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2000 - Rules and Regulations
Subpart K—Prompt Corrective Action
§ 303.200 Scope.
(a) General. (1) This subpart covers applications filed
pursuant to section 38 of the FDI Act
(12 U.S.C. 1831o),
which requires insured depository institutions that are not adequately
capitalized to receive approval prior to engaging in certain
activities. Section 38 restricts or prohibits certain activities and
requires an insured depository institution to submit a capital
restoration plan when it becomes undercapitalized. The restrictions and
prohibitions become more severe as an institution's capital level
declines.
(2) Definitions of the capital categories referenced in this
Prompt Corrective Action subpart may be found in subpart B of part 325
of this chapter,
§ 325.103(b) for state
nonmember banks and § 325.103(c) for insured branches of foreign
banks.
(b) Institutions covered. Restrictions and prohibitions
contained in subpart B of part 325 of this chapter apply primarily to
insured state nonmember banks and insured branches of foreign banks, as
well as to directors and senior executive officers of those
institutions. Portions of subpart B of part 325 of this chapter also
apply to all insured depository institutions that are deemed to be
critically undercapitalized.
[Codified to 12 C.F.R.
§ 303.200]
§ 303.201 Filing procedures.
Applications shall be filed with the appropriate FDIC office. The
application shall contain the information specified in each respective
section of this subpart, and shall be in letter form as prescribed in
§ 303.3. Additional
information may be requested by the FDIC. Such letter shall be signed
by the president, senior officer or a duly authorized agent of the
insured depository institution and be accompanied by a certified copy
of a resolution adopted by the institution's board of directors or
trustees authorizing the application.
[Codified to 12 C.F.R.
§ 303.201]
§ 303.202 Processing.
The FDIC will provide the applicant with a subsequent written
notification of the final action taken as soon as the decision is
rendered.
[Codified to 12 C.F.R.
§ 303.202]
§ 303.203 Applications for capital distributions.
(a) Scope. An insured state nonmember bank and any
insured branch of a foreign bank shall submit an application for
capital distribution if, after having made a capital distribution, the
institution would be undercapitalized, significantly undercapitalized,
or critically undercapitalized.
{{10-31-07 p.2068.10}}
(b) Content of filing. An application to repurchase,
redeem, retire or otherwise acquire shares or ownership interests of
the insured depository institution shall describe the proposal, the
shares or obligations which are the subject thereof, and the additional
shares or obligations of the institution which will be issued in at
least an amount equivalent to the distribution. The application also
shall explain how the proposal will reduce the institution's financial
obligations or otherwise improve its financial condition. If the
proposed action also requires an application under section 18(i) of the
FDI Act (12 U.S.C. 1828(i))
as implemented by § 303.241 of this part regarding prior consent to
retire capital, such application should be filed concurrently with, or
made a part of, the application filed pursuant to section 38 of the FDI
Act (12 U.S.C. 1831o).
[Codified to 12 C.F.R.
§ 303.203]
§ 303.204 Applications for acquisitions, branching, and new
lines of business.
(a) Scope. (1) Any insured state nonmember bank and any
insured branch of a foreign bank which is undercapitalized or
significantly undercapitalized, and any insured depository institution
which is critically undercapitalized, shall submit an application to
engage in acquisitions, branching or new lines of business.
(2) A new line of business will include any new activity
exercised which, although it may be permissible, has not been exercised
by the institution.
(b) Content of filing. Applications shall describe the
proposal, state the date the institution's capital restoration plan
was accepted by its primary federal regulator, describe the
institution's status in implementing the plan, and explain how the
proposed action is consistent with and will further the achievement of
the plan or otherwise further the purposes of section 38 of the FDI
Act. If the FDIC is not the applicant's primary federal regulator, the
application also should state whether approval has been requested from
the applicant's primary federal regulator, the date of such request
and the disposition of the request, if any. If the proposed action also
requires applications pursuant to section 18 (c) or (d) of the FDI Act
(mergers and branches) (12 U.S.C.
1828 (c) or (d)),
such applications should be filed concurrently with, or made a part of,
the application filed pursuant to section 38 of the FDI Act (12 U.S.C.
1831o).
[Codified to 12 C.F.R.
§ 303.204]
§ 303.205 Applications for bonuses and increased compensation
for senior executive officers.
(a) Scope. Any insured state nonmember bank or insured
branch of a foreign bank that is significantly or critically
undercapitalized, or any insured state nonmember bank or any insured
branch of a foreign bank that is undercapitalized and which has failed
to submit or implement in any material respect an acceptable capital
restoration plan, shall submit an application to pay a bonus or
increase compensation for any senior executive officer.
(b) Content of filing. Applications shall list each
proposed bonus or increase in compensation, and for the latter shall
identify compensation for each of the twelve calendar months preceding
the calendar month in which the institution became undercapitalized.
Applications also shall state the date the institution's capital
restoration plan was accepted by the FDIC, and describe any progress
made in implementing the plan.
[Codified to 12 C.F.R.
§ 303.205]
§ 303.206 Application for payment of principal or interest on
subordinated debt.
(a) Scope. Any critically undercapitalized insured
depository institution shall submit an application to pay principal or
interest on subordinated debt.
(b) Content of filing. Applications shall describe the
proposed payment and provide an explanation of action taken under
section 38(h)(3)(A)(ii) of
the FDI Act (action other than receivership or conservatorship). The
application also shall explain how such payments would further the
purposes of section 38 of the FDI Act (12 U.S.C. 1831o).
Existing approvals pursuant to requests filed under section 18(i)(1) of
the FDI Act (12 U.S.C.
1828(i)(1)) (capital stock reductions or retirements) shall not
be deemed to be the permission needed pursuant to section 38.
[Codified to 12 C.F.R. § 303.206]
{{12-31-07 p.2068.10-A}}
§ 303.207 Restricted activities for critically undercapitalized
institutions.
(a) Scope. Any critically undercapitalized insured
depository institution shall submit an application to engage in certain
restricted activities.
(b) Content of filing. Applications to engage in any of
the following activities, as set forth in sections 38(i)(2)(A) through
(G) of the FDI Act, shall describe the proposed activity and explain
how the activity would further the purposes of section 38 of the FDI
Act (12 U.S.C.
1831o):
(1) Enter into any material transaction other than in the usual
course of business including any action with respect to which the
institution is required to provide notice to the appropriate federal
banking agency. Materiality will be determined on a case-by-case basis;
(2) Extend credit for any highly leveraged transaction (as
defined in part 325 of this chapter);
{{12-31-02 p.2068.11}}
(3) Amend the institution's charter or bylaws, except to the
extent necessary to carry out any other requirement of any law,
regulation, or order;
(4) Make any material change in accounting methods;
(5) Engage in any covered transaction (as defined in section
23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b));
(6) Pay excessive compensation or bonuses. Part 364 of this
chapter provides guidance for determining excessive compensation; or
(7) Pay 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 area. Section
337.6 of this chapter
(Brokered deposits) provides guidance for defining the relevant terms
of this provision; however this provision does not supersede the
general prohibitions contained in § 337.6.
[Codified to 12 C.F.R.
§ 303.207]
§§ 303.208--303.219 [Reserved]
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