Federal Reserve Chairman Ben Bernanke on Tuesday urged a strategic overhaul of the US financial regulatory system in an effort to smooth out the boom-and-bust cycles in financial markets.

The following are highlights of his speech to the Council on Foreign Relations:

Financial regulations reform

-- We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components. In particular, strong and effective regulation and supervision of banking institutions, although necessary for reducing systemic risk, are not sufficient by themselves to achieve this aim.

Too big to fail

-- Supervisors need to move vigorously, as we are already doing, to address the weaknesses at major financial institutions in capital adequacy, liquidity management, and risk management that have been revealed by the crisis.

-- Ensure a robust framework -- both in law and practice -- for consolidated supervision of all systemically important financial firms organized as holding companies.

-- Improve tools to allow the orderly resolution of a systemically important nonbank financial firm, including a mechanism to cover the costs of the resolution.

Strengthening financial infrastructure

-- The infrastructure for managing credit default swaps and other over-the-counter derivatives is still not as efficient or transparent as that for more mature instruments.

-- Enhancing the resilience of the tri-party repurchase agreement (repo) market, in which the primary dealers and other major banks and broker-dealers obtain very large amounts of secured financing from money market mutual funds and other short-term, risk-averse sources of funding.

-- Both the operational performance of key payment and settlement systems and their ability to manage counterparty and market risks in both normal and stressed environments are critical to the stability of the broader financial system.

--Increase the resiliency of money market mutual funds that are susceptible to runs.