WASHINGTON — A suggestion by a top Federal Reserve Board official that policymakers should cap the size of the largest banks may have a chilling effect on future mergers and acquisitions.

Fed Gov. Daniel Tarullo laid out a two-fold plan this week that would restrict large institutions from expanding their systemic footprint, including limiting their size by the amount of non-deposit liabilities as a percentage of the country's gross domestic product. He also suggested the Fed may prohibit any merger among the largest U.S. banks that have been designated as globally significant to the financial system.

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