Federal Reserve Board Chairman Ben Bernanke said "systemic risk" can be broadly defined, for example, as unsafe amounts of leverage at a bank, gaps in regulatory oversight and the possibility that the failure of a large, interconnected firm could lead to a breakdown in the wider financial system.
In a letter to Sen. Bob Corker, R-Tenn., the Fed chief weighed in on the debate over what should be classified as systemically risky in the context of the planned overhaul of financial regulation.
"Systemic risks are developments that threaten the stability of the financial system as a whole and consequently the broader economy, not just that of one or two institutions," Bernanke said in the letter.
