Treasury's Ryan Says Financial System Should Allow Banks to Fail

Speaking in London at Euromoney's Global Borrowers Investors Forum 2008, Assistant Secretary of the Treasury for Financial Markets, Anthony Ryan said the financial system needs to become robust enough to allow for bank failures.

Regulations need to balance financial stability with moral hazard, Ryan said, adding that well-capitalized firms with good risk management practices would hold up well to periods of turmoil.

Earlier on Tuesday, in an interview with Bloomberg Television, Ryan said financial markets are showing signs of strength, though he urged financial institutions to not rely on the Fed as a lender of last resort.

By Erik Kevin Franco and edited by Stephen Huebl