MATED MERGERS, INCLUDING CHEMICAL AND CHASE MANHATTAN, CITICORP AND TRAVELERS, AND NATIONSBANK AND BANKAMERICA. THESE COMBINATIONS HAVE INCREASED THE IMPOR- TANCE OF HAVING A SYSTEM OF BANK SUPERVISION AND REGULATION THAT PROTECTS THE TAXPAYERS AND THE FI

Bank capital ratios have become one of the principal measures of a bank’s financial condition. Capital ratios have long been an important regulatory consideration, but their importance has recently grown partly as a consequence of international efforts to harmonize bank supervisory rules and partly because of the inclusion of prompt corrective action provisions in the Federal Deposit Insurance Corporation Improvement Act (FDICIA). One important concern is that the emphasis on capital regulation will increase banks’ costs and make them relatively less competitive with other financial service providers. The capital regulations may impose costs on banks to the extent that the controls reduce the subsidy value of the federal safety net; however, this increase in costs is an intended consequenc