FDICi NEWS RELEASE
FEOUAL CEPOSIT !NSUIAHCE CORl'ORAT!ON
HOLD FOR RELEASE UNTIL 2 P.M. (EST)
March 26, 1983
FDIC CHAIRMAN URGES INCREASED RELIANCE
ON MARKETPLACE DISCIPLINE
PR-22-83 (3-26-83)
FDIC Chairman William M. Isaac today called for increased marketplace
discipline as the key to controlling destructive competition and excessive
risk-taking in the banking industry.
He told the Independent Bankers Association of America meeting in
San Diego, California, there are two options, in a deregulated banking
environment, to control risk-taking and assure that deposits flow to the vast
majority of banks which are prudently operated.
"We can adopt countless new laws and regulations to govern every aspect
of your operations and hire thousands of additional examiners to monitor and
enforce compliance. Or, we can seek ways to increase marketplace discipline.
The FDIC clearly prefers to allow the marketplace to function to the maximum
extent possible. We are flatly opposed to unnecessary regulations."
Chairman Isaac cited current and possible future FDIC actions he believes
will encourage marketplace discipline:
Providing increased information to the banking public. "This is the
reason we have decided to make public the new call report data on interest
rate sensitivity and nonperforming loans and why we are considering additional
disclosure covering matters such as insider lending practices and enforcement
actions," he said.
- mo re -
FEDERAL OEPOSIT INSURANCE CO RPO RATION, 550 Seventeenth St. N.W., Washington, O.C. 20429 • 202-389-4221
FEOUAL CEPOSIT !NSUIAHCE CORl'ORAT!ON
HOLD FOR RELEASE UNTIL 2 P.M. (EST)
March 26, 1983
FDIC CHAIRMAN URGES INCREASED RELIANCE
ON MARKETPLACE DISCIPLINE
PR-22-83 (3-26-83)
FDIC Chairman William M. Isaac today called for increased marketplace
discipline as the key to controlling destructive competition and excessive
risk-taking in the banking industry.
He told the Independent Bankers Association of America meeting in
San Diego, California, there are two options, in a deregulated banking
environment, to control risk-taking and assure that deposits flow to the vast
majority of banks which are prudently operated.
"We can adopt countless new laws and regulations to govern every aspect
of your operations and hire thousands of additional examiners to monitor and
enforce compliance. Or, we can seek ways to increase marketplace discipline.
The FDIC clearly prefers to allow the marketplace to function to the maximum
extent possible. We are flatly opposed to unnecessary regulations."
Chairman Isaac cited current and possible future FDIC actions he believes
will encourage marketplace discipline:
Providing increased information to the banking public. "This is the
reason we have decided to make public the new call report data on interest
rate sensitivity and nonperforming loans and why we are considering additional
disclosure covering matters such as insider lending practices and enforcement
actions," he said.
- mo re -
FEDERAL OEPOSIT INSURANCE CO RPO RATION, 550 Seventeenth St. N.W., Washington, O.C. 20429 • 202-389-4221
- 2 -
Revising the procedures for handling bank failures to require that
large depositors (those over the insurance limit) share in the risk of loss
even when a failed institution is merged into another bank.
Mr. Isaac called for strengthening and simplifying the regulatory system
by consolidating the federal regulators of financial institutions into an
independent agency headed by a board. Under this concept the FDIC would
remain a separate agency with insurance responsibility for all state- and
federally chartered banks and savings and loan associations. All securities
regulation would be handled by the Securities Exchange Commission, antitrust
enforcement would become the exclusive prCNince of the Justice Department,
and consumer compliance matters would ·be administered by the Federal Trade
Commission.
Mr. Isaac reassured the bankers about the strength of the FDIC insurance
fund. While acknowledging a significant increase in the number of problem
banks and bank failures, he said the problems were anticipated and were
handled in a manner that maintained public confidence in the system.
He said the FDIC insurance fund is sound and growing despite the
extraordinary cost of handling recent bank failures, amounting to about a
billion dollars in each of the past two years. "At the beginning of 1981, the
fund totalled $11 billion; today it exceeds $14 billion, after absorbing the
full impact of over 60 failures. FDIC revenue from assessments and interest
on investments will approach $3 billion this year," he said.
# # # #
Revising the procedures for handling bank failures to require that
large depositors (those over the insurance limit) share in the risk of loss
even when a failed institution is merged into another bank.
Mr. Isaac called for strengthening and simplifying the regulatory system
by consolidating the federal regulators of financial institutions into an
independent agency headed by a board. Under this concept the FDIC would
remain a separate agency with insurance responsibility for all state- and
federally chartered banks and savings and loan associations. All securities
regulation would be handled by the Securities Exchange Commission, antitrust
enforcement would become the exclusive prCNince of the Justice Department,
and consumer compliance matters would ·be administered by the Federal Trade
Commission.
Mr. Isaac reassured the bankers about the strength of the FDIC insurance
fund. While acknowledging a significant increase in the number of problem
banks and bank failures, he said the problems were anticipated and were
handled in a manner that maintained public confidence in the system.
He said the FDIC insurance fund is sound and growing despite the
extraordinary cost of handling recent bank failures, amounting to about a
billion dollars in each of the past two years. "At the beginning of 1981, the
fund totalled $11 billion; today it exceeds $14 billion, after absorbing the
full impact of over 60 failures. FDIC revenue from assessments and interest
on investments will approach $3 billion this year," he said.
# # # #