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Preconditions for a successful implementation of supervisors' Prompt Corrective Action: Is there a case for a banking standard in the EU?

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  • María J. Nieto

    ()
    (Banco de España)

  • Larry D. Wall

    ()
    (Federal Reserve Bank of Atlanta)

Abstract

Over the past years, several countries around the world have adopted a system of prudential prompt corrective action (PCA). The European Union countries are being encouraged to adopt PCA by policy analysts who explicitly call for its adoption. To date, most of the discussion on PCA has focused on its overall merits. This paper focuses on the preconditions needed for the adoption of an effective PCA. These preconditions include conceptual elements such as a prudential supervisory focus on minimizing deposit insurance losses and mandating supervisory action as capital declines. These preconditions also include institutional aspects such as greater supervisory independence and authority, more effective resolution mechanisms and better methods of measuring capital.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0702e.pdf
File Function: First version, February 2007
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0702.

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Length: 36 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:bde:wpaper:0702

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Keywords: bank; supervision; european union; pca;

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Cited by:
  1. Banco Central Europeo, 2008. "La titulización en la zona del euro," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 136-149, Julio-sep.
  2. David G. Mayes & María J. Nieto & Larry Wall, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Banco de Espa�a Working Papers 0819, Banco de Espa�a.
  3. Amadou N. R. Sy & Jorge A. Chan-Lau, 2006. "Distance-To-Default in Banking," IMF Working Papers 06/215, International Monetary Fund.
  4. Kenneth Sullivan, 2008. "Presentación proactiva del desempeño," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 130-135, Julio-sep.
  5. Laurence Scialom, 2007. "Pour une politique d'actions correctives précoces dans l'Union européenne : les carences institutionnelles et légales," Revue d'Économie Financière, Programme National Persée, vol. 89(3), pages 111-121.
  6. Sonia Ondo-Ndong & Laurence Scialom, 2008. "Northern Rock: The anatomy of a crisis – the prudential lessons," EconomiX Working Papers 2008-23, University of Paris West - Nanterre la Défense, EconomiX.
  7. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de Espa�a Working Papers 0725, Banco de Espa�a.
  8. Michael Koetter & Tigran Poghosyan & Thomas Kick, 2010. "Recovery Determinants of Distressed Banks," IMF Working Papers 10/27, International Monetary Fund.
  9. Maria J. Nieto & Garry J. Schinasi, 2008. "Towards an EU Framework for Safeguarding Financial Stability," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 6(3), pages 27-36, October.

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