Regulation EE currently includes an activities-based test pursuant to which an entity can qualify as a financial institution for purposes of FDICIA
's netting provisions if it is a market intermediary and, during the previous 15-month period, it engaged in financial contracts exceeding specified numerical thresholds.
These buffers, which apply to banks and BHCs, therefore, can be thought of as performing a role similar to the one played by FDICIA
's prompt corrective action (PCA) requirements, which apply only to banks.
(8) Prior to FDICIA
, over the period 1986-1992, bank capital ratios averaged about -1.5 percent in the final quarter before they were closed.
's efforts to promote market discipline were subsequently bolstered by the Basel Committee on Bank Supervision's 2001 release of the New Basel Capital Accord, more commonly known as Basel II (because it updated the original 1988 Basel Capital Accord).
Prompt corrective action and LCR provisions in FDICIA
look better on paper than in action.
Thus, the Federal Reserve violated neither the letter nor the spirit of the FDICIA
in its lending practices during the 2007-2010 financial crises.
A principal motivation behind the provisions on lending to undercapitalized banks in FDICIA
was the claim that Federal Reserve loans had merely forestalled inevitable bank failures during the 1980s, which may have increased losses to the FDIC's Deposit Insurance Fund when those banks were ultimately closed.
Indeed, it would seem appropriate to revisit the issue and attempt to identify key factors, including (a) economic and financial market factors on the one hand, and (b) major federal banking statutes such as FDICIA
and the RNIBA (the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994), that might have influenced bank failures in the U.S., not only in the latter part of the 20th century but in more recent years as well.
Potential problems with FDICIA
were noted in the Fed itself.
.03 As indicated in exhibit C, "Reporting Under Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA
)," of AT section 501, the FDIC indicated that financial reporting, at a minimum, includes financial statements prepared in accordance with generally accepted accounting principles (GAAP) and the schedules equivalent to the basic financial statements that are included in the IDI's appropriate regulatory report (for example, Schedules RC, RI, and RI-A in the Consolidated Reports of Condition and Income [call report]).
In his new preface, the author observes that, by passing FDICIA
, Congress was signaling that it was "serious about ending 100 percent de facto deposit insurance." He notes that FDICIA
's least-cost resolution provisions were partially successful, terminating 100 percent de facto deposit insurance for most banks.
Finally, we selected the banking industry because it has been subject to a higher degree of internal control regulation than nearly all other industries since the passage of the Federal Deposit Insurance Corporation Improvement Act (FDICIA
) of 1991.