Fed's Ben Bernanke: Shadow Banking System Still Poses Risks
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U.S. Federal Reserve Chairman Ben Bernanke said on Friday that the shadow banking system still posed a threat to financial stability, and funding markets might still not be able to cope with a major default.
In a wide-ranging speech explaining the Fed's role in monitoring the health of the banking system, Bernanke also laid out how the central bank was looking at asset markets closely for signs of excessive risk taking.
"While the shadow banking sector is smaller today than before the crisis...regulators and the private sector need to address remaining vulnerabilities," Bernanke said at a banking conference sponsored by the Chicago Federal Reserve Bank.
The 2007-09 credit meltdown, and the collapse of investment bank Lehman Brothers, brought to light a group of firms and funding vehicles known together as shadow banks that were poorly regulated but harbored large risk.
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