Will legislated early intervention prevent the next banking crisis?
AbstractA key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) 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 legislation 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. Relative to actions taken by supervisors, PCA provisions would not have imposed more severe restrictions on banks, intervened earlier, or intervened in problem banks that would otherwise have been missed.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Working Papers with number 96-5.
Date of creation: 1996
Date of revision:
Publication status: Published in Southern Economic Journal (July 1997): 268-80.
Other versions of this item:
- Joe Peek & Eric S. Rosengren, 1996. "Will Legislated Early Intervention Prevent the Next Banking Crisis?," Boston College Working Papers in Economics 359, Boston College Department of Economics.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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