Fed No. 2 Fischer says care needed to avert crisis

Published on NewsOK Modified: July 10, 2014 at 4:45 pm •  Published: July 10, 2014
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WASHINGTON (AP) — The Federal Reserve's new No. 2 official says regulators must continue to work to end the need for the government to bail out big banks in a crisis. Stricter capital requirements, rather than breaking up the biggest banks, is the better remedy, he says.

Stanley Fischer, who became vice chairman of the Fed last month, made the remarks Thursday in his first speech since joining the central bank. He appeared to align himself with recent comments by Fed Chair Janet Yellen that signaled a key focus on bank regulation for the Fed under her tenure, to prevent the kind of risk-taking that triggered the 2008 financial crisis and nearly toppled the global banking system.

Fischer, a former official of the International Monetary Fund and a head of the Bank of Israel, said regulators "need to be vigilant" in trying to prevent the next crisis — "and there will one."

That next crisis "will not be identical to the last one," and regulators have to work both to foresee it and to prevent it, Fischer said in his speech to a conference of the National Bureau of Economic Research in Cambridge, Massachusetts.

Progress has been made in the U.S. toward reducing the chances of future big-bank failures by regulators raising capital requirements for banks and subjecting them to periodic "stress tests," Fischer told the private research organization.