Federal Reserve Chairman Jerome Powell said "things have settled down" among regional banks since the upheaval in the industry earlier this year.
Deposit outflows have "stabilized" and capital and liquidity are "strong," he said at a press conference after the Fed raised the target range for its benchmark interest rate by 0.25% on Wednesday and left the door open to more rate hikes.
Bank profits "generally are coming in strong this quarter and overall the banking system remains strong and resilient."
Read more: What the Fed rate hike means for bank accounts, CDs, loans, and credit cards
The comments about US banks came one day after regional lender PacWest (PACW) said it found a rescuer in Banc of California (BANC). PacWest was among the banks that lost depositors and investor confidence after the spring seizures of Silicon Valley Bank, Signature Bank, and First Republic.
The PacWest announcement was a fresh reminder that the turmoil that started in March is still not over for the banking industry, which still faces questions about its strength as lenders struggle with high interest rates, rising funding costs, and declining profitability.
Powell declined to discuss the PacWest deal, but did acknowledge that banks are tightening lending. He said a Fed survey of senior loan officers due to be released on Monday will show that lending conditions are "tight and getting tighter."
But it is "very hard to tease out" how that credit tightening is affecting the US economy, he added.
Read more: How to get a personal loan with bad credit
Lending for all commercial banks has been slowing since the beginning of 2023. Between June and the second week of July, the country's 25 largest banks started reducing their lending while smaller banks continued to grow lending at a slower pace, according to Federal Reserve data.
Powell said on Wednesday that "aggregate bank lending was stable quarter over quarter."
The PacWest deal may come in handy for the Fed and it and two other regulators try to sell a complex overhaul of new capital standards for banks on Thursday.
They argue the changes are needed to make lenders stronger, more resilient, and better prepared for shocks like the crisis of this spring.
The new capital proposals are expected to face pushback from the banking industry, which argues that lenders are much more resilient than they were during the 2008-09 financial crisis and that higher requirements could restrict lending.
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