Federal Reserve chairman Ben Bernanke told attendees of the 48th Annual Conference on Bank Structure and Competition in Chicago on Thursday that since the financial crisis, “banks have made considerable progress in repairing their balance sheets and building capital.”
Bernanke said risk-based capital and leverage ratios for banks of all sizes have “improved materially and are significantly above their previous highs,” according to a transcript from the Fed’s website. “Importantly, the 19 largest banking institutions that participated in the 2009 stress tests … have considerably more and better-quality capital than a few years ago.”
However, the Fed chairman said residential mortgage lending has been “particularly sluggish.”
“Tight lending standards and terms remain especially evident,” he said. “To be sure, a return to pre-crisis lending standards for residential mortgages wouldn’t be appropriate; however, current standards may be limiting or preventing lending to many creditworthy borrowers.”
Small-business owners, he added, who in the past might have tapped into the equity in their homes or used their homes as collateral for small-business loans, also have found “conditions challenging in recent years.” The stock of small loans to businesses on bank balance sheets at the end of last year was more than 15% below its peak in 2008, Bernanke noted.