The U.S. Treasury Department plans to reopen a $700 billion bailout fund to small banks once larger ones repay some of the government money they received, Treasury Secretary Timothy Geithner said on Wednesday.

In remarks prepared for delivery to a group of community bankers, Geithner said banks with total assets of less than $500 million will be able to apply for money.

He also said the financial system was starting to heal, concern about systemic risk had diminished, and overall lending conditions were starting to improve.

(Reporting by Emily Kaiser and Corbett Daly; Editing by Theodore d'Afflisio)