A 1991 law meant to restore the industry's health and avoid banking crises appears to be working, according to two economists. George Bentson of Emory University in Atlanta and George Kaufman of Loyola University in Chicago write that the Federal Deposit Insurance Corp. Improvement Act appears to be preventing banks from taking excessive risks and encouraging regulators to sanction financially troubled institutions. To ensure the law's continued success, regulators should require all banks to use market- value accounting and should raise minimum capital requirements, they write.
For a copy of "Deposit Insurance Reform in the FDIC Improvement Act: The Experience to Date," call 312-322-5111 or visit www.frbchi.org.