§3907 — Title 12 Banks and Banking | U.S. Code

Summary

Federal banking agencies must make sure insured banks keep enough capital. They do this by setting minimum capital levels and by using other tools they think fit. The agencies should try to make these rules countercyclical — meaning banks must hold more capital in good economic times and less in bad times, as long as the banks stay safe. An agency can also set a different minimum for a particular bank if that bank’s situation calls for it. If a bank falls below its required capital level, the regulator may treat that as an unsafe or unsafe-and-unsound practice under section 1818. The agency can order the bank to submit and follow a plan showing how it will reach the required capital level. That order and any plan are enforceable under section 1818(i) and treated like final orders under section 1818(b). Regulators can check a bank’s progress on such a plan when deciding whether to approve actions that would reduce earnings or capital, and they may deny approval if the action would hurt the bank’s ability to meet the plan. The Chairman of the Federal Reserve and the Secretary of the Treasury must encourage other major countries’ authorities to help keep international banks’ capital strong.

Title 12, §3907

Banks and Banking — Source: USLM XML via OLRC

(a)(1)Each appropriate Federal banking agency shall cause banking institutions to achieve and maintain adequate capital by establishing minimum levels of capital for such banking institutions and by using such other methods as the appropriate Federal banking agency deems appropriate. Each appropriate Federal banking agency shall seek to make the capital standards required under this section or other provisions of Federal law for insured depository institutions countercyclical so that the amount of capital required to be maintained by an insured depository institution increases in times of economic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the insured depository institution.

(2)Each appropriate Federal banking agency shall have the authority to establish such minimum level of capital for a banking institution as the appropriate Federal banking agency, in its discretion, deems to be necessary or appropriate in light of the particular circumstances of the banking institution.

(b)(1)Failure of a banking institution to maintain capital at or above its minimum level as established pursuant to subsection (a) may be deemed by the appropriate Federal banking agency, in its discretion, to constitute an unsafe and unsound practice within the meaning of section 1818 of this title.

(2)(A)In addition to, or in lieu of, any other action authorized by law, including paragraph (1), the appropriate Federal banking agency may issue a directive to a banking institution that fails to maintain captial 11 So in original. Probably should be “capital”. at or above its required level as established pursuant to subsection (a).

(B)(i)Such directive may require the banking institution to submit and adhere to a plan acceptable to the appropriate Federal banking agency describing the means and timing by which the banking institution shall achieve its required capital level.

(ii)Any such directive issued pursuant to this paragraph, including plans submitted pursuant thereto, shall be enforceable under the provisions of section 1818(i) of this title to the same extent as an effective and outstanding order issued pursuant to section 1818(b) of this title which has become final.

(3)(A)Each appropriate Federal banking agency may consider such banking institution’s progress in adhering to any plan required under this subsection whenever such banking institution, or an affiliate thereof, or the holding company which controls such banking institution, seeks the requisite approval of such appropriate Federal banking agency for any proposal which would divert earnings, diminish capital, or otherwise impede such banking institution’s progress in achieving its minimum capital level.

(B)Such appropriate Federal banking agency may deny such approval where it determines that such proposal would adversely affect the ability of the banking institution to comply with such plan.

(C)The Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury shall encourage governments, central banks, and regulatory authorities of other major banking countries to work toward maintaining and, where appropriate, strengthening the capital bases of banking institutions involved in international lending.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2010—Subsec. (a)(1). Pub. L. 111–203 inserted at end “Each appropriate Federal banking agency shall seek to make the capital standards required under this section or other provisions of Federal law for insured depository institutions countercyclical so that the amount of capital required to be maintained by an insured depository institution increases in times of economic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the insured depository institution.”

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the transfer date, see section 616(e) of Pub. L. 111–203, set out as a note under section 1467a of this title.

§3907 Capital adequacy