CIT's Thain Says Too-Big-to-Fail Threshold Should Be Raised

  • Thain says about 10 banks actually pose systemic threat
  • CEO says a House bill focusing on complexity a better approach

About 10 banks are actually too big to fail, and the asset threshold for determining whether a firm should face additional regulatory oversight should be raised, said John Thain, chief executive officer of CIT Group Inc.

“Whether you set the level at $100 billion or $200 billion or some other number, it’s clear that’s a better level than $50 billion," Thain, 60, said Thursday in an interview on Bloomberg Television. “But the real way to deal with it is a risk-based test."

On Wednesday the U.S. House Financial Services Committee approved legislation that would change the way a bank is designated for its risk to the financial system by replacing the $50 billion asset threshold with a new method that weighs not only a company’s size but also complexity and other factors. Thain, who announced last month he’s retiring from CIT after a 36-year career on Wall Street, said he agrees with that approach and that banks like CIT don’t pose a risk to the system.

While there’s still a “long list" of issues the biggest banks must address to make them safer, “that doesn’t mean that the same rules that apply to those 10 financial institutions that are really the biggest ones should apply to those that are $50 billion," he said.

Thain said Tuesday that he expects CIT will be designated as systemically important following the bank’s acquisition of Pasadena, California-based lender OneWest, and be required to undergo the annual Federal Reserve stress tests next year. The merger will bring CIT’s assets to about $70 billion, according to the Fed, putting it above the $50 billion threshold that triggers increased oversight under the Dodd-Frank Act.

Thain, who rebuilt CIT following the financial crisis after earlier serving as CEO of Merrill Lynch & Co. and president of Goldman Sachs Group Inc., said in October that he’ll step down as chief executive at the end of March while remaining chairman. He said Thursday that he has accomplished everything he wanted to do at CIT, and plans to spend time with his granddaughter and grown children. Ellen Alemany, a director at the bank, will succeed him as CEO.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE