Will Legislated Early Intervention Prevent the Next Banking Crisis?

23 Pages Posted: 5 Oct 1997 Last revised: 7 Oct 2015

See all articles by Eric S. Rosengren

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: Undated

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 mplemented, 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 Classification: G21

Suggested Citation

Rosengren, Eric S. and Peek, Joe, Will Legislated Early Intervention Prevent the Next Banking Crisis? (Undated). Available at SSRN: https://ssrn.com/abstract=34580 or http://dx.doi.org/10.2139/ssrn.34580

Eric S. Rosengren (Contact Author)

Federal Reserve Bank of Boston - Supervision and Regulation ( email )

600 Atlantic Avenue
P.O. Box 2076
Boston, MA 02210
United States
617-973-3090 (Phone)
617-973-3219 (Fax)

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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