Robert DeYoung

A Kansas University professor who is a leading scholar on banking urged a congressional panel on Wednesday to support safeguards against poorly managed banks.

In comments to a U.S. Senate banking subcommittee, Robert DeYoung said the federal Dodd-Frank Act includes important provisions to preserve the banking system.

One of those safeguards is the FDIC’s “orderly liquidation authority” of insolvent banks.

He said many believe that the FDIC won’t exercise this authority. That would be a mistake, he said.

“In my opinion, the most important actions that Congress and the Administration can take to limit systemic risk in the U.S. financial system is to strongly and repeatedly enunciate their support of OLA (orderly liquidation authority) and to pledge that they will not stand in the way of its implementation during a deep financial crisis,” he said.

DeYoung is the Capitol Federal Distinguished Professor in Financial Markets and Institutions at the KU School of Business. He serves as co-editor of the Journal of Money, Credit and Banking and directs KU’s Center of Banking Excellence.