Janet Yellen announced on Wednesday that a December rate hike is a "live possibility," but that no decision had yet been made.

The Federal ReserveChair testified before the house Financial Services Committee, adding that she expects further improvement in the labor market and inflation levels to return to the 2% target. "At this point, I see the U.S. economy as performing well," she said, but made clear that "it could be appropriate" to raise rates only if the data release between now and December adds up.

Yellen also addressed the condition of the banks following the 2008 crisis. "I would note that the capital of the eight largest banks alone has more than doubled since 2008, an increase of almost $5 billion," she said, adding that regional banks are seeing capital increases and community bank loan growth.

But while there have been improvements, problems still remain, Yellen told the committee, before noting "substantial" compliance and risk management issues still undermining consumer confidence in the country's largest banks. "Given the firms' size, complexity, and inter-connectedness. The LISCC (Large Institution Supervision Coordinating Committee) firms must address these issues directly and comprehensively," she concluded.

The Fed proposed new financial reform measures last week aimed at reducing the chances of big bank failures. The regulations would require six of the eight major banks to raise an additional $120 billion.

Yellen stressed the importance of more stringent capital and liquidity requirements for major banks to keep the financial system stable. "Our new regulatory approaches are aimed at helping ensure these firms remain strong," she told the committee.

Republican representatives were quick to hit out at the White House administration for its delay in putting forward a Vice Chairman for Bank Supervision to testify before congress. The position is a mandatory one, according to the Dodd-Frank law, passed back in 2010 and has so far been left unfilled.