(Adds comments on asset bubbles)

By John Parry

NEW YORK, Nov 9 (Reuters) - U.S. Federal Reserve Governor Daniel Tarullo on Monday endorsed the idea of requiring big banks to hold more capital and renewed his suggestion that direct efforts to limit the size of banks may be worth considering.

Fed Chairman Ben Bernanke and other officials have raised the idea of a capital surcharge to prevent banks from getting so big that the government is compelled to prop them up in a crisis.

The idea "has substantial appeal," Tarullo said in remarks prepared for a speech at New York University.

Tarullo did not comment on the outlook for the economy or interest rates in a speech on financial regulation.

The Fed governor said that in the debate over reforms to prevent a repeat of the recent financial meltdown, policy-makers could also focus on changes to the structure of the financial system as well as regulations.

He said both regulators and the financial industry were to blame for the crisis.

He renewed his suggestion that directly limiting the size of financial institutions may have merit.