Multiple Safety Net Regulators and Agency Problems in the EU: Is Prompt Corrective Action Partly the Solution?
FRB of Atlanta Working Paper No. 2007-9
34 Pages Posted: 31 May 2007
Date Written: May 2007
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.
Keywords: bank supervision, prompt corrective action, European Union
JEL Classification: G21, K23, F23
Suggested Citation: Suggested Citation