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Precondition for a Successful Implementation of Supervisors' Primpt Corrective Action: Is There a Case for a Banking Standard in the EU?

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  • Larry Wall
  • Maria Nieto

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 focussed on its overall merits. This paper focuses on the preconditions needed for the adoption of an effective PCA. These precondtions 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 meauring capital.

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File URL: http://www.lse.ac.uk/fmg/documents/specialPapers/2006/sp165.pdf
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Bibliographic Info

Paper provided by Financial Markets Group in its series FMG Special Papers with number sp165.

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Date of creation: Mar 2006
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Handle: RePEc:fmg:fmgsps:sp165

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Web page: http://www.lse.ac.uk/fmg/

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Cited by:
  1. 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.
  2. Kenneth Sullivan, 2008. "Presentación proactiva del desempeño," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 130-135, Julio-sep.
  3. Mayes, David G. & Nieto, María J. & Wall, Larry, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Journal of Financial Stability, Elsevier, vol. 4(3), pages 232-257, September.
  4. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de Espa�a Working Papers 0725, Banco de Espa�a.
  5. 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.
  6. 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.
  7. 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.
  8. Michael Koetter & Tigran Poghosyan & Thomas Kick, 2010. "Recovery Determinants of Distressed Banks: Regulators, Market Discipline, or the Environment?," IMF Working Papers 10/27, International Monetary Fund.
  9. Amadou N. R. Sy & Jorge A. Chan-Lau, 2006. "Distance-to-Default in Banking: A Bridge Too Far?," IMF Working Papers 06/215, International Monetary Fund.

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