The president of the U.S. Federal Reserve, Ben Bernanke has called for more regulation and has warned of the danger they pose to traditional banking financial operations of risk in the shade.
In a speech at the Federal Reserve Bank of Atlanta (Georgia State), Bernanke has called for “both regulators and the private sector begin to take action to prevent future panics and other problems in the banking shadow “in reference to financial institutions that operate at the margins of the system with high-risk assets.
“Panics and other crises in the shadow banking can extend and spread to traditional banks,” stated Bernanke has stressed the need to explore ways to reduce the risks that still persist in the financial system.
The head of U.S. monetary policy has recognized that progress has been made, but the need to strengthen supervision in the financial system, as in the case of funds that invest in short-term government assets.
“It takes additional steps to increase the resilience of money market funds, which are important for stability at the overall financial system,” Bernanke noted in his speech.
“One of the most important lessons learned from the financial crisis is that the rise of what has been called ‘shadow banking’ channels creates potential propagation of shocks across the financial system and economy,” Bernanke warned.
“The high cost and the human burden of a crisis underlines the importance of taking all necessary measures to prevent recurrence of past events,” Bernanke said in reference to the crash of 2008 that triggered the bankruptcy of Lehman Brothers, the overvaluation of assets backed by subprime mortgages.
Category: Business News