Much higher capital standards are needed for the financial industry to be a source of economic growth over the long-run, a top U.S. Federal Reserve official said on Sunday.

International bankers this weekend warned a global crackdown on bank oversight could undermine a fragile economic recovery if governments move too fast and fail to cooperate.

"The industry and others will remind us often that to place too high a capital requirement or too short a time horizon on the industry will constrain credit and slow the recovery and expansion," Kansas City Federal Reserve Bank President Thomas Hoenig, said at a closed door meeting in Washington, according to prepared remarks.

"However, we can be just as confident that current equity capital standards must be set much higher than recent levels if the industry is to retain the public's trust and be a source of sustained credit and economic growth."

Global regulators, aiming to prevent any repeat of the worst financial crisis since the Great Depression, agreed in September to force banks to more than triple the amount of top-quality capital they must hold in reserve.

Hoenig said those implementing higher capital standards will face "a heavy burden" as banks will launch "an enormous effort" to change terms.

"It takes time to build capital. It inhibits the payments of dividends that banks are eager to restart," he said.

Hoenig said the crisis showed both the industry and supervisory authorities lost sight of the long run and wrongly trusted that the market would self-regulate.

"It didn't, it can't and it won't," he said. "The industry's structure and incentives are now inconsistent with the market being the disciplinarian."

In a speech honoring former regulator William Taylor, Hoenig praised him for staying "outside of politics and profit."

"He was not concerned with re-election, reappointment or fundraising. He had no paid speeches or consulting contracts," he said.

"Nothing prevented him from telling the hard facts."