I 
111TH CONGRESS 
1ST SESSION H. R. 3968 
To amend the Bank Holding Company Act of 1956 to require the Board 
of Governors of the Federal Reserve System to take prompt corrective 
action to resolve problems of bank holding companies. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 29, 2009 
Mr. ELLISON introduced the following bill; which was referred to the 
Committee on Financial Services 
A BILL 
To amend the Bank Holding Company Act of 1956 to re-
quire the Board of Governors of the Federal Reserve 
System to take prompt corrective action to resolve prob-
lems of bank holding companies. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. PROMPT CORRECTIVE ACTION FOR BANK 
HOLDING COMPANIES. 
Section 6 of the Bank Holding Company Act of 1956 
is amended to read as follows: 
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‘‘SEC. 6. PROMPT CORRECTIVE ACTION FOR BANK HOLD-
ING COMPANIES. 
‘‘(a) PROMPT CORRECTIVE ACTION REQUIRED.—The 
Board shall take prompt corrective action to resolve the 
problems of a bank holding company. 
‘‘(b) DEFINITIONS.—For purposes of this section: 
‘‘(1) CAPITAL CATEGORIES.— 
‘‘(A) WELL CAPITALIZED.—A bank hold-
ing company is ‘well capitalized’ if it exceeds 
the required minimum level for each relevant 
capital measure. 
‘‘(B) UNDERCAPITALIZED.—A bank hold-
ing company is ‘undercapitalized’ if it fails to 
meet the required minimum level for any rel-
evant capital measure. 
‘‘(C) 
SIGNIFICANTLY
UNDERCAPITAL-
IZED.—A bank holding company is ‘signifi-
cantly undercapitalized’ if it is significantly 
below the required minimum level for any rel-
evant capital measure. 
‘‘(D) CRITICALLY UNDERCAPITALIZED.—A 
bank holding company is ‘critically under-
capitalized’ if it fails to meet any level specified 
in subsection (c)(3)(A). 
‘‘(2) OTHER DEFINITIONS.— 
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‘‘(A) AVERAGE.—The ‘average’ of an ac-
counting item during a given period means the 
sum of that item at the close of business on 
each business day during that period divided by 
the total number of business days in that pe-
riod. 
‘‘(B) CAPITAL DISTRIBUTION.—The term 
‘capital distribution’ means— 
‘‘(i) a distribution of cash or other 
property by a bank holding company to its 
owners made on account of that ownership, 
but not including any dividend consisting 
only of shares of the bank holding com-
pany or rights to purchase such shares; 
‘‘(ii) a payment by a bank holding 
company to repurchase, redeem, retire, or 
otherwise acquire any of its shares or other 
ownership interests, including any exten-
sion of credit to finance any person’s ac-
quisition of those shares or interests; or 
‘‘(iii) a transaction that the Board de-
termines, by order or regulation, to be in 
substance a distribution of capital to the 
owners of the bank holding company. 
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‘‘(C) CAPITAL RESTORATION PLAN.—The 
term ‘capital restoration plan’ means a plan 
submitted under subsection (e)(2). 
‘‘(D) COMPENSATION.—The term ‘com-
pensation’ includes any payment of money or 
provision of any other thing of value in consid-
eration of employment. 
‘‘(E) RELEVANT CAPITAL MEASURE.—The 
term ‘relevant capital measure’ means the 
measures described in subsection (c). 
‘‘(F) REQUIRED
MINIMUM
LEVEL.—The 
term ‘required minimum level’ means, with re-
spect to each relevant capital measure, the min-
imum acceptable capital level specified by the 
Board by regulation. 
‘‘(G) SENIOR EXECUTIVE OFFICER.—The 
term ‘senior executive officer’ has the same 
meaning as the term ‘executive officer’ in sec-
tion 22(h) of the Federal Reserve Act (12 
U.S.C. 375b). 
‘‘(c) CAPITAL STANDARDS.— 
‘‘(1) RELEVANT CAPITAL MEASURES.— 
‘‘(A) IN GENERAL.—The Board shall pre-
scribe capital standards for bank holding com-
panies, which shall include— 
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‘‘(i) a leverage limit; and 
‘‘(ii) a risk-based capital requirement. 
‘‘(B) OTHER
CAPITAL
MEASURES.—The 
Board may by regulation— 
‘‘(i) establish any additional relevant 
capital measures to carry out this section; 
or 
‘‘(ii) rescind any relevant capital 
measures prescribed under subparagraph 
(A) upon determining that the measure is 
no longer an appropriate means for car-
rying out this section. 
‘‘(2) CAPITAL CATEGORIES GENERALLY.—The 
Board shall, by regulation, specify for each relevant 
capital measure the levels at which a bank holding 
company is well capitalized, undercapitalized, and 
significantly undercapitalized. 
‘‘(3) CRITICAL CAPITAL.— 
‘‘(A) BOARD TO SPECIFY LEVEL.— 
‘‘(i) LEVERAGE
LIMIT.—The Board 
shall, by regulation, specify the ratio of 
tangible equity to total assets at which a 
bank holding company is critically under-
capitalized. 
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‘‘(ii) 
OTHER
RELEVANT
CAPITAL 
MEASURES.—The Board may, by regula-
tion, specify for 1 or more other relevant 
capital measures, the level at which a bank 
holding company is critically undercapital-
ized. 
‘‘(B) LEVERAGE LIMIT RANGE.—The level 
specified under subparagraph (A)(i) shall re-
quire tangible equity in an amount— 
‘‘(i) not less than 2 percent of total 
assets; and 
‘‘(ii) except as provided in clause (i), 
not more than 65 percent of the required 
minimum level of capital under the lever-
age limit. 
‘‘(d) CAPITAL DISTRIBUTIONS RESTRICTED.— 
‘‘(1) IN GENERAL.—A bank holding company 
shall make no capital distribution if, after making 
the distribution, the bank holding company would be 
undercapitalized. 
‘‘(2) EXCEPTION.—Notwithstanding paragraph 
(1), the Board may permit a bank holding company 
to repurchase, redeem, retire, or otherwise acquire 
shares or ownership interests if the repurchase, re-
demption, retirement, or other acquisition— 
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‘‘(A) is made in connection with the 
issuance of additional shares or obligations of 
the bank holding company in at least an equiva-
lent amount; and 
‘‘(B) will reduce the bank holding com-
pany’s financial obligations or otherwise im-
prove the bank holding company’s financial con-
dition. 
‘‘(e) PROVISIONS APPLICABLE TO UNDERCAPITAL-
IZED BANK HOLDING COMPANIES.— 
‘‘(1) 
MONITORING
REQUIRED.—The 
Board 
shall— 
‘‘(A) closely monitor the condition of any 
undercapitalized bank holding company; 
‘‘(B) closely monitor compliance by any 
undercapitalized bank holding company with 
capital restoration plans, restrictions, and re-
quirements imposed under this section; and 
‘‘(C) periodically review the plan, restric-
tions, and requirements applicable to any 
undercapitalized bank holding company to de-
termine whether the plan, restrictions, and re-
quirements are effective. 
‘‘(2) 
CAPITAL
RESTORATION
PLAN
RE-
QUIRED.— 
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‘‘(A) IN
GENERAL.—An undercapitalized 
bank holding company shall submit an accept-
able capital restoration plan to the Board with-
in the time allowed by the Board under sub-
paragraph (D). 
‘‘(B) CONTENTS
OF
PLAN.—The capital 
restoration plan shall— 
‘‘(i) specify— 
‘‘(I) the steps the bank holding 
company will take to become well cap-
italized; 
‘‘(II) the levels of capital to be 
attained by the bank holding company 
during each year in which the plan 
will be in effect; 
‘‘(III) how the bank holding com-
pany will comply with the restrictions 
or requirements then in effect under 
this section; and 
‘‘(IV) the types and levels of ac-
tivities in which the bank holding 
company will engage; and 
‘‘(ii) contain such other information 
that the Board may require. 
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tent that the order is based on subsection 
(g)(1).’’. 
Æ 
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