Fed's Kohn says markets improving but no guarantees

WASHINGTON (Reuters) - Federal Reserve Vice Chairman Donald Kohn said on Thursday that the nation's financial system was in sounder shape now and that banks have improved their capital positions.

"I think we've come a long way. The markets are in a lot better shape than they were in March, but having said that, I don't think anyone can guarantee what's going to happen next," he said in response to questions at a Senate Banking Committee hearing.

"I would expect that we would see a gradual improvement in financial markets, that our institutions are taking steps to make that possible, but there are no guarantees," Kohn said.

(Reporting by Glenn Somerville; Editing by Dan Grebler)