WASHINGTON (AP) Chairman Ben Bernanke said Friday that the Federal Reserve is drafting rules to close large insolvent banks without bringing down the broader U.S. financial system, one of many steps regulators must take to prevent another financial crisis.
Bernanke said the absence of a process to deal with systemically important institutions in 2008 left regulators facing the "terrible choices of a bailout or allowing a potentially destabilizing collapse."
His comments were made at a conference sponsored by the International Monetary Fund.
The financial overhaul law passed by Congress in 2010 gave regulators better tools to close down large financial institutions, he said. The central bank and other regulators are working to implement those rules.
"Our continuing challenge is to make financial crises far less likely and, if they happen, far less costly," Bernanke said.
Bernanke did not make any comments during his appearance about current economic conditions or the Fed's interest rate policies.