The global financial system “was woefully inadequate” in 2008, and while progress in reform has been made, the work “is far from complete,” Federal Reserve Bank of New York president and chief executive William Dudley said Friday.

Without a “stable financial system,” he said, there can be no sustainable economic growth.

The financial system needs to funnel “savings from investors to borrowers even under adverse circumstances,” Dudley told the Bretton Woods Committee International Council meeting, according to a prepared text of his remarks.

The private sector as well as the government should be involved in the efforts, with regulators responsible for minimizing costs and reacting to “unforeseen consequences of reform,” he said. It is also important that regulators keep costs “commensurate with the financial stability benefits generated by particular reform measures,” especially “on smaller, less systemically important institutions.”

The private sector needs to offer “smart solutions to achieve essential financial stability objectives and not simply lobby against change.”

“It is clear that the buildup of debt during the years prior to the crisis, as well as the crisis itself, has contributed to an unusually anemic recovery. This has occurred despite the best efforts of policymakers to stimulate demand through aggressive monetary and fiscal easing,” he said. “The extraordinarily poor economic outcomes we see today underscore the importance of building a financial system that is resilient in its ability to provide credit to households and business throughout the business cycle. It also underscores the importance of limiting the types of financial and real imbalances that develop during times of prosperity. When such balances unwind, they can cause significant damage to the financial system and the economy.”

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