If regulators allow insolvent thrift institutions to continue to operate this policy is called regulatory forbearance.

Question

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Regulatory forbearance refers to a policy where regulators allow financial institutions that are insolvent or near insolvency to continue operating instead of shutting them down or forcing them into immediate corrective action. This can be done in the hope that the institutions might recover with time.

If Regulators Allow Insolvent Thrift Institutions to Continue to Operate