Will Legislated Early Intervention Prevent the Next Banking Crisis?

Joe Peek and Eric Rosengren ()

No 359, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: A key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 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, as implemented, 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. Since it imposes an essentially nonbinding constraint on bank supervisors, PCA is not likely to play a major role in preventing the next banking crisis.

JEL-codes: G21 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1996-12
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Will Legislated Early Intervention Prevent the Next Banking Crisis? (1997)
Working Paper: Will legislated early intervention prevent the next banking crisis? (1996)
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