Dallas Fed: The Markets Like Big Banks Better Than 'Super Big' Banks

Markets favour large, straight-forward banks at the expense of complex ones, according to the director of research at the Federal Reserve Bank of Dallas.

In a new report called “levelling The Playing Field,” Harvey Rosenblum writes that too-big-to-fail banks still “pose a clear and present danger” thanks in part to “favourable government policies.”

He also includes a chart showing that being too-complex-to-fail may not be good for business either.

He looks at the price-book ratios of 12 large-cap banks, which he divides into two categories: those with assets greater than $100 billion in assets and predominantly “driven by commercial/retail banking activities,” and those with more than $100 billion in assets more focused on “global banking or investment services and management.”

Here’s the result:

dallas fed tbtf

Photo: Dallas Fed

Rosenblum actually draws a broader conclusion: “Looking at the largest U.S. banking companies, recent stock prices suggest that markets have a gloomy view of bigness.”

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