WASHINGTON -- The U.S. banking system faces numerous challenges from a housing downturn that causing asset write-downs and losses, but these should not threaten banks' viability, Federal Reserve Vice Chairman Donald Kohn said on Wednesday.

"The U.S. banking system is facing some challenges, but remains in sound overall condition, having entered the period of recent financial turmoil with solid capital and strong earnings," Kohn said in prepared testimony to the U.S. Senate Banking Committee.

"The problems in the mortgage and housing markets have been highly unusual and clearly some banking organizations have failed to manage their exposures well and have s=uffered losses as a result. But in general these losses should not threaten their viability," Kohn said.

Kohn did not address Fed monetary policy in his prepared testimony.

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