Federal Reserve Governor Daniel Tarullo said banks need to build sufficient reserve capital to avert taxpayer-funded bailouts similar to the Troubled Asset Relief Program.

“The best way to avoid another TARP is for our large regulated institutions to have adequate capital buffers, reflecting the damage that would be done to the financial system were such institutions to fail,” Tarullo said in written testimony prepared for a hearing today before Senate Banking Committee.

The TARP is a fund created by the government to backstop bank capital and financial institutions in the aftermath of the U.S. financial crisis caused by rising defaults on home loans.