WASHINGTON — Federal Reserve Board Chairman Ben Bernanke said Thursday that the central bank remains committed to expanding the flow of credit to small businesses, saying it has retrained its examiners to ensure they are not part of the problem.

In a speech in Detroit, Bernanke said a key issue remains whether the recent falloff in lending is the result of weaker demand by creditworthy borrowers or if lending standards have become too strict. Bankers have complained that examiners from all four banking regulators are overly tough, and are partly to blame for the credit crunch.

But Bernanke said the central bank has spent time with its examiners to ensure that is not taking place.

"We have also conducted extensive training programs for our bank examiners, with the message that encouraging lending to small businesses that are well positioned to repay is positive, not negative, for the safety and soundness of our banking system," he said.

Lending to small business has declined during the financial crisis. Outstanding loans to small businesses dropped from almost $700 billion in the second quarter of 2008 to roughly $660 billion in the first quarter of 2010, Bernanke said.

He said the Fed is focused on trying to reverse that trend, saying the Talf program and other measures have been helpful.

"We helped in bringing capital from the securities markets to small business through the Term Asset-Backed Securities Loan Facility," Bernanke said. "Our bank stress tests of a year ago also drew private capital to the banking system, which helped offset credit losses and provided the basis for increased lending."

Bernanke acknowledged that some borrowers may feel frustrated when they do not get a loan, but that the bank may view the economic situation as too risky to fund that business.

"Some potential borrowers have been turned down because lending terms and conditions remain tighter than before the financial crisis, perhaps reflecting banks' concerns about the effects of the recession on borrowers' economic prospects and balance sheets," he said. "From the borrower's point of view, particularly a borrower who has been able to obtain loans in the past, these changes may feel like a reduction in the supply of credit. From the lender's point of view, the problem appears to be a lack of demand from creditworthy borrowers."

Bernanke said that the "collective challenge is to help ensure that creditworthy borrowers have access to credit so that, should they choose, they can expand their businesses or increase payrolls, helping our economy to recover."

Bernanke said lending standards appear to be stabilizing, citing the most recent senior loan officer survey, which said most banks have stopped tightening standards.

Bernanke's speech is part of a series of more than 40 gatherings that the Federal Reserve System is holding across the country to address the needs of financing for small businesses. The findings will be presented later this summer in Washington at a conference with the Board of Governors.

"Meetings like this one allow us to gather intelligence we and others can use to facilitate the flow of credit to small businesses — for instance, by identifying specific credit gaps, clarifying examiner expectations and procedures, improving coordination of small-business support services and ensuring the availability of technical assistance for loan applications," Bernanke said. "Thus we can help ensure that small businesses are able to participate in and contribute to the recovery."

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