Regulator forbearance is a policy of allowing economically insolvent FIs to continue in operation.

Question

Quizplus · Accepted Answer

Regulator forbearance allows financially troubled FIs to continue operating, often by offering temporary regulatory relief or delaying enforcement action, in order to avoid causing disruptions in the financial system. However, this policy can also have negative consequences in the long run if it allows financially weak FIs to continue operating unsustainably, potentially causing greater disruptions down the line.

Regulator Forbearance Is a Policy of Allowing Economically Insolvent FIs