Lessons Learned From Recent U.S. Banking Experience

GAO discussed the lessons Europeans could learn from recent U.S. banking experience to help prepare them for a more deregulated financial services market. GAO noted that: (1) since banks were likely to engage in more risky activities to make up for limited profits, the quality of supervision must be high to control excessive bank risk-taking and to reduce costly failures; (2) accurate information on banks' financial positions was imperative for resolving bank problems before they reached crisis proportions; and (3) a national system of bank supervision might make it harder to control risk, since some nations might be inclined to use concessions as an incentive.