TORONTO -- Paul Volcker, former chairman of the Federal Reserve Board, said he sees reason to be more optimistic about U.S. banking.

"At long last, there is more reason to be optimistic that the repair process is under way," Mr. Volcker said during a visit to the International Monetary Conference. "I think banks have finally learned that the road to prosperity is not making bad loans."

Mr. Volcker, now chairman of the investment banking firm of James D. Wolfensohn Inc., New York, also said he expects bank profits to improve gradually. Widely anticipated higher bank insurance premiums are "residue" from past industry mistakes and bad loans, he added.

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