Financial institutions' risk management and government supervision have been lacking, according to Federal Reserve Board governor Daniel K. Tarullo.

"The financial crisis and its aftermath have revealed fundamental problems in both risk management by financial institutions and supervision by government regulators," Tarullo told the North Carolina Bankers Association annual convention, according to prepared text of his remarks released by the Fed.

"These shortcomings arose in no small part from a failure by both the private and public sectors to adjust to far-reaching changes in financial markets over recent decades. There is a growing, though certainly not unanimous, view that supervision and regulation must be substantially more oriented toward containing systemic risk and addressing the associated problems posed by institutions considered too big to fail. The public policy agenda will thus rightly be dominated for some time by proposals for legislative and administrative measures directed at systemic risk."

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