Bernanke says community banks strengthening

March 14, 2012 - 10:26 AM

WASHINGTON (AP) — U.S. community banks are gaining strength even though the economy is improving only moderately, Federal Reserve Chairman Ben Bernanke said Wednesday.

The Fed chief delivered prerecorded remarks on a video monitor before a convention of community bankers in Nashville. The speech resembled one he gave last month in Arlington, Va.

Bernanke said community bank profits were higher in 2011 than the previous year and bad loans were decreasing. He also said they have built up cushions against loan losses. Community banks have assets below $10 billion.

Bernanke did not mention the Fed's interest rate policies in his taped speech. During the February speech, Bernanke defended the Fed's decisions to keep interest rates at record-low levels.

On Tuesday, the Fed repeated its plan to keep short-term interest rates near zero through 2014.

In Wednesday's speech, Bernanke sought to counter criticism that the sweeping overhaul of financial regulations that Congress passed in 2010 was imposing unnecessary burdens on banks.

"We take quite seriously the importance of evaluating the costs and benefits of new rules," Bernanke said in his remarks to the national convention of the Independent Community Bankers of America.

Bernanke said that most of the provisions in the 2010 law were aimed at addressing the threats posed to the financial system from the largest financial institutions and not community banks.

"We will work to maintain a clear distinction between community banks and larger institutions in the application of new regulations," Bernanke said.