Regulators must not only sharpen their assessments of individuals banks, but also examine the financial system as a whole to detect risks that could endanger the normal flow of credit, market operations and commerce - critical elements to the smooth functioning of the US economy, Mr Bernanke said.

'A principal lesson of the crisis is that an approach to supervision that focuses narrowly on individual institutions can miss broader problems that are building up in the system,' the Fed chief said in remarks delivered via satellite to a Fed conference in Chicago.

The current financial crisis - the worst since the 1930s - has revealed 'serious deficiencies' on the part of some financial institutions, which regulators are working to fix, Mr Bernanke said.

Those deficiencies on the part of banks include not having adequate capital, or buffers, on hand against potential losses. Some banks also did not plan effectively to make sure they have easy-to-sell 'liquid' assets if economic conditions worsen, and they did not have strong risk management policies in place to detect problems, he said.

'Increasing the effectiveness of supervision must be a top priority,' Mr Bernanke said.

Huge, globally interconnected financial firms whose failure could endanger the US economy should be subject to 'a robust framework for consolidated supervision,' he said.

Sheila Bair, the head of the Federal Deposit Insurance Corp., on Wednesday told Congress new powers are needed to oversee such companies and suggested the FDIC could share those oversight duties with other regulators.

Mr Bernanke didn't provide details about the results of 'stress tests' on the nation's 19 largest banks. Those results, to be released later on Thursday, will shed light on which banks have enough capital and the right mix of it to weather a deeper recession.

If they don't, banks will 30 days to come up with plans to remedy the situation and then have six months to implement them. Mr Bernanke earlier this week said he was hopeful banks could raise capital on their own, rather than having to rely on the government for aid. Regardless, no bank will be allowed to fail, Fed officials have said. -- AP