The increased regulation of major banks since the financial crisis of 2008 should help prevent future crises, or at least lessen their impact, says former Federal Reserve Chairman Ben Bernanke.
At a banking conference in Acapulco, Mexico, he cited the Fed's stress tests of major banks in the United States as an example of what will help lessen the impact of another crisis,
The Wall Street Journal reports.
All 31 of the large banks have sufficient capital to absorb losses during a severe economic downturn, the Fed announced in its latest test results earlier this month.
"The Fed has more resources for monitoring the system," said Bernanke, who chaired the central bank from 2006 to 2014.
However, he noted that there could be another crisis, but added, "I hope we don't get tested.'
Bernanke didn't offer a view as to when the Fed will begin raising interest rates. But he did say that its open communication on the issue could mean that market volatility will climb prior to the first rate increase, and then a relief rally will ensue once the Fed actually acts.
"The trick is always when to move," Bernanke proclaimed.
After the Fed's dovish policy statement last week, many economists expect it to begin lifting rates in September. The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.
Star bond fund manager Bill Gross of Janus Capital Group thinks the rate hikes will begin in September. In dropping the word "patient" from its
policy statement last week, the Fed shifted from a patient stance to a "prudent" one on raising rates, according he told
CNBC.
"The Fed expressed a lot of prudence and concerns going forward," he explained.
"They expressed concern about the potential for inflation. They expressed concern about the potential for global weakness and international developments, which is code basically for a strong dollar. And they expressed concern in terms of the employment situation not threatening inflation going forward."
In its statement, the Fed stated, "The [Fed's policymaking] Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."
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