Bernanke calls for more derivatives oversight

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday that credit default swaps and other derivatives need more oversight, and suggested a central counterparty could help with problems that arise from the largely unregulated financial instruments.

"We need to strengthen the infrastructure, we need to work...to create central counterparties, exchanges, other mechanisms to reduce the instability that arises when the failure of one large counterparty permeates the entire system through over-the-counter derivatives, CDS and other types of instruments," he told a luncheon.

Bernanke's call echoes that made by New York Insurance Superintendent Eric Dinallo, who has said a central counterparty would provide insurance on risky swaps.

(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)