OECD applauds Obama bank reforms

(AP) — President Barack Obama's plan to limit banks' size and risky trading habits could help to avoid a new financial crisis, the head of the Organization for Economic Cooperation and Development said Tuesday.

Obama's plan, outlined last week, would bar the biggest banks from proprietary trading — when banks use their own money to make high-risk bets. If those bets go bad and a bank goes under, taxpayers could be on the hook.

By separating core commercial banking from such higher-risk activities, the plan "could help to avoid a new financial crisis by resolving some major risk inherent to the current financial system," OECD secretary general Angel Gurria said in a statement published on the organization's web site.

Gurria said the financial crisis has its origins in banks' "shift over time away from the 'credit culture' of commercial banking toward an 'equity culture' focused on generating profits for shareholders and management."

Gurria added that the plan's timing and details still needed to be clarified before it can be put into effect.

The OECD is a 30-member club of the industrialized world's wealthiest countries. It advises its members on economic policy.