The regulatory architecture of the financial system must be reformed, Federal Reserve Bank of Philadelphia President Charles I. Plosser said Friday.
“The financial crisis has underscored the need for reforming the regulatory and supervisory architecture of our financial system,” Plosser said at a New York University conference this morning, according to prepared text of the speech, which was released by the Fed.
Plosser said, “We must address the too-big-to-fail and too-interconnected-to-fail issue by developing a resolution mechanism that reduces the systemic costs of failure. Second, we must develop ways to measure systemic risk and impose higher regulatory burdens, in a systematic and transparent way, on firms that generate increasing levels of systemic risk. Third, the Fed should play a central role in reducing systemic risk through an explicit mandate to regulate systemically important payments and settlements systems. However, we should not ask the Fed to take on responsibilities that would undercut its ability to achieve its monetary policy objectives.”
