Bank regulation would be cheaper and more effective if it were augmented by the forces of market discipline, said Gary H. Stern, the president of the Federal Reserve Bank of Minneapolis President, on Wednesday.

Market-based assessments of a bank's soundness should be built into the current regulatory structure, Mr. Stern said in a speech sponsored by the American Enterprise Institute. "I think it is irresponsible not to do so as a matter of public policy, because of considerations both of effectiveness and of resources."

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