What is the Financial Institutions Reform, Recovery and Enforcement Act?

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) is a federal law that governs banking law in California. It was enacted in 1989 in response to the 1980s Savings and Loan crisis and is enforced by the Federal Deposit Insurance Corporation (FDIC). FIRREA seeks to protect consumers and depositors by setting guidelines for banks and other financial institutions. Specifically, FIRREA requires all banks and financial institutions to put appropriate capital ratios and risk management practices in place, as well as create consumer protection measures. It also requires banks to adhere to lending procedures and practices, as well as consumer disclosure rules. Additionally, FIRREA provides the FDIC with the authority to take corrective action if a bank fails to comply with the rules, including closing down the bank. The purpose of FIRREA is to increase consumer confidence in the banking system, protect taxpayer dollars from banking failures, and ensure the safe and sound operation of banks and other financial institutions. Through FIRREA, California banks and financial institutions are held to a higher standard than those in other states. This higher standard helps to protect consumers and depositors, as well as promote a safe and secure banking environment.

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What is the Financial Institutions Reform, Recovery and Enforcement Act?

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