Fed chief Ben Bernanke says recovery not complete

Ben Bernanke
Image caption US Federal Reserve Chairman Ben Bernanke has warned of new risks to the financial markets

US Federal Reserve Chairman Ben Bernanke has said the US economy is yet to fully recover from the impact of the global financial crisis.

Mr Bernanke said that more regulatory action was needed to ensure the stability of the financial markets.

However, he warned that as these procedures were put in place new risks might emerge.

Mr Bernanke's comments come amid calls for a tighter control of the sector to avoid a repeat of the financial crisis.

"Even as we make progress on known vulnerabilities, we must be mindful that our financial system is constantly evolving and that unanticipated risks will develop over time," Mr Bernanke said.

'Inevitable side effect'

Last month, the US Federal Reserve bank conducted stress tests on 19 major US banks to ensure they have the ability to survive a financial shock.

Even though four banks, including Citigroup, failed the tests, the Federal Reserve said all those tested were in a much stronger position than they were after the 2008 financial crisis.

Mr Bernanke said the Fed had also been keeping a close watch on the exposure of US banks to the European debt crisis.

At the same time, he said that tougher standards were being put in place for banks and other financial institutions in a bid to ensure stability in the markets in times of a financial downturn.

However, he cautioned that just regulating the sector was not enough and authorities need to keep a close watch on any new potential risks that may emerge in the future.

"An inevitable side effect of new regulations is that the system will adapt in ways that push risk-taking from more-regulated to less-regulated areas, increasing the need for careful monitoring and supervision of the system as a whole."

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