Federal Reserve Chairman Ben Bernanke minced no words Friday on the issue of "too-big-to-fail" banks, saying financial institutions large enough to threaten global economic stability need to be broken up.

“I think that too-big-to-fail is a very big issue,” Bernanke said in a speech in Chicago. “We will not have completed the goals of regulatory reform if we have not adequately” addressed the problem.

Critics of the Dodd-Frank regulatory bill passed in the wake of the financial crisis say the legislation doesn’t go far enough to prevent a repeat of the credit crunch that nearly derailed the global economy four years ago.

Indeed, the four largest U.S. banks, J.P. Morgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo & Co. (WFC) are bigger now than before the crisis hit.

The Perils of 'Too-Big-to-Fail'

In his remarks, Bernanke said, “It’s very important for the long-term stability of our financial system to eliminate too-big-to-fail.”

During the financial crisis of 2008-2009, many economists believed the threats to the global financial system were increased because some banks facing bankruptcy had to be saved due to their size and broad global connections. If one of them failed, the theory went, it could have caused a domino effect of failures.

When huge investment bank Lehman Brothers was allowed to fail in the fall of 2008, the repercussions were felt throughout the global financial system. Consequently, the U.S. government sought bailouts for other big financial institutions, such as American International Group (NYSE: AIG), a giant insurance company with deep ties to the global economy.

Bernanke said steps have been taken to prevent banks from repeating the mistakes of last decade. But not enough.

“We are greatly strengthening the capital requirements,” he said -- meaning banks have been required to have more cash stashed away in the event their debts rapidly come due as happened in 2008 and 2009.

“Too big to fail is partly a credibility issue on the part of the federal government.  Will it go through with it?” Bernanke asked.

Follow Dunstan Prial on Twitter @DunstanPrial