Speaking on the topic of banking regulation at the Institute of International Bankers in Washington, D.C. on Monday, Hoenig said the U.S. Treasury's rescue plan is "daunting," and suggested regulatory agencies don't overreact in responding to the turmoil.

"I think one of the issues that now has to be addressed...is for the financial industry itself to step up and lead through this. I don't think we can do it with just [the] Federal Reserve and the Treasury," he said.

He said the new rules must be simple and enforceable, and that he favours a rules-based set of regulations as opposed to a principles-based system. "Principles-based solutions usually become vague, they're subject to volumes of regulatory interpretation," he noted.

Hoenig, who is not a voter on the Fed's policy-setting board, said the bank supervisory structure is not the cause of the crisis and warned against the rise of a "financial oligarchy."

Following his speech, Hoenig said limiting executive pay has merits, if implemented right, and that firms with high leverage ratios are likely to experience problems over time.

He also said he suspects Basel II will have to be revised as a result of the crisis. While he said the U.S. will still go ahead with the Basel II recommendations, he explained a close eye will have to be kept on leverage ratios.

Basel II is a set of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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