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Preconditions for a successful implementation of supervisors' prompt corrective action: Is there a case for a banking standard in the European Union?

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  • María J. Nieto
  • Larry D. Wall

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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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2006-27.

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Date of creation: 2006
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Handle: RePEc:fip:fedawp:2006-27

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Cited by:
  1. Schoenmaker, Dirk & Gros, Daniel, 2012. "A European Deposit Insurance and Resolution Fund," CEPS Papers 6918, Centre for European Policy Studies.
  2. Gillian G.H.Garcia & Rosa M. Lastra & Maria J. Nieto, 2009. "Bankruptcy and reorganisation procedures for cross-border banks in the EU: Towards an integrated approach to the reform of the EU safety net," FMG Special Papers sp186, Financial Markets Group.
  3. Schoenmaker, Dirk & Gros, Daniel, 2012. "A European Deposit Insurance and Resolution Fund - An Update," CEPS Papers 7276, Centre for European Policy Studies.
  4. Edward Kane, 2007. "Connecting National Safety Nets: The Dialectics of the Basel II Contracting Process," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(4), pages 399-409, December.

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