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2000 - Rules and Regulations
Subpart B—Prompt Corrective
Action
§ 325.101 Authority, purpose, scope, other supervisory
authority, and disclosure of capital categories.
(a) Authority. This subpart is issued by the FDIC
pursuant to section 38 (section 38) of the Federal Deposit Insurance
Act (FDI Act), as added by section 131 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (Pub. L. 102--242, 105 Stat. 2236
(1991)) (12 U.S.C. 1831o).
(b) Purpose. Section 38 of the FDI Act establishes a
framework of supervisory actions for insured depository institutions
that are not adequately capitalized. The principal purpose of this
subpart is to define, for FDIC-insured state-chartered nonmember banks,
the capital measures and capital levels, and for insured branches of
foreign banks, comparable asset-based measures and levels, that are
used for determining the supervisory actions authorized under section
38 of the FDI Act. This subpart also establishes procedures for
submission and review of capital restoration plans and for issuance and
review of directives and orders pursuant to section 38.
(c) Scope. This subpart implements the provisions of
section 38 of the FDI Act as they apply to FDIC-insured state-chartered
nonmember banks and insured branches of foreign banks for which the
FDIC is the appropriate federal banking agency. Certain of these
provisions also apply to officers, directors and employees of those
insured institutions. In addition, certain provisions of this subpart
apply to all insured depository institutions that are deemed critically
undercapitalized.
(d) Other supervisory authority. Neither section 38 nor
this subpart in any way limits the authority of the FDIC under any
other provision of law to take supervisory actions to address unsafe or
unsound practices, deficient capital levels, violations of law, unsafe
or unsound conditions, or other practices. Action under section 38 of
the FDI Act and this subpart may be taken independently of, in
conjunction with or in addition to any other enforcement action
available to the FDIC, including issuance of cease and desist orders,
capital directives, approval or denial of applications or notices,
assessment of civil money penalties, or any other actions authorized by
law.
(e) Disclosure of capital categories. The assignment of
a bank or insured branch under this subpart within a particular capital
category is for purposes of implementing and applying the provisions of
section 38. Unless permitted by the FDIC or otherwise required by law,
no bank may state in any advertisement or promotional material its
capital
{{4-29-05 p.2251}}category under this subpart or
that the FDIC or any other federal banking agency has assigned the bank
to a particular capital category.
[Codified to 12 C.F.R. § 325.101]
[Section 325.101 added at 57 Fed. Reg. 44900, September
29, 1992, effective December 19,
1992]
§ 325.102 Notice of capital category.
(a) Effective date of determination of capital category.
A bank shall be deemed to be within a given capital category for
purposes of section 38 of the FDI Act and this subpart as of the date
the bank is notified of, or is deemed to have notice of, its capital
category, pursuant to paragraph (b) of this section.
(b) Notice of capital category. A bank shall be deemed
to have been notified of its capital levels and its capital category as
of the most recent date:
(1) A Consolidated Report of Condition and Income (Call Report)
is required to be filed with the FDIC;
(2) A final report of examination is delivered to the bank; or
(3) Written notice is provided by the FDIC to the bank of its
capital category for purposes of section 38 of the FDI Act and this
subpart or that the bank's capital category has changed as provided in
§ 325.103(d).
(c) Adjustments to reported capital levels and capital
category--(1) Notice of adjustment by bank. A bank
shall provide the appropriate FDIC regional director with written
notice that an adjustment to the bank's capital category may have
occurred no later than 15 calendar days following the date that any
material event has occurred that would cause the bank to be placed in a
lower capital category from the category assigned to the bank for
purposes of section 38 and this subpart on the basis of the bank's most
recent Call Report or report of examination.
(2) Determination by the FDIC to change capital category.
After receiving notice pursuant to paragraph (c)(1) of this
section, the FDIC shall determine whether to change the capital
category of the bank and shall notify the bank of the FDIC's
determination.
[Codified to 12 C.F.R. § 325.102]
[Section 325.102 added at 57 Fed. Reg. 44900, September
29, 1992, effective December 19,
1992]
§ 325.103 Capital measures and capital category definitions.
(a) Capital measures. For purposes of section 38 and
this subpart the relevant capital measures shall be:
(1) The total risk-based capital ratio;
(2) The Tier 1 risk-based capital ratio; and
(3) The leverage ratio.
(b) Capital categories. For purposes of section 38 and
this subpart, a bank shall be deemed to be:
(1) Well capitalized if the bank:
(i) Has a total risk-based capital ratio of 10.0 percent or
greater; and
(ii) Has a Tier 1 risk-based capital ratio of 6.0 percent or
greater; and
(iii) Has a leverage ratio of 5.0 percent or greater; and
(iv) Is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the FDIC
pursuant to section 8 of the FDI Act
(12 U.S.C. 1818), the
International Lending Supervision Act of 1983
(12 U.S.C. 3907), or section
38 of the FDI Act (12 U.S.C.
1831o), or any regulation thereunder, to meet and maintain a
specific capital level for any capital measure.
(2) Adequately capitalized if the bank:
(i) Has a total risk-based capital ratio of 8.0 percent or
greater; and
(ii) Has a Tier 1 risk-based capital ratio of 4.0 percent or
greater; and
(iii) Has:
{{4-29-05 p.2252}}
(A) A leverage ratio of 4.0 percent or greater; or
(B) A leverage ratio of 3.0 percent or greater if the bank is
rated composite 1 under the CAMELS rating system in the most recent
examination of the bank and is not experiencing or anticipating
significant growth; and
(iv) Does not meet the definition of a well capitalized
bank.
(3) Undercapitalized if the bank:
(i) Has a total risk-based capital ratio that is less than 8.0
percent; or
(ii) Has a Tier 1 risk-based capital ratio that is less than 4.0
percent or
(iii)(A) Except as provided in paragraph (b)(3)(iii)(B) of this
section, has a leverage ratio that is less than 4.0 percent; or
(B) Has a leverage ratio that is less than 3.0 percent if the
bank is rated composite 1 under the CAMELS rating system in the most
recent examination of the bank and is not experiencing or anticipating
significant growth.
(4) Significantly undercapitalized if the bank has:
(i) A total risk-based capital ratio that is less than 6.0
percent; or
(ii) A Tier 1 risk-based capital ratio that is less than 3.0
percent; or
(iii) A leverage ratio that is less than 3.0 percent.
(5) Critically undercapitalized if the insured
depository institution has a ratio of tangible equity to total assets
that is equal to or less than 2.0 percent.
(c) Capital categories for insured branches of foreign banks.
For purposes of the provisions of section 38 and this subpart, an
insured branch of a foreign bank shall be deemed to be:
(1) Well capitalized if the insured branch:
(i) Maintains the pledge of assets required under § 347.209 of
this chapter; and
(ii) Maintains the eligible assets prescribed under § 347.210
of this chapter at 108 percent or more of the preceding quarter's
average book value of the insured branch's third-party liabilities;
and
(iii) Has not received written notification from:
(A) The OCC to increase its capital equivalency deposit pursuant
to 12 CFR 28.15(b), or to comply with asset maintenance requirements
pursuant to 12 CFR 28.20; or
(B) The FDIC to pledge additional assets pursuant to § 347.209
of this chapter or to maintain a higher ratio of eligible assets
pursuant to § 347.210 of this chapter.
(2) Adequately capitalized if the insured branch:
(i) Maintains the pledge of assets required under § 347.209 of
this chapter; and
(ii) Maintains the eligible assets prescribed under § 347.210
of this chapter at 106 percent or more of the preceding quarter's
average book value of the insured branch's third-party liabilities;
and
(iii) Does not meet the definition of a well capitalized insured
branch.
(3) Undercapitalized if the insured branch:
(i) Fails to maintain the pledge of assets required under
§ 347.209 of this chapter; or
(ii) Fails to maintain the eligible assets prescribed under
§ 347.210 of this chapter at 106 percent or more of the preceding
quarter's average book value of the insured branch's third-party
liabilities.
(4) Significantly undercapitalized if it fails to
maintain the eligible assets prescribed under § 347.210 of this
chapter at 104 percent or more of the preceding quarter's average book
value of the insured branch's third-party liabilities.
(5) Critically undercapitalized if it fails to
maintain the eligible assets prescribed under § 347.210 of this
chapter at 102 percent or more of the preceding quarter's average book
value of the insured branch's third-party liabilities.
(d) Reclassifications based on supervisory criteria other
than capital. The FDIC may reclassify a well capitalized bank as
adequately capitalized and may require an adequately capitalized bank
or an undercapitalized bank to comply with certain mandatory or
discretionary supervisory actions as if the bank were in the next lower
capital category (except that the FDIC may not reclassify a
significantly undercapitalized bank as critically
{{4-29-05 p.2253}}undercapitalized) (each of
these actions are hereinafter referred to generally as
"reclassifications") in the following circumstances:
(1) Unsafe or unsound condition. The FDIC has
determined, after notice and opportunity for hearing pursuant to
§ 308.202(a) of this
chapter, that the bank is in unsafe or unsound condition; or
(2) Unsafe or unsound practice. The FDIC has
determined, after notice and opportunity for hearing pursuant to
§ 308.202(a) of this chapter, that, in the most recent examination of
the bank, the bank received and has not corrected a
less-than-satisfactory rating for any of the categories of asset
quality, management, earnings, or liquidity.
[Codified to 12 C.F.R. § 325.103]
[Section 325.103 added at 57 Fed. Reg. 44901, September
29, 1992, effective December 19, 1992; amended at 63 Fed. Reg. 17074,
April 8, 1998, effective July 1, 1998; 66 Fed. Reg. 59653, November 29,
2001, effective January 1, 2002; 70 Fed. Reg. 17559, April 6, 2005,
effective July 1, 2005]
§ 325.104 Capital restoration plans.
(a) Schedule for filing plan--(1) In general.
A bank shall file a written capital restoration plan with the
appropriate FDIC regional director within 45 days of the date that the
bank receives notice or is deemed to have notice that the bank is
undercapitalized, significantly undercapitalized, or critically
undercapitalized, unless the FDIC notifies the bank in writing that the
plan is to be filed within a different period. An adequately
capitalized bank that has been required pursuant to § 325.103(d) of
this subpart to comply with supervisory actions as if the bank were
undercapitalized is not required to submit a capital restoration plan
solely by virtue of the reclassification.
(2) Additional capital restoration plans.
Notwithstanding paragraph (a)(1) of this section, a bank that has
already submitted and is operating under a capital restoration plan
approved under section 38 and this subpart is not required to submit an
additional capital restoration plan based on a revised calculation of
its capital measures or a reclassification of the institution under
§ 325.103 unless the FDIC notifies the bank that it must submit a new
or revised capital plan. A bank that is notified that it must submit a
new or revised capital restoration plan shall file the plan in writing
with the appropriate FDIC regional director within 45 days of receiving
such notice, unless the FDIC notifies the bank in writing that the plan
must be filed within a different period.
(b) Contents of plan. All financial data submitted in
connection with a capital restoration plan shall be prepared in
accordance with the instructions provided on the Call Report, unless
the FDIC instructs otherwise. The capital restoration plan shall
include all of the information required to be filed under
section 38(e)(2) of the FDI
Act. A bank that is required to submit a capital restoration plan as a
result of a reclassification of the bank pursuant to § 325.103(d) of
this subpart shall include a description of the steps the bank will
take to correct the unsafe or unsound condition or practice. No plan
shall be accepted unless it includes any performance guarantee
described in section 38(e)(2)(C) of the FDI Act by each company that
controls the bank.
(c) Review of capital restoration plans. Within 60 days
after receiving a capital restoration plan under this subpart, the FDIC
shall provide written notice to the bank of whether the plan has been
approved. The FDIC may extend the time within which notice regarding
approval of a plan shall be provided.
(d) Disapproval of capital plan. If a capital
restoration plan is not approved by the FDIC, the bank shall submit a
revised capital restoration plan within the time specified by the FDIC.
Upon receiving notice that its capital restoration plan has not been
approved, any undercapitalized bank (as defined in § 325.103(b) of
this subpart) shall be subject to all of the provisions of section 38
and this subpart applicable to significantly undercapitalized
institutions. These provisions shall be applicable until such time as a
new or revised capital restoration plan submitted by the bank has been
approved by the FDIC.
(e) Failure to submit capital restoration plan. A bank
that is undercapitalized (as defined in § 325.103(b) of this subpart)
and that fails to submit a written capital restoration plan within the
period provided in this section shall, upon the expiration of that
period, be
{{4-29-05 p.2254}}subject to all of the
provisions of section 38 and this subpart applicable to significantly
undercapitalized institutions.
(f) Failure to implement capital restoration plan. Any
undercapitalized bank that fails in any material respect to implement a
capital restoration plan shall be subject to all of the provisions of
section 38 and this subpart applicable to significantly
undercapitalized institutions.
(g) Amendment of capital restoration plan. A bank that
has filed an approved capital restoration plan may, after prior written
notice to and approval by the FDIC, amend the plan to reflect a change
in circumstance. Until such time as a proposed amendment has been
approved, the bank shall implement the capital restoration plan as
approved prior to the proposed amendment.
(h) Performance guarantee by companies that control a
bank--(1) Limitation on liability--(i) Amount
limitation. The aggregate liability under the guarantee provided
under section 38 and this subpart for all companies that control a
specific bank that is required to submit a capital restoration plan
under this subpart shall be limited to the lesser of:
(A) An amount equal to 5.0 percent of the bank's total assets at
the time the bank was notified or deemed to have notice that the bank
was undercapitalized; or
(B) The amount necessary to restore the relevant capital measures
of the bank to the levels required for the bank to be classified as
adequately capitalized, as those capital measures and levels are
defined at the time that the bank initially fails to comply with a
capital restoration plan under this subpart.
(ii) Limit on duration. The guarantee and limit of
liability under section 38 and this subpart shall expire after the FDIC
notifies the bank that it has remained adequately capitalized for each
of four consecutive calendar quarters. The expiration or fulfillment by
a company of a guarantee of a capital restoration plan shall not limit
the liability of the company under any guarantee required or provided
in connection with any capital restoration plan filed by the same bank
after expiration of the first guarantee.
(iii) Collection on guarantee. Each company that
controls a given bank shall be jointly and severally liable for the
guarantee for such bank as required under section 38 and this subpart,
and the FDIC may require and collect payment of the full amount of that
guarantee from any or all of the companies issuing the guarantee.
(2) Failure to provide guarantee. In the event that a
bank that is controlled by any company submits a capital restoration
plan that does not contain the guarantee required under section
38(e)(2) of the FDI Act, the bank shall, upon submission of the plan,
be subject to the provisions of section 38 and this subpart that are
applicable to banks that have not submitted an acceptable capital
restoration plan.
(3) Failure to perform guarantee. Failure by any
company that controls a bank to perform fully its guarantee of any
capital plan shall constitute a material failure to implement the plan
for purposes of section 38(f)
of the FDI Act. Upon such failure, the bank shall be subject to the
provisions of section 38 and this subpart that are applicable to banks
that have failed in a material respect to implement a capital
restoration plan.
[Codified to 12 C.F.R. § 325.104]
[Section 325.104 added at 57 Fed. Reg. 44901, September
29, 1992, effective December 19, 1992; amended at 57 Fed. Reg. 48426,
October 23, 1992]
§ 325.105 Mandatory and discretionary supervisory actions under
section 38.
(a) Mandatory supervisory actions--(1) Provisions
applicable to all banks. All banks are subject to the restrictions
contained in section 38(d) of
the FDI Act on payment of capital distributions and management fees.
(2) Provisions applicable to undercapitalized,
significantly undercapitalized, and critically undercapitalized banks.
Immediately upon receiving notice or being deemed to have notice,
as provided in § 325.102 of this subpart, that the bank is
undercapitalized,
{{8-31-04 p.2255}}significantly
undercapitalized, or critically undercapitalized, the bank shall become
subject to the provisions of section 38 of the FDI Act:
(i) Restricting payment of capital distributions and management
fees (section 38(d));
(ii) Requiring that the FDIC monitor the condition of the bank
(section 38(e)(1));
(iii) Requiring submission of a capital restoration plan within
the schedule established in this subpart (section 38(e)(2));
(iv) Restricting the growth of the bank's assets (section
38(e)(3)); and
(v) Requiring prior approval of certain expansion proposals
(section 38(e)(4)).
(3) Additional provisions applicable to significantly
undercapitalized, and critically undercapitalized banks. In
addition to the provisions of section 38 of the FDI Act described in
paragraph (a)(2) of this section, immediately upon receiving notice or
being deemed to have notice, as provided in § 325.102 of this
subpart, that the bank is significantly undercapitalized, or critically
undercapitalized, or that the bank is subject to the provisions
applicable to institutions that are significantly undercapitalized
because the bank failed to submit or implement in any material respect
an acceptable capital restoration plan, the bank shall become subject
to the provisions of section 38 of the FDI Act that restrict
compensation paid to senior executive officers of the institution
(section 38(f)(4)).
(4) Additional provisions applicable to critically
undercapitalized institutions. (i) In addition to the provisions
of section 38 of the FDI Act described in paragraphs (a)(2) and (a)(3)
of this section, immediately upon receiving notice or being deemed to
have notice, as provided in § 325.102 of this subpart, that the
insured depository institution is critically undercapitalized, the
institution is prohibited from doing any of the following without the
FDIC's prior written approval:
(A) Entering into any material transaction other than in the
usual course of business, including any investment, expansion,
acquisition, sale of assets, or other similar action with respect to
which the depository institution is required to provide notice to the
appropriate federal banking agency;
(B) Extending credit for any highly leveraged transaction;
(C) Amending the institution's charter or bylaws, except to the
extent necessary to carry out any other requirement of any law,
regulation, or order;
(D) Making any material change in accounting methods;
(E) Engaging in any covered transaction (as defined in section
23A(b) of the Federal Reserve Act (12
U.S.C. 371c(b));
(F) Paying excessive compensation or bonuses;
(G) Paying interest on new or renewed liabilities at a rate that
would increase the institution's weighted average cost of funds to a
level significantly exceeding the prevailing rates of interest on
insured deposits in the institution's normal market areas; and
(H) Making any principal or interest payment on subordinated debt
beginning 60 days after becoming critically undercapitalized except
that this restriction shall not apply, until July 15, 1996, with
respect to any subordinated debt outstanding on July 15, 1991, and not
extended or otherwise renegotiated after July 15, 1991.
(ii) In addition, the FDIC may further restrict the activities of
any critically undercapitalized institution to carry out the purposes
of section 38 of the FDI Act.
(5) Exception for certain savings associations. The
restrictions in paragraph (a)(4) of this section shall not apply,
before July 1, 1994, to any insured savings association if:
(i) The savings association had submitted a plan meeting the
requirements of section 5(t)(6)(A)(ii) of the Home Owners' Loan Act
(12 U.S.C. 1464(t)(6)(A)(ii))
prior to December 19, 1991;
(ii) The Director of OTS had accepted the plan prior to December
19, 1991; and
(iii) The savings association remains in compliance with the plan
or is operating under a written agreement with the appropriate federal
banking agency.
(b) Discretionary supervisory actions. In taking any
action under section 38 that is within the FDIC's discretion to take in
connection with:
{{8-31-04 p.2256}}
(1) An insured depository institution that is deemed to be
undercapitalized, significantly undercapitalized, or critically
undercapitalized, or has been reclassified as undercapitalized, or
significantly undercapitalized; or
(2) An officer or director of such institution,
the FDIC shall follow the procedures for issuing directives under
§§ 308.201 and
308.203 of this chapter,
unless otherwise provided in section 38 or this subpart
[Codified to 12 C.F.R. § 325.105]
[Section 325.105 added at 57 Fed. Reg. 44902, September 29, 1992,
effective December 19, 1992]
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