Federal Reserve Chairman Ben Bernanke said Monday that the banking system, like other financial indicators, has improved significantly since the worst of the crisis.
"Loss rates on most types of loans seem to be peaking, and, in the aggregate, bank capital ratios have risen to new highs," Bernanke said in a speech before the annual meeting of the Southern Legislative Conference of the Council of State Governments in Charleston, S.C.
Still, the Fed chief said many banks continue to experience a large volume of troubled loans, and credit conditions are still tight.
As a result, bank loans outstanding have continued to decline, he said.
Particularly hard hit have been small businesses, which rely heavily on bank credit and have seen lending standards restricted.