FORT WORTH, Texas (Reuters) - Banks in the Lone Star State have been more profitable than those in the rest of the United States for the past five years, Dallas Federal Reserve Bank President Richard Fisher, a leading critic of the nation's biggest banks, said on Friday.
The comments come a day after JPMorgan, the second-biggest U.S. bank, revealed a $2 billion trading loss, unleashing a new round of criticism against large U.S. banks and their trading practices.
Fisher has called for the breakup of the five largest U.S. banks, including JPMorgan, saying their size makes them a threat to the stability of the financial system. The biggest Texas-based banks, BBVA USA Bancshares and Comerica Inc, rank as 31st and 32nd biggest in the United States, according to data collected by the Federal Reserve.
On Friday at a Texas Bankers Association, Fisher declined to comment directly on JPMorgan's losses but cited the Dallas Fed's "tough stance" on all big banks.
"What concerns me is risk management, size, scope," Fisher said in answer to an audience question about the trading loss. "At what point do you get to the point that you don't know what's going on underneath you? That's the point where you've got too big."
Bankers should aim never to be on the front page of the newspapers, he said, unless it's for Rotary Club or other community work.
Fisher, an outspoken foe of further monetary policy easing by the Fed, also used the appearance to repeat his opposition to a third round of quantitative easing, known as QE3.
"I did not support QE2, and I will not support QE3, I made that clear," he said in answer to an audience question.
Known for trumpeting the merits of the Texas economy, Fisher heaped praise on his home-state banks, calling them "the nation's best-run."
In 2009, when the nation was reeling from the financial crisis, U.S. banks as a whole lost $11.5 billion; Texas banks earned $1.4 billion, he said.
One of the most widely used measures of credit quality at banks is still called the "Texas ratio," a name that dates from the late 1980s when Texas banks were among the worst in the nation. The higher the ratio, the worse the bank's credit.
The measure should be renamed the "anywhere but Texas ratio," Fisher said, noting that now less than 1 percent of Texas banks had a ratio of over 100 last year, compared to 4.6 nationwide, and 24 percent in Georgia.
(Reporting by Marice Richter; Writing by Ann Saphir; Editing by Neil Stempleman)
