Source: https://www.law.cornell.edu/uscode/text/12/1831o
Timestamp: 2019-04-26 16:11:59+00:00

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The purpose of this section is to resolve the problems of insured depository institutions at the least possible long-term loss to the Deposit Insurance Fund.
Each appropriate Federal banking agency and the Corporation (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.
An insured depository institution is “well capitalized” if it significantly exceeds the required minimum level for each relevant capital measure.
An insured depository institution is “adequately capitalized” if it meets the required minimum level for each relevant capital measure.
An insured depository institution is “undercapitalized” if it fails to meet the required minimum level for any relevant capital measure.
An insured depository institution is “significantly undercapitalized” if it is significantly below the required minimum level for any relevant capital measure.
An insured depository institution is “critically undercapitalized” if it fails to meet any level specified under subsection (c)(3)(A).
The “average” of an accounting item (such as total assets or tangible equity) 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 period.
In the case of insured depository institutions that have total assets of less than $300,000,000 and normally file reports of condition reflecting weekly (rather than daily) averages of accounting items, the appropriate Federal banking agency may provide that the “average” of an accounting item during a given period means the sum of that item at the close of business on the relevant business day each week during that period divided by the total number of weeks in that period.
a transaction that the appropriate Federal banking agency or the Corporation determines, by order or regulation, to be in substance a distribution of capital to the owners of the insured depository institution or company.
The term “capital restoration plan” means a plan submitted under subsection (e)(2).
The term “company” has the same meaning as in section 1841 of this title.
The term “compensation” includes any payment of money or provision of any other thing of value in consideration of employment.
The term “relevant capital measure” means the measures described in subsection (c).
The term “required minimum level” means, with respect to each relevant capital measure, the minimum acceptable capital level specified by the appropriate Federal banking agency by regulation.
The term “senior executive officer” has the same meaning as the term “executive officer” in section 375b of this title.
The term “subordinated debt” means debt subordinated to the claims of general creditors.
rescind any relevant capital measure required under subparagraph (A) upon determining (with the concurrence of the other Federal banking agencies) that the measure is no longer an appropriate means for carrying out the purpose of this section.
Each appropriate Federal banking agency shall, by regulation, specify for each relevant capital measure the levels at which an insured depository institution is well capitalized, adequately capitalized, undercapitalized, and significantly undercapitalized.
Each appropriate Federal banking agency shall, by regulation, in consultation with the Corporation, specify the ratio of tangible equity to total assets at which an insured depository institution is critically undercapitalized.
The agency may, by regulation, specify for 1 or more other relevant capital measures, the level at which an insured depository institution is critically undercapitalized.
except as provided in clause (i), not more than 65 percent of the required minimum level of capital under the leverage limit.
The appropriate Federal banking agency shall not, without the concurrence of the Corporation, specify a level under subparagraph (A)(i) lower than that specified by the Corporation for State nonmember insured banks.
An insured depository institution shall make no capital distribution if, after making the distribution, the institution would be undercapitalized.
will reduce the institution’s financial obligations or otherwise improve the institution’s financial condition.
An insured depository institution shall pay no management fee to any person having control of that institution if, after making the payment, the institution would be undercapitalized.
periodically review the plan, restrictions, and requirements applicable to any undercapitalized insured depository institution to determine whether the plan, restrictions, and requirements are achieving the purpose of this section.
Any undercapitalized insured depository institution shall submit an acceptable capital restoration plan to the appropriate Federal banking agency within the time allowed by the agency under subparagraph (D).
contain such other information as the appropriate Federal banking agency may require.
provided appropriate assurances of performance.
require the agency to submit a copy of any plan approved by the agency to the Corporation before the end of the 45-day period beginning on the date such approval is granted.
the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time the institution fails to comply with a plan under this subsection.
affecting compliance by brokers, dealers, government securities brokers, and government securities dealers with the financial responsibility requirements of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.] and regulations and orders thereunder.
the institution’s ratio of tangible equity to assets increases during the calendar quarter at a rate sufficient to enable the institution to become adequately capitalized within a reasonable time.
the Board of Directors determines that the proposed action will further the purpose of this section.
The appropriate Federal banking agency may, with respect to any undercapitalized insured depository institution, take actions described in any subparagraph of subsection (f)(2) if the agency determines that those actions are necessary to carry out the purpose of this section.
fails in any material respect to implement a plan accepted by the agency.
Requiring the institution to sell enough shares or obligations of the institution so that the institution will be adequately capitalized after the sale.
Further requiring that instruments sold under clause (i) be voting shares.
Requiring the institution to be acquired by a depository institution holding company, or to combine with another insured depository institution, if 1 or more grounds exist for appointing a conservator or receiver for the institution.
Requiring the institution to comply with section 371c of this title as if subsection (d)(1) of that section (exempting transactions with certain affiliated institutions) did not apply.
Further restricting the institution’s transactions with affiliates.
Restricting the interest rates that the institution pays on deposits to the prevailing rates of interest on deposits of comparable amounts and maturities in the region where the institution is located, as determined by the agency.
This subparagraph does not authorize the agency to restrict interest rates paid on time deposits made before (and not renewed or renegotiated after) the agency acted under this subparagraph.
Restricting the institution’s asset growth more stringently than subsection (e)(3), or requiring the institution to reduce its total assets.
Requiring the institution or any of its subsidiaries to alter, reduce, or terminate any activity that the agency determines poses excessive risk to the institution.
Ordering a new election for the institution’s board of directors.
Requiring the institution to dismiss from office any director or senior executive officer who had held office for more than 180 days immediately before the institution became undercapitalized. Dismissal under this clause shall not be construed to be a removal under section 1818 of this title.
Requiring the institution to employ qualified senior executive officers (who, if the agency so specifies, shall be subject to approval by the agency).
Prohibiting the acceptance by the institution of deposits from correspondent depository institutions, including renewals and rollovers of prior deposits.
Prohibiting any bank holding company having control of the insured depository institution from making any capital distribution without the prior approval of the Board of Governors of the Federal Reserve System.
Requiring the institution to divest itself of or liquidate any subsidiary if the agency determines that the subsidiary is in danger of becoming insolvent and poses a significant risk to the institution, or is likely to cause a significant dissipation of the institution’s assets or earnings.
Requiring any company having control of the institution to divest itself of or liquidate any affiliate other than an insured depository institution if the appropriate Federal banking agency for that company determines that the affiliate is in danger of becoming insolvent and poses a significant risk to the institution, or is likely to cause a significant dissipation of the institution’s assets or earnings.
Requiring any company having control of the institution to divest itself of the institution if the appropriate Federal banking agency for that company determines that divestiture would improve the institution’s financial condition and future prospects.
Requiring the institution to take any other action that the agency determines will better carry out the purpose of this section than any of the actions described in this paragraph.
The action described in clause (i) or (iii) of paragraph (2)(A) (relating to requiring the sale of shares or obligations, or requiring the institution to be acquired by or combine with another institution).
The action described in paragraph (2)(B)(i) (relating to restricting transactions with affiliates).
The action described in paragraph (2)(C) (relating to restricting interest rates).
Pay any bonus to any senior executive officer.
Provide compensation to any senior executive officer at a rate exceeding that officer’s average rate of compensation (excluding bonuses, stock options, and profit-sharing) during the 12 calendar months preceding the calendar month in which the institution became undercapitalized.
The appropriate Federal banking agency shall not grant any approval under subparagraph (A) with respect to an institution that has failed to submit an acceptable capital restoration plan.
The agency may impose 1 or more of the restrictions prescribed by regulation under subsection (i) if the agency determines that those restrictions are necessary to carry out the purpose of this section.
Before the agency or Corporation makes a determination under paragraph (2)(I) with respect to an affiliate that is a broker, dealer, government securities broker, government securities dealer, investment company, or investment adviser, the agency or Corporation shall consult with the Securities and Exchange Commission and, in the case of any other affiliate which is subject to any financial responsibility or capital requirement, any other appropriate regulator of such affiliate with respect to the proposed determination of the agency or the Corporation and actions pursuant to such determination.
if the institution is undercapitalized, take any 1 or more actions authorized under subsection (f)(2) as if the institution were significantly undercapitalized.
Any plan required under paragraph (1) shall specify the steps that the insured depository institution will take to correct the unsafe or unsound condition or practice. Capital restoration plans shall not be required under paragraph (1)(B).
Any critically undercapitalizedinsured depository institution shall comply with restrictions prescribed by the Corporation under subsection (i).
A critically undercapitalizedinsured depository institution shall not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on the institution’s subordinated debt.
the Corporation determines that the exception would further the purpose of this section.
Until July 15, 1996, subparagraph (A) shall not apply with respect to any subordinated debt outstanding on July 15, 1991, and not extended or otherwise renegotiated after July 15, 1991.
Subparagraph (A) does not prevent unpaid interest from accruing on subordinated debt under the terms of that debt, to the extent otherwise permitted by law.
take such other action as the agency determines, with the concurrence of the Corporation, would better achieve the purpose of this section, after documenting why the action would better achieve that purpose.
Any determination by an appropriate Federal banking agency under subparagraph (A)(ii) to take any action with respect to an insured depository institution in lieu of appointing a conservator or receiver shall cease to be effective not later than the end of the 90-day period beginning on the date that the determination is made and a conservator or receiver shall be appointed for that institution under subparagraph (A)(i) unless the agency makes a new determination under subparagraph (A)(ii) at the end of the effective period of the prior determination.
Notwithstanding subparagraphs (A) and (B), the appropriate Federal banking agency shall appoint a receiver for the insured depository institution if the institution is critically undercapitalized on average during the calendar quarter beginning 270 days after the date on which the institution became critically undercapitalized.
the head of the appropriate Federal banking agency and the Chairperson of the Board of Directors both certify that the institution is viable and not expected to fail.
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.
Extending credit for any highly leveraged transaction.
Amending the institution’s charter or bylaws, except to the extent necessary to carry out any other requirement of any law, regulation, or order.
Making any material change in accounting methods.
Engaging in any covered transaction (as defined in section 371c(b) of this title).
Paying excessive compensation or bonuses.
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.
to a bridge depository institution, none of the voting securities of which are owned by a person or agency other than the Corporation or the Resolution Trust Corporation.
upon request by any Member of Congress, to that Member.
if the Corporation is appointed receiver of the institution, and it is or becomes apparent that the present value of the outlays of the Deposit Insurance Fund with respect to that institution will exceed the present value of receivership dividends or other payments on the claims held by the Corporation.
$50,000,000, if the loss occurs on or after January 1, 2014, provided that if the inspector general of a Federal banking agency certifies to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that the number of projected failures of depository institutions that would require material loss reviews for the following 12 months will be greater than 30 and would hinder the effectiveness of its oversight functions, then the definition of “material loss” shall be $75,000,000 for a duration of 1 year from the date of the certification.
the date on which it becomes apparent that the assistance will not be fully repaid during the 24-month period described in paragraph (2)(A)(i).
If the institution is described in paragraph (2)(A)(ii), during the 6-month period beginning on the date on which it becomes apparent that the present value of the outlays of the Deposit Insurance Fund with respect to that institution will exceed the present value of receivership dividends or other payments on the claims held by the Corporation.
any information about the insured depository institution under paragraph (4) (other than trade secrets) or paragraph (8) of section 552(b) of that title.
Subparagraph (A) does not require the agency to disclose the name of any customer of the insured depository institution (other than an institution-affiliated party), or information from which such a person’s identity could reasonably be ascertained.
for each loss identified under subclause (I) that warrants an in-depth review, the date by which such review, and a report on such review prepared in a manner consistent with reports under paragraph (1)(A), will be completed and submitted to the Federal banking agency and Congress.
provide a copy of the report required under paragraph (A) to any Member of Congress, upon request.
The Comptroller General of the United States shall, under such conditions as the Comptroller General determines to be appropriate, review reports made under paragraph (1) and recommend improvements in the supervision of insured depository institutions (including the implementation of this section).
Each appropriate Federal banking agency shall prescribe such regulations (in consultation with the other Federal banking agencies), issue such orders, and take such other actions as are necessary to carry out this section.
Any determination or concurrence by an appropriate Federal banking agency or the Corporation required under this section shall be written.
This section does not limit any authority of an appropriate Federal banking agency, the Corporation, or a State to take action in addition to (but not in derogation of) that required under this section.
A director or senior executive officer dismissed pursuant to an order under subsection (f)(2)(F)(ii) may obtain review of that order by filing a written petition for reinstatement with the appropriate Federal banking agency not later than 10 days after receiving notice of the dismissal.
appear, personally or through counsel, before 1 or more members of the agency or designated employees of the agency.
hold the hearing not later than 30 days after the petition is filed, unless the petitioner requests that the hearing be held at a later time.
notify the petitioner of the order.
to correct the unsafe or unsound condition or unsafe or unsound practice, to the extent that the order is based on subsection (g)(1).
the savings association remains in compliance with the plan or is operating under a written agreement with the appropriate Federal banking agency.
The Securities Exchange Act of 1934, referred to in subsec. (e)(2)(E)(ii)(III), is act June 6, 1934, ch. 404, 48 Stat. 881, as amended, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.
2010—Subsec. (k). Pub. L. 111–203, § 987(b), substituted “Reviews” for “Review” and “losses” for “material loss” in heading.
Subsec. (k)(4)(A). Pub. L. 111–203, § 987(a)(2), substituted “any report on losses required under this subsection,” for “the report” in introductory provisions.
Subsec. (k)(5). Pub. L. 111–203, § 987(a)(5), added par. (5). Former par. (5) redesignated (6).
Subsec. (k)(6). Pub. L. 111–203, § 987(a)(3), (4), redesignated par. (5) as (6) and struck out former par. (6). Prior to amendment, par. (6) related to transition rule during the period beginning on July 1, 1993, and ending on June 30, 1997.
2008—Subsec. (j)(2). Pub. L. 110–289 substituted “bridge depository institution” for “bridge bank”.
2006—Subsec. (a). Pub. L. 109–173, § 8(a)(37), substituted “Fund” for “funds” in heading.
Pub. L. 109–171 repealed Pub. L. 104–208, § 2704(d)(14)(AA). See 1996 Amendment note below.
Subsec. (a)(1). Pub. L. 109–173, § 8(a)(36), substituted “the Deposit Insurance Fund” for “the deposit insurance fund”.
Subsec. (k)(1). Pub. L. 109–173, § 8(a)(38)(A), substituted “the Deposit Insurance Fund” for “a deposit insurance fund” in introductory provisions.
Pub. L. 109–171 repealed Pub. L. 104–208, § 2704(d)(14)(BB)(i). See 1996 Amendment note below.
Subsec. (k)(1)(A)(i). Pub. L. 109–173, § 8(a)(36), substituted “the Deposit Insurance Fund” for “the deposit insurance fund”.
Subsec. (k)(2)(A). Pub. L. 109–173, § 8(a)(38)(B), substituted “The Deposit Insurance Fund” for “A deposit insurance fund” in introductory provisions.
Pub. L. 109–171 repealed Pub. L. 104–208, § 2704(d)(14)(BB)(ii). See 1996 Amendment note below.
Subsec. (k)(2)(A)(ii). Pub. L. 109–173, § 8(a)(38)(C), substituted “the outlays of the Deposit Insurance Fund” for “the deposit insurance fund’s outlays”.
Subsec. (k)(3)(B). Pub. L. 109–173, § 8(a)(38)(C), substituted “the outlays of the Deposit Insurance Fund” for “the deposit insurance fund’s outlays”.
“(A) In general.—In implementing this section, the appropriate Federal banking agency (and, to the extent applicable, the Corporation) shall exercise the same care as if the Savings Association Insurance Fund (rather than the Resolution Trust Corporation) bore the cost of resolving the problems of insured savings associations described in clauses (i) and (ii)(II) of section 1441a(b)(3)(A) of this title.
Pub. L. 109–171 repealed Pub. L. 104–208, § 2704(d)(14)(CC). See 1996 Amendment note below.
1996—Subsec. (a). Pub. L. 104–208, § 2704(d)(14)(AA), which directed substitution of “fund” for “funds” in heading, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
Subsec. (k)(1). Pub. L. 104–208, § 2704(d)(14)(BB)(i), which directed substitution of “the Deposit Insurance Fund” for “a deposit insurance fund”, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
Subsec. (k)(2)(A). Pub. L. 104–208, § 2704(d)(14)(BB)(ii), which directed substitution of “The Deposit Insurance Fund” for “A deposit insurance fund” in introductory provisions and “the outlays of the Deposit Insurance Fund” for “the deposit insurance fund’s outlays” in cl. (ii), was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
Subsec. (o). Pub. L. 104–208, § 2704(d)(14)(CC), which directed the amendment of subsec. (o) by striking par. (1) and the par. designation and heading of par. (2), redesignating subpars. (A) to (C) as pars. (1) to (3), respectively, and cls. (i) and (ii) as subpars. (A) and (B), respectively, and realigning margins, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
1994—Subsec. (f)(6). Pub. L. 103–325 substituted “Commission” for “Commisssion”.
1992—Subsec. (e)(2)(D)(i). Pub. L. 102–550, § 1603(d)(1)(A), struck out “and” after semicolon at end.
Subsec. (f)(6). Pub. L. 102–550, § 1603(d)(1)(B), (D), in heading substituted “other regulators” for “functional regulators” and in text substituted “appropriate regulator” for “functional regulator (as defined in section 1841(s) of this title)”.
Subsec. (g)(1)(B). Pub. L. 102–550, § 1603(d)(1)(C), substituted “capitalized (but not well capitalized)” for “capitalized”.
Section effective 1 year after Dec. 19, 1991, see section 131(f) of Pub. L. 102–242, set out as an Effective Date of 1991 Amendment note under section 1464 of this title.
In this section, the term ‘custodial bank’ means any depository institution holding company predominantly engaged in custody, safekeeping, and asset servicing activities, including any insured depository institution subsidiary of such a holding company.
the sovereign debt of such member country is not in default or has not been in default during the previous 5 years.
with respect to the funds described in subparagraph (A), any amount that exceeds the total value of deposits of the custodial bank that are linked to fiduciary or custodial and safekeeping accounts shall be taken into account when calculating the supplementary leverage ratio as applied to the custodial bank.
the subtraction is consistent with the purpose of section 38 of the Federal Deposit Insurance Act.
Any exception made under this section shall expire not later than February 28, 1999.
The term ‘appropriate Federal banking agency’ has the same meaning as in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
The term ‘insured depository institution’ has the same meaning as in section 3 of the Federal Deposit Insurance Act.
The term ‘leverage limit’ has the same meaning as in section 38 of the Federal Deposit Insurance Act [12 U.S.C. 1831o].
Pub. L. 103–76, § 3, Aug. 12, 1993, 107 Stat. 753.
Pub. L. 102–485, § 4, Oct. 23, 1992, 106 Stat. 2772.

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