WASHINGTON (AP) — Chairman Ben Bernanke says the Federal Reserve is drafting rules to close large insolvent banks without bringing down the broader financial system, one of many steps regulators must take to prevent another financial crisis.

Bernanke says the absence of a process to deal with systemically important institutions in 2008 left regulators facing the "terrible choices of a bailout or allowing a potentially destabilizing collapse." Bernanke is making the comments at a conference sponsored by the International Monetary Fund

The financial overhaul law passed by Congress in 2010 gave regulators better tools to close down large financial institutions, he said. The Fed and other regulators are working to implement those rules now.