Once on-site, examiners analyze the bank’s loans and other assets to ascertain the organization’s current condition, and also to evaluate its internal control process and its own ability to identify and resolve problems. As a result, the Federal Reserve is placing greater reliance than before on a bank’s internal auditors and on the accuracy and adequacy of its information systems.
Market disciplines are more likely to be effective where governments do not insulate depositors from losses - whether explicitly in the form of deposit insurance or through implicit depositor protection.