WASHINGTON - Though bankers appear to be improving credit quality and bank performance remains solid, "continuous vigilance" by bankers and regulators is necessary to guard against failures, Federal Reserve Chairman Alan Greenspan said Thursday.

In a wide-ranging speech delivered by satellite to a meeting of the National Association of Urban Bankers in San Francisco, Mr. Greenspan said that the Fed would continue exploring ways to develop a more tailored exam process that better responds to the needs of small- and medium-size banks.

Currently, he noted, large banks receive near-constant supervision, while smaller banks are regulated on a less intensive basis. "Clearly, these two broad supervisory programs will need further customization or segmentation to respond to the evolving diversity of our supervisory caseload."

Mr. Greenspan said the Fed continues to explore a dual capital system as well, noting that pending revisions to the Basel Capital Accord may establish capital requirements that are too complex and expensive for practical implementation in community banks.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.