Summary: Pursuant to a legislative requirement, GAO reviewed issues associated with reforming the federal deposit insurance system, focusing on whether such reforms will result in a more safe, sound, and stable banking industry.
GAO presented a comprehensive three-part reform program that could change the way banks are regulated and supervised, as well as the way the deposit insurance system functions, focusing on: (1) strengthening supervision, bank internal controls, and financial reporting requirements so that regulators can more effectively protect the Bank Insurance Fund (BIF) from losses; (2) changing economic incentives through strengthened capital requirements, risk-based premiums, and other means to ensure that owners, managers, and creditors bear most of the bank failure costs; and (3) updating the bank holding company structure and regulation to reduce risks to the banking system and to modernize the financial system if Congress wishes to expand the powers of banks and other financial institutions.
