FDICIA: where did it come from and where will it take us?

Catharine Lemieux

Financial Industry Perspectives, 1993, issue Nov, 1-13

Abstract: The purpose of the Federal Deposit Insurance Corporation Improvement Act of 1991 was to provide additional resources to the Bank Insurance Fund and reduce the cost and likelihood of future failures. While the Act does accomplish these objectives, the changes it makes to bank supervision have the potential to affect banking's traditional safety net. ; This article discusses three provisions contained in FDICIA that could affect financial stability: prompt corrective action, least cost resolution, and liquidity support for troubled banks. While these provisions attempt to reduce the risky activities of troubled banks and force banks to promptly deal with problems, changes of this magnitude will alter the way depositors, investors, and bank management operate. These changes can have a negative impact on financial stability, particularly during an economic downturn. This article suggests that the limits FDICIA places on a troubled bank's ability to access sources of liquidity, combined with increased depositor discipline, will make it more difficult for banks to weather periods of economic uncertainty.

Keywords: Banks and banking; Deposit insurance; Federal Deposit Insurance Corporation Improvement Act of 1991 (search for similar items in EconPapers)
Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkfi:y:1993:i:nov:p:1-13

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Financial Industry Perspectives from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().