As policymakers debate how the regulatory system should be reworked, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, said Monday that breaking up large banking companies should be an option.

"While a carefully constructed safety net and a better resolution procedure for large institutions are critical, we also need to think about how to prevent such institutions from holding us hostage in the future," he said Monday. "This may require breaking them up, limiting the activities or size, increasing capital requirements or taking other steps to limit the systemic risks they impose on the financial system."

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