In Brief: Kansas City Fed Chief: Risk in Being Too Big

Large bank mergers pose a risk because the resulting institutions could become "too big" to be allowed to fail, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said last week.

"Mergers we want to prevent are those with no clear efficiency gains and that are viable, in part, because of the subsidy resulting from the institution becoming too big to fail," Mr. Hoenig said in remarks prepared for an international banking conference.

But large bank mergers shouldnot be halted, he said, and the United States has room for further consolidation in the banking industry.

Still, he said, such mergers will force bank regulators to monitor such banks closely or the banks will have to "increase the incentive and ability" of investors to monitor the banks' financial health.

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