Federal Reserve Chairman Ben Bernanke said Wednesday that there is no other agency that could replicate the "breadth and depth of relevant expertise" that the central bank has in its regulation of the nation's banks and its analysis of systemic risks.
Speaking at a hearing before the U.S. House Committee on Financial Services, Bernanke said that the Fed is uniquely suited to supervise large financial organizations and added that its involvement in regulation of banks enhances its ability to carry out its duties.
"The Federal Reserve's participation in the oversight of banks of all sizes significantly improves its ability to carry out its central banking functions, including making monetary policy, lending through the discount window, and fostering financial stability," he said in prepared remarks.
Bernanke's testimony before the committee comes days after Senator Chris Dodd, D-Conn., unveiled a financial regulatory reform package that would create a consumer protection agency within the Fed and would also create a Financial Oversight Council, which could give the central bank the power to require companies to divest holdings, though "only as a last resort."
At the hearing, Bernanke said that the economy must be subject to strong supervision and said that the Fed has developed expertise in areas critical for effective consolidated supervision, including "macroeconomic analysis and forecasting" and "a close working knowledge of the financial infrastructure."
He added, "Perhaps most important, as this crisis has once again demonstrated, the Federal Reserve's ability to identify and address diverse and hard-to-predict threats to financial stability depends critically on the information, expertise, and powers that it has as both a bank supervisor and a central bank."
Bernanke went on to say that the central bank supports the effort to reform financial regulation and said the Fed itself is implementing improvements to its regulatory capabilities.
"We have played a key role in international efforts to ensure that systemically critical financial institutions hold more and higher-quality capital, have enough liquidity to survive highly stressed conditions, and meet demanding standards for company-wide risk management," he said. "We have also been taking the lead in addressing flawed compensation practices by issuing proposed guidance to help ensure that compensation structures at banking organizations provide appropriate incentives without encouraging excessive risk-taking."
He added that the central bank is using its expertise in various areas of the economy and financial sector to take a multi-disciplinary approach toward regulation and making greater use of horizontal examinations when reviewing financial firms.
Bernanke concluded by saying that the Fed will make the oversight and control of its supervisory functions more centralized, enhancing the supervisory involvement of senior Fed officials as well as senior bank managers and boards of directors.
"We are strengthening regulation and overhauling our supervisory framework to improve consolidated supervision as well as our ability to identify potential threats to the stability of the financial system," he said. "And we are taking steps to strengthen the oversight and effectiveness of our supervisory activities."
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.