Multiple safety net regulators and agency problems in the European Union: Is prompt corrective action partly the solution?

David Mayes, Maria J. Nieto and Larry Wall

No 2007-09, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper discusses the institutional changes needed in Europe if prompt corrective action (PCA) is to be effective in supervising and resolving cross-border banking groups. The paper identifies these changes starting with enhancements in the availability of information on banking groups? financial condition to prudential supervisors. Next, the paper considers the collective decision making by prudential supervisors with authority to make discretionary decisions within the PCA framework as soon as a bank in a cross-border banking group falls below the minimum capital standard. Finally, the paper analyzes the coordination measures that should be implemented if PCA requires the bank to be resolved.

Date: 2007
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