Timothy Geithner, president and chief executive officer of the New York Federal Reserve, has warned banks to tighten their monitoring of hedge funds, as debate over regulating the industry continues to rage.

Speaking at a meeting of the Economic Club of New York, Geithner described the doubling of the hedge fund industry since 1998 as a challenge to the resiliency of the US financial system. He said he was concerned that there was considerable clustering of hedge fund positions, which would magnify the impact of market moves.