In her final appearance before Congress, outgoing Federal Deposit Insurance Corp. Chairman Sheila Bair reiterated her call for a 3-percentage-point capital surcharge for large banks in an effort to ward off another financial crisis.

Regulators are debating how much common equity "systematically important" banks must hold on top of a standard set last year by international regulators of 7 percent of assets weighted for risk. Capital is the cushion banks need to absorb unexpected losses.

A total capital requirement of 10 percent of risk-weighted assets "is actually moderate," Bair said at a subcommittee hearing chaired by Rep. Patrick McHenry, R-N.C. She noted others have called for a total capital buffer as high as 15 percent for large institutions.

Bankers argue that too high of a standard will tamp down lending and harm the economy. Concerns about new capital requirements have depressed the stocks of large banks such as Bank of America Corp. and Wells Fargo & Co. in recent weeks.

During her five years at the FDIC, Bair was a key player in government rescues of major financial institutions, including Wachovia Corp. and Bank of America. The bailouts were necessary only because regulators lacked the necessary tools to wind down large financial firms, Bair said. Last year's Dodd-Frank financial reform law included new powers backed by the FDIC for dissolving failing institutions.

"In order to restore discipline in the marketplace, large, complex banks and other financial companies must - without exception - be allowed to fail if they become nonviable," Bair said in her written testimony.

McHenry, who is chairman of the Oversight and Government Reform subcommittee that oversees bank bailouts, praised Bair for her service during a difficult time for the financial industry. The tone of the session contrasted with the Cherryville Republican's sharp questioning last month of Elizabeth Warren, the Harvard professor assembling the new Consumer Financial Protection Bureau. That hearing sparked a social media backlash against McHenry from Warren supporters.

"We wish you the best going forward," McHenry said at the end of the less than one-hour hearing.