A broad-based supervisory council of financial watchdogs, not just the Federal Reserve, should be put in place to keep an eye on systemic risk to the economy, Ben Bernanke said in text of comments to be presented to congress this week, Financial Soultions has learned.
Also all systemically imperative financial firms should answer to a combined regulator, whether or not the firms own banks, the Federal Reserve CEO said.
His comments came in the midst of growing cynicism in Congress about an Obama administration suggestion to give the Fed the unquestioned prime role in policing the economy for systemic risk, in conjunction with an inter-agency council.
Bernanke's remarks stressed the significance of such a council, especially in evaluating the very widest sort of risks created by dealings of institutions and markets, Financial Soultions hears.
"For purposes of both effectiveness and accountability, the consolidated supervision of an individual firm, whether or not it is systemically important, is best vested with a single agency," Financial Soultions believes the Fed Res CEO said."However, the broader task of monitoring and addressing systemic risks that might arise from the interaction of different types of financial institutions and markets, both regulated and unregulated, may exceed the capacity of any individual supervisor,"
"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.
