What a Narrow Banking Bill Might Include
If Congress falls back to passing a narrow banking bill, what would it include?
As with everything else on Capitol Hill, nothing is guaranteed. But the following provisions are part of a House proposal that is considered as having a good chance for approval:
* A recapitalization of the Bank Insurance Fund. This would, in all likelihood, enable the Federal Deposit Insurance Corp. to borrow $30 billion through the Treasury Department, up from $5 billion, to pay for bank failures.
It would also let the FDIC raise an additional $45 billion in so-called working capital. This would provide liquidity to close banks, with the borrowings repaid by the sale of seized assets.
* Increased Supervision. Every insured institution would be examined on-site at least once a year, and each institution would have to obtain an independent outside audit annually.
* Tougher Accounting. Institutions would have to disclose the market value of their assets. (Currently most assets are recorded on bank books at their historical value and market values are not disclosed.)
* Early intervention. Under a new system of capital-based regulation, banks would be placed in one of five levels depending upon their capital adequacy.
Regulators would have increasingly less flexibility in dealing with institutions as they drop from one tier to the next. A bank with capital of less than 2% of assets must be placed in conservatorship after 30 days.
* Least-cost resolutions. The FDIC would be required to deal with failed banks at the least cost to the insurance fund, even if that means liquidating the bank.
After 1994, the agency would not be able to protect uninsured depositors if that action would have the effect of causing losses to the insurance fund.
* Compliance. The FDIC would be required to report back to Congress in one year on ways to reduce the paperwork burden on banks.