WASHINGTON (AP) — Regulators must better understand threats to the financial system to be able to prevent another crisis, Federal Reserve Chairman Ben Bernanke acknowledged Thursday.
"These are difficult challenges, but if we are to avoid a repeat of the crisis and its economic consequences, these challenges must be met," Bernanke said in a speech to a banking conference in Chicago.
Bernanke said they are making progress implementing the financial overhaul law passed last year. It directed the Federal Reserve and other regulators to improve oversight of banks and Wall Street firms, with the goal of averting another crisis like the 2008 financial meltdown.
Bernanke said increased coordination among regulators should reduce duplicative or conflicting regulations.
But regulators face a delicate balancing act, he said. They must improve oversight of financial companies, while also not stifling innovation that can support economic growth and job creation.
"No one's interests are served by the imposition of ineffective or burdensome rules that lead to excessive increases in costs or unnecessary restrictions in the supply of credit," Bernanke said.
Still, Bernanke was confident that the new law will help the financial system better withstand any new threats.
"So that no matter where the next shock may come from, I think there's a reasonable expectation that our system will be stronger and more resilient in the face of that shock," he said fielding questions after his speech.
Republicans, who solidly opposed the financial overhaul legislation, have said the law goes too far and could make it harder for U.S banks to compete globally. Some are seeking to reduce funding for agencies set up under the law and limit the scope of new rules. The General Accounting Office says the law will cost nearly $1 billion to implement this year.