Bernanke: Fed's not waiting for Congress on reform

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke said Thursday the central bank is working to increase oversight of financial institutions, even as Congress debates a package of Wall Street reforms.

In a speech at the Federal Reserve Bank of Chicago, Bernanke said he "supports" ongoing efforts in Congress to reform financial regulation. But he added that the Fed is already taking steps to tighten up oversight of the banking system.

"While these legislative steps are necessary, we are not waiting to implement improvements that can be accomplished within our existing authority," he said.

"Now we are working with banks to ensure they improve their risk-measurement and risk management as well as strengthen their liquidity and capital levels while also providing the credit that households and businesses need," the Fed chairman added.

Bernanke said any reform package should give regulators the power to break up financial institutions that could threaten the economy if they fail.

The Senate took a major step towards achieving that goal Wednesday in approving a bipartisan deal to unwind big financial firms that are considered too big to fail. But lawmakers are still debating a number of other proposals, including new rules for the derivatives market and new consumer protections.

In the meantime, Bernanke said the Fed is working with regulators around the world to toughen up capital and liquidity rules for banks. The goal is to ensure that banks have sufficient money in reserve as a bulwark against future crises.

Bernanke said the central bank has taken "significant steps" to ensure that banks do not structure compensation agreements that encourage employees to take excessive risks to maximize pay.

In addition, the Fed is working with other government regulators and investors to strengthen the infrastructure of key financial markets, he said. Among them are the market for securities repurchase agreements, or "repos," and over-the-counter derivatives.

The Fed has also enhanced its data collection process as part of a renewed focus on "systemic surveillance," he said. The aim is to better gauge how exposed large banks are to certain risks and how vulnerable they are to a potential shock.

Bernanke also said the bank stress tests, completed nearly one year ago, helped stabilize the financial system and revive the economy.

The Fed and other bank regulators launched the Supervisory Capital Assessment Program, also called the bank stress test, beginning in February 2009. The goal was to assess the health of 19 major U.S. financial institutions in the wake of the financial crisis of 2008 and determine how best to stabilize the system.

The program, Bernanke said, "helped restore confidence in the banking system and broader financial system, thereby contributing to the economy's recovery."

But he said banks need to conduct their own stress tests to ensure that risk managers take into consideration all outcomes, even unlikely ones.

Many bankers have argued that the severe downturn in the housing market, which precipitated the financial crisis, could not have been foreseen.

"It is essential that every complex firm be able to evaluate its firmwide exposures in a timely way," Bernanke said.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,805.41 127.51 0.76%
Nasdaq 4,483.72 30.92 0.69%
S&P 500 1,964.58 13.76 0.71%
Treasuries 2.27 -0.00 -0.09%
Data as of 2:25pm ET
Company Price Change % Change
Ford Motor Co 13.78 -0.62 -4.31%
Microsoft Corp 46.13 1.11 2.47%
Apple Inc 105.22 0.39 0.37%
Bank of America Corp... 16.72 0.12 0.72%
Yahoo! Inc 43.50 0.90 2.11%
Data as of Oct 24

Sections

New York headlines took a straight forward and direct approach with NYC's Ebola news. More

The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More

Shares of Facebook recently topped $80. They've more than quadrupled from their post-IPO lows of two years ago. Can Mark Zuckerberg keep the momentum in mobile going? More

Host a furniture market. Here's how small town High Point, N.C. rakes in this much money -- twice a year. More

If you're looking to fly this holiday season, the clock's ticking to get the best prices. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.