Office of Thrift Supervision Page 1 of 2 

Regulatory Bulletin

2. Savings Associations That Fail To

Meet A Prescribed Regulatory

Standard

The standards for safety and soundness section of the FDIA, § 39,3

requires the federal banking agencies to prescribe for insured depository institutions safety and soundness standards relating to, among

other things, asset growth. Under

this authority, OTS regulation

12 CFR Part 570, “Submission and

Review of Safety and Soundness

Compliance Plans and Issuance of

Orders to Correct Safety and Soundness Deficiencies,” requires savings

associations that fail to meet a prescribed Part 570 regulatory standard

to submit an acceptable compliance

plan that shall specify the steps the

association will take to correct the

failure. 

Among other things, Part 570 provides that the OTS may restrict the

asset growth of a savings association that (1) fails to submit or implement an acceptable compliance

plan, or (2) experienced extraordinary growth during the 18-month

period before the date on which it

failed to meet a safety and soundness standard. Regional Directors

are to determine extraordinary

growth on a case-by-case basis

dependent on a number of factors

particular to each association, such

as its demonstrated management

For Further Information Contact: Your

Regional Office, or Francis E. Raue,

Policy Analyst, Supervision Policy,

Washington, D.C., (202) 906-5750. 

Regulatory Bulletin 3b

Statutory Growth Restrictions

The Home Owners’ Loan Act

(HOLA) and the Federal Deposit

Insurance Act (FDIA) provide the

Office of Supervision (OTS) with

authorities and responsibilities to

restrict growth for savings associations that (1) are undercapitalized,

(2) fail to meet a prescribed regulatory standard, or (3) take excessive

risks or pay excessive rates.

1. Undercapitalized Savings Associations

The capital standards section of the

HOLA, § 5(t)(6)(B),1 requires the

OTS to prohibit asset growth of

undercapitalized savings associations, except as provided under limited circumstances. Also, the

prompt corrective action section of

the FDIA, § 38,2 requires the federal

banking agencies to impose mandatory sanctions on undercapitalized

insured depository institutions,

which may include asset growth

restrictions. 

November 26, 1996

Sections: 120; 510

RB 3b

capabilities, quality of assets, capital

adequacy, interest-rate-risk profile,

earnings, and operating controls

and procedures. Extraordinary

growth may also occur in specific

asset categories due to changes in

the overall asset mix.

3. Savings Associations Taking

Excessive Risks or Paying Excessive Rates

The excessive risks or rates capital

standards section of the HOLA, § 5

(t)(6)(D),4 provides that the OTS

Director may restrict the asset

growth of any savings association

that the Director determines is taking excessive risks or paying excessive rates for deposits.

Policy Growth Restrictions for Savings Associations Not Subject to

Statutory Growth Restrictions

On the basis of safety and soundness concerns, Regional Directors

generally should impose growth

restrictions on a savings association

which is not subject to a statutory

growth restriction, but is in a “troubled condition.”5 In these cases,

Regional Directors may prohibit any

growth or allow limited growth,

such as an increase in assets in an

amount not to exceed net interest

credited on deposit liabilities (or

earnings credited on share accounts)

during a calendar quarter. Where it

Office of Thrift Supervision

Handbook: Thrift Activities

Subjects: Capital Adequacy; Asset Liability/Management

Policy Statement on Growth for Savings Associations

Summary: This Bulletin rescinds Regulatory Bulletin 3a-1. It identifies statutory growth restrictions, sets forth policy

growth restrictions for savings associations not subject to statutory restrictions, and reminds Regional Directors of

their overall growth oversight responsibilities.

1. 12 USC § 1464(t)(6)(B).

2. 12 USC § 1831o. 

3. 12 USC § 1831p-1. 

4. 12 USC § 1464(t)(6)(D).

5. As defined in 12 CFR § 574.9(a)(5)(i).
Page 2 of 2 Office of Thrift Supervision

Regulatory Bulletin

problems, any unplanned or poorly

managed growth is a cause for

supervisory concern. Regional

Directors accordingly must take

steps to ensure that the growth of all

savings associations is prudent, adequately capitalized, and directed

and managed in a safe and sound

manner in the interests of the

deposit insurance fund. 

Regional Directors are to ensure that

growth is monitored through quarterly Thrift Financial Reports (TFR).

The growth and percentage change

indicators in the Uniform Thrift Peris clearly documented to be reasonable in the context of a troubled

association’s operations and does

not significantly increase the association’s risk profile, Regional Directors may allow more growth appropriate to the circumstances.

Regional Directors are to document

their growth determinations in association regulatory plans, including

the bases for their decisions.

Regional Director Responsibilities

While growth by itself does not necessarily cause safety and soundness

formance Report section of the TFR

provide early warning growth signs

and may indicate that further investigation is needed. When necessary,

Regional Directors may request

additional financial information

from an association.

While TFR quarter-end data normally is used to determine growth,

Regional Directors may chose to use

average total assets if necessary to

prevent manipulation of the TFR

quarter-end data.

RB 3b

—John F. Downey

Executive Director, Supervision