The highly complex and leveraged US financial system is fraught with problems, but the government should refrain from simply breaking the big banks up, said a leading US business expert in a recent discussion in Harvard Business School.

"When you have the complexity in the system and you have a high degree of leverage, you are probably going to create an accident down the road. However, I don't think the government should simply break these big banks up," said Robert Kaplan, one of the top 25 business thinkers named by the Financial Times in 2005.

"These are big complex institutions, and they have been very highly leveraged. So when there is a severe economic downturn, you are going to have problems," he said.

The US government last year injected massive bailout funds to firms such as American International Group Inc (AIG) and CitigroupInc, worrying that the collapse of a large firm could cause a major disruption of the entire financial system.

Kaplan is a co-developer of both Activity-Based Costing and the Balanced Scorecard, which are used extensively in business and industry, government, and nonprofit organizations worldwide.

Elected to the Accounting Hall of Fame in 2006, he has researched and consulted globally on linking cost and performance management systems to strategy implementation and operational excellence.

In Kaplan's view, there is a role for government regulation.

Earlier this month, the US House Financial Services Committee proposed new powers for US regulators to police, take over, restructure and shut down firms that pose a "systemic risk."

They argue that when these institutions are "too big to fail," they are "too big to exist." Therefore the preemptive breaking up would not cause collateral damage to the markets as a whole.

However, is "too big to fail" the real problem?

In Kaplan's view, better board judgment and having "pure" banks that can lend during the economic downturn are the two areas companies and government should look into.

"People tend to think that it takes the same kind of leadership to run all kinds of businesses. It doesn't," Kaplan said, explaining that every institution and its board has to decide "are we too diverse than will the far leadership to be able to run this business?" That is one judgment the board has to make.