Will Legislated Early Intervention Prevent the Next Banking Crisis?
AbstractA key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 was prompt corrective action (PCA). PCA emphasized early intervention by bank supervisors and was intended to limit forbearance by making supervisory intervention more timely and less discretionary. However, PCA, as implemented, appears to have been oversold. Had PCA been in place during the recent banking crisis in New England, it would have had little, if any, effect. Since it imposes an essentially nonbinding constraint on bank supervisors, PCA is not likely to play a major role in preventing the next banking crisis.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 359.
Length: 23 pages
Date of creation: Dec 1996
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Other versions of this item:
- Joe Peek & Eric S. Rosengren, 1996. "Will legislated early intervention prevent the next banking crisis?," Working Papers 96-5, Federal Reserve Bank of Boston.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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