Assessing Bank Reform: FDICIA One Year Later.

• Author: Tiwari, Kashi Nath

This book is the product of a symposium sponsored by the Brookings Institution and the Chicago Clearing House on December 16, 1992 to assess the impact of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). The book provides a comprehensive historical background for the enactment of FDICIA, an issue of first-order significance. Through the introduction of risk-based deposit insurance premiums and through timely failure resolution and regulatory intervention, the Act intends to bring greater stability in the banking industry.

Both editors, George Kaufman and Robert Litan, are highly acclaimed academicians. They are equally versatile in theoretical and empirical works. The other contributors to the book are also highly renowned academicians, practitioners, and policymakers. The readers will be enlightened by the last chapter of the book that summarizes the general discussion from the conference participants. This chapter clarifies many finer points, while weighing pros and cons of the effects of banking regulations and reforms. This book would provide useful information to researchers, participants of the banking sector, and policymakers.

The contributions made by various authors are well integrated and are divided into five major categories: Background of the Act: Intellectual and Political History, Implementation of the Act: Key Regulations and Regulatory Proposals, Two Views from the Policymaking Community, Responses to FDICIA: Banks and Regulators, and Where To From Here. The book comprises an eloquent and comprehensive introduction by the editors, eleven papers, and five formal comments. The editors have included a concluding section to cover the general comments and remarks made by symposium attendees. In brief, the new banking environment can be described as a system that requires: risk-based capital standards, risk-based deposit premiums, recapitalization of the FDIC, and supervision of domestic offices of foreign banks. The new system of mandated structured early intervention and resolution (SEIR) will lessen the impact of bank failures on the FDIC.

George Kaufman and George Benston provide a detailed and thought provoking historical perspective of the events that led to the enactment of FDICIA. During the first year, the risk-based deposit insurance premiums charged to institutions that were classified into the highest risk category was only modestly higher (.08 percent) than that charged to institutions...