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Title 12 — Banks and BankingRelease 119-73

§51b–1 Consideration of preferred stock in determining impairment of capital; dividends; retirement

Title 12 › Chapter CHAPTER 2— - NATIONAL BANKS › Subchapter SUBCHAPTER II— - CAPITAL, STOCK, AND STOCKHOLDERS › § 51b–1

Last updated Apr 6, 2026|Official source

Summary

Decides how preferred stock is counted when checking a bank’s capital. Preferred shares are counted at their par value (their stated face value) to decide if capital is impaired, even if holders might get more on retirement or liquidation. If the bank has capital notes or debentures that the Reconstruction Finance Corporation could buy under section 51d, the bank can be treated as not impaired if the sound value of its assets is at least its total liabilities including capital stock but excluding those notes, debentures and debts expressly subordinated to them. Preferred stock sold under the Emergency Banking and Bank Conservation Act (March 9, 1933) earns cumulative dividends based on the purchase price. Retirement or liquidation payments to those preferred holders may not exceed the purchase price plus accumulated dividends and must follow the bank’s articles of association approved by the Comptroller. If the bank is liquidated or a conservator or receiver is appointed, common shareholders get nothing until preferred holders are paid in full.

Full Legal Text

Title 12, §51b–1

Banks and Banking — Source: USLM XML via OLRC

If any part of the capital of a national bank, State member bank, or bank applying for membership in the Federal Reserve System consists of preferred stock, the determination of whether or not the capital of such bank is impaired and the amount of such impairment shall be based upon the par value of its stock even though the amount which the holders of such preferred stock shall be entitled to receive in the event of retirement or liquidation shall be in excess of the par value of such preferred stock. If any such bank or trust company shall have outstanding any capital notes or debentures of the type which the Reconstruction Finance Corporation is authorized to purchase pursuant to the provisions of section 51d of this title, the capital of such bank may be deemed to be unimpaired if the sound value of its assets is not less than its total liabilities, including capital stock, but excluding such capital notes or debentures and any obligations of the bank expressly subordinated thereto. Notwithstanding any other provision of law, the holders of preferred stock issued by a national banking association pursuant to the provisions of the Emergency Banking and Bank Conservation Act, approved March 9, 1933, as amended, shall be entitled to receive such cumulative dividends on the purchase price received by the association for such stock and, in the event of the retirement of such stock, to receive such retirement price, not in excess of such purchase price plus all accumulated dividends, as may be provided in the articles of association with the approval of the Comptroller of the Currency. If the association is placed in voluntary liquidation, or if a conservator or a receiver is appointed therefor, no payment shall be made to the holders of common stock until the holders of preferred stock shall have been paid in full such amount as may be provided in the articles of association with the approval of the Comptroller of the Currency, not in excess of such purchase price of such preferred stock plus all accumulated dividends.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 51d of this title, referred to in text, which was section 304 of the Emergency Banking and Bank Conservation Act, approved March 9, 1933, ch. 1, 48 Stat. 6, as amended, and which authorized the Re

Construction

Finance Corporation, upon the request of the Secretary of the Treasury approved by the President, to purchase, or to make loans upon, the capital stock of any bank or trust company requiring funds for capital purposes in connection with its organization or reorganization, and which made provision for the purchase of the capital notes of banks organized in States which subject holders of preferred stock to double liability and for the sale of any stock or notes purchased under such authority, was repealed by act
June 30, 1947, ch. 166, title II, § 206(b), (o), 61 Stat. 208. However, according to the information received from the Department of the Treasury, the second sentence of this section is not obsolete even though it contains such obsolete reference to section 51d of this title, and even though, under 1957 Reorg. Plan No. 1, eff.
June 30, 1957, 22 F.R. 4633, 71 Stat. 647, set out in the Appendix to Title 5, Government Organization and Employees, the Re

Construction

Finance Corporation was abolished, for many banks have outstanding debentures which they obtained pursuant to the provisions of section 51d, and which they are not required to redeem; and their benefits or entitlements conferred by the second sentence of this section will remain until the debentures are redeemed. The Emergency Banking and Bank Conservation Act, approved March 9, 1933, as amended, referred to in text, is act Mar. 9, 1933, ch. 1, 48 Stat. 1, which is classified to section 51a, 51b, 51c, 51d, 95, 201 to 212, 248, 347b, 347c, 347d, and 445 of this title and section 4305 of Title 50, War and National Defense, and classified as a note under section 4305 of Title 50.

Amendments

1980—Pub. L. 96–221 struck out limitation on payment of cumulative dividends at a rate not exceeding 6 per centum per annum.

Executive Documents

Exception as to

Transfer of Functions

Functions vested by any provision of law in Comptroller of the Currency, referred to in this section, not included in

Transfer of Functions

to Secretary of the Treasury, see note set out under section 1 of this title.

Reference

Citations & Metadata

Citation

12 U.S.C. § 51b–1

Title 12 — Banks and Banking

Last Updated

Apr 6, 2026

Release point: 119-73