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Federal Reserve Chairman Ben Bernanke said Thursday that all regulatory agencies, not just the central bank, should be granted additional oversight powers to protect the U.S. financial system from risk.
Speaking before the U.S. House Financial Services Committee, Bernanke said that a regulatory oversight council should monitor risks to financial stability, identify regulatory gaps and coordinate regulatory agency responses to systemic risks.
"To further encourage a more comprehensive and holistic approach to financial oversight, all federal financial supervisors and regulators--not just the Federal Reserve--should be directed and empowered to take account of risks to the broader financial system as part of their normal oversight responsibilities," he said in prepared remarks.
The chairman's remarks come amid debate among lawmakers as to whether the Fed's regulatory powers should be broadened. The Obama Administration has proposed that the central bank's regulatory power be strengthened, but opponents of the plan argue that the Fed should narrow its focus to issues regarding monetary policy.
Bernanke said that the task of monitoring systemic risks arising from interaction among different types of financial institutions and markets might be too much for one supervising agency to handle.
"Instead, we should seek to marshal the collective expertise and information of all financial supervisors to identify and respond to developments that threaten the stability of the system as a whole," he said.
At the hearing, the Fed chief outlined five key elements to regulatory reform - including a regulatory oversight council - among them consolidated supervision of systemically important firms.
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