Outgoing Kansas City Federal Reserve Bank President Thomas Hoenig railed against SIFIs, or systemically important financial institutions, calling them "fundamentally inconsistent with capitalism."

Hoenig made that statement at an event hosted by the Pew Financial Reform Project and the New York University Stern School of Business.

SIFIs have been in the headlines since 2008, becoming the banking sector's central players, and the ones now facing pressure to beef up capital requirements to protect the international financial system.

The emergence of SIFIs after the financial crisis even prompted the Basel Committee on Banking Supervision to announce that it will require globally significant banks to enhance their capital requirements to safeguard the international economy.

The committee said in a report over the weekend that large bank "loss absorbency requirements are to be met with a progressive common equity tier 1 capital requirement ranging from 1% to 2.5%, depending on the bank's importance to the system."

A year after the passage of Dodd-Frank, Hoenig said the legislation mainly revolves around SIFIs, essentially creating a banking system that plods forward under the dominance of a few large players, while the competitive forces of capitalism are drained from the sector.

"So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril," Hoenig said in his prepared statements.

Hoenig's speech, which is peppered with numerous criticisms of the SIFIs, arrives four months before his retirement from the Fed. Hoenig places a clear disclaimer on his speech, saying the views expressed are his and not necessarily reflective of the Fed at large.

In the past year, Hoenig has been a voice of dissent at the Fed, arguing against the idea of aggressive accomodative policy stance, including the Fed's QE2 Treasury-bond buying spree, which ends this month.

He told a crowd Monday,"To more fundamentally address this issue, we must go beyond today’s Dodd-Frank. We must confine the use of the safety net to its original intent. We must reduce the artificial complexity of existing financial structures."

Hoenig describes the emergence of the SIFI as a type of moral hazard where the nation is now dominated by the very banks that took the big risks leading up to the recession. He also cited the repeal of Glass-Steagall in the 90s as one of the moments that led to the crisis since it gave "high-risk firms almost unlimited access to funds generated through their new access to the safety net." That safety net being a type of government mandate that eventually found the institutions too-big-to-fail, making the institutions creditors' unaccountable for any of the risks.

Hoenig said in the late 1980s, the five largest banks held only 29% of total banking organization assets and 14% of GDP, now the five largest players control over half of the industry's assets and 60% of GDP.

Write to: Kerri Panchuk.