# ‘We Might Cut Banks Down to About This Size’

1 Opinion November 10, 2014 Financial News ![Roy C. Smith](/sites/default/files/styles/246w/public/assets/images/uat_025572.jpg?itok=Kn4Ckx0s) By Roy C. Smith > Dudley’s cultural workshop may actually be less about culture and more a blunt warning to those banks the Fed considers to be moving too slowly in transforming themselves into the well-managed entities it wants.

William Dudley’s message could not have been plainer – shape up or I will break you up. The president of the New York Fed spelt it out to top executives from big US and international banks: “If those of you here today as stewards of … large financial institutions do not do your part in pushing forcefully for change across the industry, then bad behaviour will undoubtedly persist.

“If that were to occur, the inevitable conclusion will be reached that your firms are too big and complex to manage effectively. In that case, financial stability concerns would dictate that your firms need to be dramatically downsized and simplified so they can be managed effectively … The consequences of inaction seem obvious to me – they are both fully appropriate and unattractive – compared to the alternative of improving the culture at the large financial firms and the behaviour that stems from it. So let’s get on with it.”

**Sharp-edged and aggressive**
Dudley was speaking at the Fed’s Workshop on Reforming Culture and Behaviour in the Financial Services Industry on October 20 for about 90 invited senior bank executives, regulators, prosecutors and academics. His remarks were a thoughtful analysis of the dangers of sharp-edged, aggressive “trading cultures” at banks. But his point was clear.

Read full article as published in [Financial News](http://www.efinancialnews.com/story/2014-11-10/banking-misconduct-william-dudley-new-york-fed-comment)

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*Roy C. Smith is the Kenneth G. Langone Professor of Entrepreneurship and Finance and a Professor of Management Practice.*## More Opinions from Roy C. Smith

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