Chairman of the US Federal Reserve, Ben Shalom Bernanke, said that the country’s weak and sluggish economic recovery has made it harder for banks to make money from loans, but the financial conditions of the nation’s smaller institutions appear to be solidifying.

Talking in a community banking conference on Thursday, Bernanke said that even though there has been some recent signs of economic improvement, the recovery has been crawling, constraining opportunities for profitable lending.

He said that despite high ratios of nonperforming assets, asset quality shows to be calming down and provisions for loan losses at community banks appear to be declining, but the capital ratios appear to be improving.

Throughout his speech at the conference, the Fed head did not broadly discuss the outlook for the economy or monetary policy.

The Fed Chairman said that he is well aware that the US central bank’s ultra-loose monetary policy has squeezed bank productivity and profitability, but argued a stronger economy will improve the bank business over time.

He also defended the decisions of the Fed to keep the interest rates at record-low levels. The US Fed cut interest rates at a record low level, near zero, more than three years ago, and in the last month said that the slow economic recovery is expected to warrant keeping rates at fire-sale levels for around another two years.

Bernanke said that in the longer term, the overall result on bank productivity and profitability of a suitably accommodative monetary policy is almost certainly positive. He made the same argument against criticism toward the Fed, that its policy of keeping interest rates low was hurting savers on fixed incomes.

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