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Federal Reserve Bank of Boston
Working Papers
Will legislated early intervention prevent the next banking crisis?
Joe Peek
Eric S. Rosengren
Abstract

A key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) 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 legislation 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. Relative to actions taken by supervisors, PCA provisions would not have imposed more severe restrictions on banks, intervened earlier, or intervened in problem banks that would otherwise have been missed.


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Joe Peek & Eric S. Rosengren, Will legislated early intervention prevent the next banking crisis?, Federal Reserve Bank of Boston, Working Papers 96-5, 1996.
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Keywords: Banks and banking ; Federal Deposit Insurance Corporation Improvement Act of 1991 ; Financial crises - Asia
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