WASHINGTON BUREAU — Federal Reserve Board Chairman Ben Bernanke today said the financial crisis has demonstrated the need for “systemically important” insurers to come under the kind of consolidated supervision that now applies to bank holding companies.
The Federal Reserve is well-suited to the task of being the consolidated supervisor for systemically important non-banks, Bernanke said.
Bernanke said the country also needs a system for “resolving” large insurers and other non-banks such as insurers “analogous to the regime currently used by the Federal Deposit Insurance Corporation,” Bernanke said.
He made his comments in testimony before the House Financial Services Committee.
During the hearing, Bernanke called for creation of an oversight council made up of all the agencies involved in financial supervision. The council should have the authority to monitor and identify emerging risks to financial stability across the entire financial system, to identify regulatory gaps, and to coordinate the agencies’ responses to potential systemic risks, he said.
Moreover, he said, all federal financial supervisors and regulators–not just the Federal Reserve System–should be directed and empowered to consider the risks facing the broader financial system as part of their normal oversight responsibilities.
But putting all systemically important financial institutions under the jurisdiction of the Federal Reserve would prevent financial firms that do not own a bank, but that nonetheless pose risks to the overall financial system because of the size, risks, or interconnectedness of their financial activities, from avoiding comprehensive supervisory oversight, Bernanke said.