Banking Practice Exam 2026 - Free Banking Practice Questions and Study Guide

The main purpose of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) is to provide guidelines for bank recovery and enforcement mechanisms. This act was enacted in response to the savings and loan crisis of the 1980s and early 1990s, which highlighted the need for a comprehensive regulatory framework to address issues surrounding failing financial institutions. FIRREA established processes for resolving the insolvency of these institutions and created the Resolution Trust Corporation (RTC) to manage the assets of failed savings and loan associations. By reinforcing the capabilities of regulatory agencies and enhancing their ability to oversee and address financial instability, FIRREA aimed to restore public confidence in the banking system and ensure a more stable financial environment.

While the act does have implications for consumer protections and bank audits, its core objective focuses on the procedural and enforcement aspects related to bank recovery, which is pivotal in preventing future financial crises.