Bernanke lays out financial regulation reform strategy

Special Report:Global Financial Crisis

WASHINGTON, March 10 (Chinese media) -- Federal Reserve Chairman Ben Bernanke on Tuesday laid out his financial regulation reform strategy, urging an overhaul of the U.S. system.

"We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components," Bernanke said in a speech to the Council on Foreign Relations.

The Fed chief's new strategy includes four key elements, namely addressing the problem of "too-big-to-fail," strengthening the financial infrastructure, reviewing regulatory policies and accounting rules, and creating an authority specifically charged with monitoring and addressing systemic risks.

Bernanke said authorities have strong incentives to prevent the failure of a large, highly interconnected financial institution.

He admitted government rescues of too-big-to-fail firms can be costly to taxpayers, "and in the present crisis, the too-big-to-fail issue has emerged as an enormous problem."

Bernanke also blamed global imbalances as fundamental causes of the financial crisis, saying "it is impossible to understand this crisis without reference to the global imbalances in trade and capital flows that began in the latter half of the 1990s."

"The global imbalances were the joint responsibility of the United States and our trading partners, and although the topic was a perennial one at international conferences, we collectively did not do enough to reduce those imbalances," he added.

Predicting financial crisis will continue to occur, Bernanke said "it is unrealistic to hope that financial crises can be entirely eliminated, especially while maintaining a dynamic and innovative financial system.