Fed Chairman Ben Bernanke said the Federal Reserve will examine guidance on capital and liquidity and that new regulations should insulate against financial market shocks.
While he said it is difficult to make rule changes during periods of economic crisis, Bernanke said the markets right now can't wait.
Bernanke made the comments at the President's Working Group and Financial Stability Forum hosted by the World Affairs Council of Greater Richmond. He did not comment on U.S. monetary policy or economic outlook.
"The process of implementing the PWG's implementations will be challenging, in no small measure because of the continuing pressures of short-term crisis management," he said.
"However, we do not have the luxury of waiting for markets to stabilize before we think about the future. Indeed, many of the necessary changes that have been identified, including increasing transparency, improving risk management, and attaining better coordination among regulators, could provide important support to the process of normalizing our financial markets," he added.
Bernanke explained the economy can't grow at potential due to the credit crunch and that he sees a need for more underwriting, transparency and risk management.
The international community is also expected to continue working to address liquidity concerns, he added.
"In recent months, the Federal Reserve has been intensely focused on the continuing strains in financial markets," Bernanke said. "Healthy, well-functioning financial markets are essential to sustainable growth. In particular, much experience shows that economies cannot perform at their full potential when financial conditions are such as to restrict the supply of credit to sound borrowers."
He added, "We are addressing these financial strains and their potential economic consequences with a number of tools, including the provision of extra liquidity to the system and reductions in our target for the federal funds rate."
Bernanke said he also backs tougher licensing standards for mortgage brokers.
By Stephen Huebl and edited by Nancy Girgis