Recent government backing of large financial firms highlights the need for better supervision of systemically important institutions, a top Federal Reserve System official said Thursday.
Gary Stern, the Minneapolis Federal Reserve Bank president, called for "systemic focused supervision" to keep a large bank's problems from touching other institutions.
"The 'too big to fail' problem has once again gotten worse," Mr. Stern said in prepared remarks for a speech in Montana.
Mr. Stern, who has raised "too big to fail" concerns before, said a better supervisory system would include more frequent stress-testing at large financial institutions, enhanced prompt corrective action, and a way of publicizing efforts to minimize a bank's systemic effect so that creditors will not expect a government rescue.
"Creditor expectations of receiving government support will diminish … when it is known that policymakers have less reason to provide such support," he said.
