Fischer also warned against "bankers' backlash," but said opposition to regulation is "making headway."
"But often when bankers complain about regulations, they give the impression that financial crises are now a thing of the past, and furthermore in many cases, that they played no role in the previous crisis," he said.
He emphasized that individuals should be punished for financial misconduct.
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It is not clear if government has sufficient tools to prevent all financial crises, he said, and the Fed may need interest rates to prevent financial instability. Fischer did take the opportunity to say econometric evidence shows the Fed's post-crisis quantitative easing policies worked.
Fischer also said he views the world economy as still growing very slowly, and that "confidence in the financial system and the growth of the economy has been profoundly shaken."
Turning to the future, Fischer said that the regulated financial industry and the regulators "will have to work very hard, for a very long time, and then keep on working hard, to reduce the frequency and magnitude of those future crises."
—Reuters contributed to this report.