Greenspan on the state of the banking industry

"In general, the industry is adequately managing interest-rate exposure," Greenspan said in prepared testimony to the Senate Banking Committee, which was holding a hearing on the state of the banking industry.

"Many banks seem to believe that as rates rise - presumably along with greater economic growth - they can increase lending rates more than they will need to increase rates paid on deposits," Greenspan said.

"Certainly, there are always outliers, and some banks would undoubtedly be hurt by rising rates," Greenspan added. "However, the industry appears to have been sufficiently mindful of interest rate cycles and not to have exposed itself to undue risk."

Asked by Senate Banking Committee Chairman Richard Shelby, if Greenspan felt optimistic about the economy and job creation, the Fed chief responded: "I do, Mr. Chairman."

He said he believed that "inflationary pressures will be reasonably well contained" so long as companies continue to produce healthy productivity gains.

"Measures of concentration in local banking markets, both urban and rural, have actually declined modestly not just since 2000 but since the mid 1990s," Greenspan said.

"Significantly, most households and small and medium-sized businesses obtain the vast majority of their banking services in such local markets," he said.

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Statement of Federal Reserve Chairman Alan Greenspan before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, 20 April 2004.

The state of the banking industry