Top Fed official suggests US bank size cap The top Federal Reserve official overseeing financial regulation has suggested that US lawmakers cap the size of banks based on the amount of their borrowings. US banks currently can hold no more than 10 per cent of the country's deposits. Dan Tarullo, Fed governor, on Wednesday proposed a different cap based on a bank's other borrowings - so-called non-deposit liabilities - relative to a percentage of US gross domestic product. Mr Tarullo's proposal is similar to legislation being considered by Congress that would force a break-up of the six biggest US banks by assets: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. Mr Tarullo said "there would be merit" if such an idea was enacted into law. The proposal in Congress, put forward by Senator Sherrod Brown, Democrat from Ohio, and Representative Brad Miller, Democrat from North Carolina, sets the percentage so low the biggest US banks would have to be restructured. Similar legislation offered in 2010 by Mr Brown was defeated in the Senate after the Treasury department lobbied lawmakers to reject it. The 2010 overhaul of US financial regulation known as Dodd-Frank contains a provision capping a financial group's borrowings relative to total borrowings by financial companies. Tarullo dismissed that provision as "somewhat awkward." Mr Tarullo joins a growing band of current and former regulators in advocating either a limit on bank size or forced divestments that would shrink financial groups" balance sheets. He is among the most senior officials to endorse efforts by lawmakers to legislate these ideas into law. Three years ago, Mr Tarullo said calls for forced break-ups of large financial groups were "more a provocative idea than a proposal." Sandy Weill, former Citi chief executive, called in July for a break-up of big banks. John Reed, former co-chief executive of Citi, and Phil Purcell, former chief executive of Morgan Stanley, also have called for banks to be split up . Other bankers, such as JPMorgan's chief executive, Jamie Dimon, have rejected such ideas, arguing that big corporations need big banks to serve them. Mr Dimon's bank came under fire from supporters of bank break-ups after a JPMorgan trader - known as the "London Whale" - lost $5.8bn this year. Speaking separately on Wednesday, Mr Dimon said of the trading loss: "We made a stupid error. I mean, we're pretty disciplined risk people. But we made an error. He added: "I should have caught it also. I didn't. But it isn't going to sink our ship.