While fear, uncertainty and volatility have plagued the markets since Federal Reserve Chairman Ben Bernanke said the Fed might start tapering its bond-buying programs this year, Jean Claude Trichet, former head of the European Bank, says the markets have over-reacted, but that Bernanke did the right thing.

Trichet believes the volatility says more about the market than it does about the Fed's communication.

"I think that it was appropriate for Ben Bernanke to say 'well this will not last forever,' ... but he remained very conditional in his own explanation so I think it was very well done. It was carefully crafted. That you have an over-reaction was something that we have to live with," Trichet told CNBC.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

According to Trichet, non-traditional monetary policies were a necessary response and central banks deserve credit not criticism.

"We have to pay homage to the central banks. Without their bold and swift actions, we would have known ... probably a great depression," Trichet said.

Trichet noted that it might be time for central banks to reassess their policies, but he does not think market volatility should mold their decisions.

"I think that it is perfectly legitimate that central banks [reflect] on whether what we do is still commensurate to the present difficulty," he told CNBC.

"If [central banks] do too much, then they are only paving the way for the other partners — the governments, the parliament and the private sector — not to do their own job. It's clear that the central bank cannot do everything," Trichet added.

But, many are concerned the Fed's efforts to pass the baton will wreak havoc in the bond market where the yield on Treasurys is already climbing.

Trichet proclaimed we must not confuse the present with 1994, when yields jumped 2 percentage points with a year. Then, the markets were taken by surprise because rates were hiked without a pre-announcement.

"So it's a totally different universe," he noted.

"But again, one has to understand that we, the central banks cannot [the Fed as well as others] cannot be the prisoner of an environment," Trichet added.

Bernanke's efforts to provide better communication have backfired, Alan Ruskin global head of Group of 10 foreign-exchange strategy at Deutsche Bank, told Bloomberg TV.

"Transparency isn't actually working terribly well — it's actually engendering market volatility."

And now many are concerned central banks, including the Fed, may do too much. The Bank of International Settlements (BIS) issued a report warning of the dangers.

"Central banks cannot do more without compounding the risks they have already created," the report stated.

"It is others that need to act, speeding up the hard but essential reform and repair work to unlock productivity and employment growth," Stephen Cecchetti, economic adviser and head of the monetary and economic department at the BIS, told reporters, according to Bloomberg.

The BIS urged central banks to refocus their efforts back to their traditional roles and warned that disruptive market dynamics could materialize when the markets receive signals of an exit.

"The risk that exit will be delayed to avoid such disruptions is likely to rise over time, as the situation becomes more entrenched," the report said.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did