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Vol. 73, No. 3
Posted 1991-05-01

Supervision of Undercapitalized Banks: Is There a Case for Change?

R. Alton Gilbert examines banks whose capital ratios were below the specified minimum for periods longer than one year during 1985 to 1989 to determine whether they generally violated the constraints that would be imposed under prompt corrective action. He finds that, while most long-term undercapitalized banks did not violate these constraints, a substantial minority did so. He also finds, however, that there was no significant difference in the recovery rates between the banks that violated the "prompt corrective action” constraints and those that did not.

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