Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The correct answer is the Financial Institutions Reform, Recovery, and Enforcement Act. This act, commonly known as FIRREA, was passed in 1989 in response to the savings and loan crisis. It introduced several reforms aimed at improving the regulation of financial institutions and addressing issues related to bank failures. One significant component of FIRREA was the establishment of a framework for the Federal Deposit Insurance Corporation (FDIC) to take prompt corrective actions when banks are in trouble. This includes measures to strengthen the safety and soundness of banks to prevent failures, protecting depositors, and maintaining public confidence in the banking system.

The other acts listed have different focuses and do not specifically mandate the FDIC's actions regarding bank failures in the same way. For instance, the Depository Institutions Act (Garn-St. Germain) primarily aimed to deregulate savings and loans institutions, while the Competitive Equality Banking Act focused on providing deposit insurance to savings institutions. The Depository Institutions Deregulation and Monetary Control Act aimed at deregulating interest rates and creating a more competitive banking environment. Thus, FIRREA is the most relevant legislation for the prompt corrective actions taken by the FDIC regarding bank failures.