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’...

In this paper we investigate the effects of regulatory policies on troubled banks. In our analysis banks' portfolio decisions are unobservable and are made by management. Management's decisions are influenced by the compensation and intervention policies of shareholders and regulators as well as...

Over the past years, several countries around the world have adopted a system of prudential prompt corrective action (PCA). the European Union countries are being encouraged to adopt PCA by policy analysts who explicitly call for its adoption. To date, most of the discussion on PCA has focussed...

The federal government has an interest in the financial stability of Fannie Mae and Freddie Mac because of their importance to financial markets and the government's implicit guarantee of their liabilities. ; In October 2000 these two housing government-sponsored enterprises (GSEs) announced six...

Three government-sponsored enterprises (GSEs)-Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System-were created to improve the availability of home mortgage financing by supplementing local funding. But today's more evolved financial markets enable retail lenders to tap national...

This paper presents a stylized mechanism aimed at dealing with the cross border agency problems that arise in supervising and resolving cross border banking groups in the European Union (EU). The authors assume that PCA policies have been implemented by the national supervisors and explore the...

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’...