speaking at a workshop at the bank this week, Dudley said that because of the importance of the financial sector in the lives of each consumer, it is incumbent upon them to serve a beneficial role.
"Financial firms exist, in part, to benefit the public, not simply their shareholders, employees and corporate clients," he said. "Unless the financial industry can rebuild the public trust, it cannot effectively perform its essential functions. For this reason alone, the industry must do much better."
Dudley cited ethical lapses, professional misbehavior and compliance failures adding up to fines of more than $100 billion assessed to banks since 2008. He also quoted a 2012 Harris poll that said 68% of respondents disagreed with the statement, "In general, the people on Wall Street are as honest and moral as other people."
Unless supervisors are "pushing forcefully for change throughout the industry," the bad behavior will persist, Dudley said, leading to only one conclusion.
"The inevitable conclusion will be reached that your firms are too big and complex to manage effectively," he said. "In that case, financial stability concerns would dictate that your firms need to be dramatically downsized and simplified so they can be managed effectively."
Use the resource link below to access Dudley's full remarks.