Should certainly Regulators Intervene to Take More than Weak Banking institutions?
-why the necessity
for government bodies?
- helps prevent banks from failures
-- provides visibility to the financial system
- protects depositors
-who will be these government bodies?
In U. S.
National banks will be regulated by the OCC, the Fed and the FDIC Point out banks by their respective condition agency, the Fed (if members) as well as the FDIC (if insured simply by it)
In E. U. the EBA supervises bank regulations
Financial institutions are governed on:
-- deposit insurance
- loan composition
- bonds that they can be allowed to buy
- minimum capital level
- places they can operate in
- services presented
-how happen to be banks regulated?
-how carry out regulators
decide that a
financial institution is weak?
C - Capital adequacy
A - Asset quality
M - Administration quality
E - Earnings
L - Liquidity
S i9000 - Awareness to Market Risk
Regulators ask bank organization authorities to rate the
bank applying an international bank-rating system - CAMELS
Lender supervisory regulators assign every bank a score
over a scale of just one (best) to 5 (worst) for every factor.
*If the report 3 -- less-than-satisfactory
Composite resin ratings and steps of intervention:
• 1 - exhibit the strongest efficiency
• two - secure and in a position of stand business fluctuations; supervisory response is casual and limited • several - weaknesses in one or even more of the components; requires formal or casual enforcement activities • 5 - hazardous practices or conditions; close supervisory interest and treatment is required; inability is possible • 5 -- exhibit a critically deficient performance; quick intervention; failing is highly possible Source: www.fdic.gov
During the financial crisis that were only available in 2007, the biggest bank failure in U. S. background occurred when Washington Mutual with $307 billion in assets shut down its gates
The Bankers' Panic of 1907 in the US also known as Knickerbocker Crisis
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