Responding to the financial crises gripping Asia and Russia, Federal Reserve Board Governor Edward M. Gramlich on Tuesday advocated limited controls on the free flow of international capital.

"There may be occasional instances where some restrictions are necessary to control extreme capital flows not justified by economic fundamentals," Mr. Gramlich said at Carnegie Mellon University in Pittsburgh.

Mr. Gramlich stressed he is a supporter of free international capital flows and, rather than radical surgery, recommended less-invasive approaches.

"Before we initiate more artificial restrictions on capital flows, we should try to improve the system to take advantage of its very large benefits," he said.

For instance, he recommended imposing restrictions on the amount of foreign funds banks may borrow.

"Countries have often gotten into trouble when they have done too much maturity transformation-that is, borrowed from abroad at short maturities to finance long-term investments," he said. "Steps could be taken to limit such borrowing."

These restrictions should be imposed by domestic regulators on borrowings by their banks, he said. He rejected proposals to limit volatility by taxing international capital flows.

"The tax rates necessary to do the job could be very high, and it might be more effective to use orthodox principles of bank supervision," he said.

He also reiterated the Fed's call for greater financial transparency, which means lenders have better access to reliable data on the financial health of foreign borrowers. He also said countries should release better aggregate statistics on uncommitted foreign reserve balances.

"It is hard to imagine a solution to the international lending problems of the day without more transparent accounting," Mr. Gramlich said.

Reform of the International Monetary Fund also is important, he said. "There clearly is a need for better warnings about the risks of lending to certain countries, to prevent currency vulnerabilities from building up as much as they did," he said.

"The IMF's one-size-fits-all recommendations of fiscal austerity should also be reexamined, because in many Asian countries expansionary fiscal policies were clearly called for-indeed, still are called for-while the IMF initially recommended the reverse."

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