About 40% of large banks are failing to meet the Federal Reserve's threshold for a satisfactory rating, though the overall financial condition of the U.S. banking system is "generally strong," the Fed said in a new report.

The Fed's inaugural supervision and regulation report includes the regulator's first disclosure of aggregate statistics showing how many banks are rated as satisfactory under the Fed's current rating system.

The report highlights the generally healthy condition of the banking industry, noting that banks' return on equity and return on average assets are at 10-year highs, their nonperforming loan ratios are generally improving or about the same and they continue to build up larger reserves.

Their liquidity and capital levels are also substantially higher than before the financial crisis due to new regulatory requirements, the report said. In a speech earlier in the day focused on stress test changes, Fed Vice Chairman for Supervision Randal Quarles said large U.S. banks subject to the Fed's Comprehensive Capital Analysis and Review process have more than doubled their common equity Tier 1 capital ratios, from 5% in 2009 to 12% in the second quarter of 2018.

The report, which comes ahead of Quarles' semiannual testimony in Congress next week, also included a section showing the aggregate ratings from the Fed for bank holding companies with more than $50 billion in assets. The ratings for individual companies are confidential.

Roughly 60% of those companies were rated 1 or 2, the two ratings deemed satisfactory, on the Fed's 5-point scale. The remainder of scores fell in the bottom three ratings.

Those firms "generally exhibit weaknesses in one or more areas," such as compliance, internal controls and operational risk management, the report said. Some firms also have struggled to develop adequate compliance programs to meet the Bank Secrecy Act and anti-money-laundering laws, the Fed said, areas that "sometimes have longer remediation timelines."

"While most firms have improved in key areas of supervisory focus, such as capital planning and liquidity management, some firms continue to work to meet supervisory expectations in certain risk-management areas," the regulator said.

Large banks have addressed a significant number of supervisory findings since the financial crisis. As a result, the number of outstanding concerns from supervisors has generally decreased, the Fed wrote.

Last week, the Fed overhauled the rating system for many banks with more than $50 billion in assets by finalizing a new rating system specifically designed for larger firms. The Fed has said the new system is necessary because the regulator's way of rating large banks has not changed since the financial crisis, even as it has implemented a wide array of regulatory requirements.