Speaking ahead of a weekend summit, Bernanke warned that a sustainable recovery from the global economic slump "will remain out of reach" until governments stabilized the financial system.
"We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components," he told the Washington-based Council on Foreign Relations ahead of the Group of 20 finance ministers and central bank chiefs meeting in London.
"In particular, strong and effective regulation and supervision of banking institutions, although necessary for reducing systemic risk, are not sufficient by themselves to achieve this aim," he said.
Bernanke said a key pillar of any oversight strategy of the global financial system should address the problem of financial institutions "deemed too big -- or perhaps too interconnected -- to fail."
US and European governments have moved to rescue large private institutions, mostly banks, reeling from the current stock market meltdown and credit crunch triggered by a US home mortgage crisis.
The home foreclosure crisis plunged the world's biggest economy into prolonged recession, sending the unemployment rate to a 25-year high, pushing stocks to 12-year lows and forcing government rescues of blue-chip companies such as AIG, Citigroup and General Motors.
"Indeed, in the present crisis, the too-big-to-fail issue has emerged as an enormous problem," Bernanke said, citing the heavy cost borne by taxpayers on government rescues of mega firms that had taken excessive financial risks.
He said policymakers should address the issue by "better supervising systemically critical firms to prevent excessive risk-taking" and by "strengthening the resilience of the financial system to minimize the consequences when a large firm must be unwound."
As many large and complex financial firms are global in nature and subject to complex regulatory structures, any new regime must be structured to work as seamlessly as possible with other domestic or foreign insolvency regimes, he said.
Bernanke said another key pillar for better oversight of the global financial system was strengthening "financial infrastructure," such as rules that govern trading and settlement in financial markets, to ensure that it would "perform well under stress."
He also sought a review of regulatory policies and accounting rules and the possibility of setting up an authority specifically charged with monitoring and addressing "systemic risks" to "help protect the system."
"In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit," he said.
Amid the festering financial crisis, International Monetary Fund managing director Dominique Strauss-Kahn warned Tuesday that the global economy could contract for the first time in 60 years in 2009.
Differences have also surfaced ahead of the G20 talks between key emerging and industrialized nations designed to coordinate a global response to the worsening credit crunch.
The White House Monday denied a rift with Europe over whether economic stimulus or regulatory reform offers the best path to revival of the global economy.
Washington is pressing its transatlantic allies to emphasize stimulus. But the European Union has failed to forge a common approach, and some EU leaders led by France are pressing for a comprehensive rewrite of global regulation.
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