WASHINGTON Feb 16 The weak economic
recovery has made it harder for banks to make money from loans
but the financial conditions of smaller institutions appear to
be solidifying, Federal Reserve Chairman Ben Bernanke said
"Despite some recent signs of improvement, the recovery has
been frustratingly slow, constraining opportunities for
profitable lending," Bernanke told a banking conference.
Despite high ratios of nonperforming assets, asset quality
appears to be stabilizing and provisions for loan losses at
community banks appear to be decreasing, Bernanke said.
Capital ratios also seem to be improving, he added.
The Fed chairman did not extensively discuss the outlook for
the economy or monetary policy in his speech.
Bernanke said he is aware that the central bank's
ultra-loose monetary policy has squeezed bank profitability but
argued a stronger economy will boost bank business over time.
The Fed cut interest rates to near zero more than three
years ago and said in January that the sluggish recovery is
likely to warrant keeping rates at fire-sale levels for around
another two years.
"In the longer term the overall effect on bank profitability
of an appropriately accommodative monetary policy is almost
certainly positive," Bernanke said.