Federal Reserve Chairman Ben Bernanke said today that the U.S. banking system is stronger and more resilient while still facing challenges on credit quality and liquidity, Bloomberg reported.

“Banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment,” Bernanke said during a speech at the Federal Reserve Bank of Chicago’s annual conference on banks.

As the economic expansion proceeds, “a financially stronger banking system will be well positioned to expand its lending,” he said.

Some large firms still face “challenges on the liquidity front” as they rely heavily on wholesale short-term funding, he said, and as government guarantees on some of their liabilities expire. Loan delinquency rates on credit backed by commercial and residential real estate “remain elevated,” Bernanke said.

The largest 19 banking institutions have increased their Tier 1 common equity to nearly $760 billion, an increase of more than $300 billion since 2009. Tier 1 common equity is “the best buffer against future losses,” Bernanke said.

“The Tier 1 common ratio for these firms, which compares this high-quality capital to risk-weighted assets, stood at 10.5 percent at the end of last year,” Bernanke said.

Bernanke cited the central bank’s 2012 stress tests showing that 15 out of the 19 banks, including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., would be able to maintain capital levels above a regulatory minimum in an “extremely adverse” economic scenario, even while continuing to pay dividends and repurchasing stock.