The Federal Deposit Insurance Corp. now has a larger role in supervising the country's banks, following a Monday vote by its board of directors to enhance its backup authority.
The FDIC is one of five federal agencies that regulate banks, but because it administers the insurance fund that pays depositors when banks fail, it has "backup" authority over all banks.
Monday's vote expands that authority and is expected to improve the FDIC's access to information needed to evaluate the country's financial firms. It follows criticism that the FDIC lacked the authority to intervene when Washington Mutual was failing in 2008.
"While the FDIC has had backup authority for several years, and for the most part it has worked rather well, the past financial crisis provided us with a strong and sober reminder that the activities of large banks are often very complex and opaque," FDIC Chair Sheila Bair said in a statement. "The FDIC needs to have a more active on-site presence and greater direct access to information and bank personnel in order to fully evaluate the risks to the deposit insurance fund on an ongoing basis and to be prepared for all contingencies."
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A study released in April by the inspectors general of the FDIC and the Treasury Department said that the FDIC was limited in its ability to make its own assessments about the failing Washington Mutual and instead was forced it to rely on the work of the bank's primary federal regulator, the Office of Thrift Supervision.
A hearing by the Senate Permanent Subcommittee on Investigations earlier this year portrayed OTS as a "feeble" regulator waging a turf war against the FDIC.
OTS limited the FDIC's access to Washington Mutual banking data and capped the number of FDIC workers allowed on-site at the bank.
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