U.S. Federal Reserve Chairman Ben Bernanke said today that planned regulatory reforms could help ease the credit crisis.

Speaking at the World Affairs Council of Greater Richmond’s Virginia Global Ambassador Award Luncheon, in Richmond, Va., Bernanke reviewed the recent report of the President’s Working Group (PWG) on Financial Markets, and its recommendations coming out of the credit market disruption.

“The process of implementing the PWG’s implementations will be challenging, in no small measure because of the continuing pressures of short-term crisis management. However, we do not have the luxury of waiting for markets to stabilize before we think about the future,” he said. “Indeed, many of the necessary changes that have been identified, including increasing transparency, improving risk management, and attaining better coordination among regulators, could provide important support to the process of normalizing our financial markets.”

Bernanke noted that the PWG approach relies on both improved regulation, and market discipline. “With respect to market discipline, in light of recent experience, investors are unlikely to rely solely on credit ratings in the future but will instead require more and better information from originators and sponsors of credit products. Credit rating agencies will also be tougher about the information they demand from securitizers, and I expect they will be more skeptical about especially complex and opaque instruments,” he said. Regulation complements market discipline, he added, “for example, by requiring disclosures that improve the ability of consumers to shop and of investors to evaluate risks, by providing protections to less-sophisticated market participants (such as subprime mortgage borrowers), and by requiring that financial institutions meet high standards in their management of risk.”

“We regulators must act to ensure that our policies and supervisory procedures are consistent with the objectives of improving the originate-to-distribute system and strengthening risk management more broadly,” Bernanke noted. “We will review some aspects of our regulations and strengthen our supervisory guidance and disclosure requirements in key areas, such as those relating to securitizations and off-balance-sheet vehicles. We will review our own use of credit ratings as a risk metric. And we must be sure that we are working effectively with both the private sector and other domestic and international regulators to help the system function better.” Bernanke said that fixing the weaknesses in the risk-management practices of financial institutions is primarily the responsibility of the firms’ managements,”But prudential supervisors, including the Federal Reserve, must also review their existing policies and guidance to identify areas where changes could help firms strengthen their risk management–a process that is already under way,” he said.

He suggested that regulators should adopt policies that lead financial institutions to hold adequate capital and liquidity cushions, and said that work is ongoing through international bodies to enhance regulatory guidance in a variety of areas in which weaknesses were identified. “I expect, for example, to see work forthcoming on liquidity risk management, concentration risk management, stress testing, governance of the risk-control framework, and management information systems,” he noted.