The US needs an overarching regulatory authority to prevent a repeat of risks building up unchecked across the financial system and exploding into economic crisis, Ben Bernanke said on Tuesday. In remarks that echo calls on Capitol Hill for a powerful co-ordinating regulator in the US, the Federal Reserve chairman said the central bank would need to be involved in such a body, if not take the lead role itself. He said the financial crisis, which had seen huge risks building up in lightly regulated institutions, had revealed the weakness of fragmented regulation. ‘This crisis has revealed some rather shocking gaps, he said. ‘Who was overseeing the subprime lenders, for example? Who was overseeing AIG? There simply wasn’t enough adequate oversight in those cases. Mr Bernanke said a range of fixes were being ­proposed or implemented, including consolidated supervision for financial holding companies, tighter restrictions on the investments made by money ­market mutual funds and reviewing capital adequacy standards for banks to moderate their incentives to lend too much in booms and too little in recessions. The US also needed a new way to resolve crises in large non-bank financial institutions rather than threatening the whole […]