PRIA, Government Policy, Made Personal

Summary

The Director must closely watch any regulated company that is undercapitalized. The Director must monitor the company’s condition, check that it follows its capital restoration plan and other limits, and review those plans and limits from time to time to see if they are working. A company that is undercapitalized must send the Director a capital restoration plan within the time allowed by section 4622(b) and (d) and must carry out the plan after the Director approves it. The company may not make capital payments that would push it into the “significantly” or “critically” undercapitalized categories. It may not let its average total assets grow from one quarter to the next unless the Director has accepted the plan, the asset increase fits the plan, and the company’s tangible-equity-to-assets ratio rises enough to reach adequate capital in a reasonable time. The company also must get the Director’s OK before buying interests or starting new activities unless the Director finds the action supports the plan or the subchapter’s purpose. The Director must reclassify an undercapitalized company as significantly undercapitalized if the company fails to submit a plan that meets the requirements of section 4622 within the allowed time or if the Director does not approve the plan, or if the company fails in any important way to follow the approved plan’s schedule. The Director may also use any actions allowed for significantly undercapitalized companies under section 4616 when needed to achieve the subchapter’s goals.

Title 12, §4615

Banks and Banking, Source: USLM XML via OLRC

(a)Mandatory actions

(1)Required monitoring

The Director shall—

(A)closely monitor the condition of any undercapitalized regulated entity;

(B)closely monitor compliance with the capital restoration plan, restrictions, and requirements imposed on an undercapitalized regulated entity under this section; and

(C)periodically review the plan, restrictions, and requirements applicable to an undercapitalized regulated entity to determine whether the plan, restrictions, and requirements are achieving the purpose of this section.

(2)Capital restoration plan

A regulated entity that is classified as undercapitalized shall, within the time period provided in section 4622(b) and (d) of this title, submit to the Director a capital restoration plan that complies with section 4622 of this title and carry out the plan after approval.

(3)Restriction on capital distributions

A regulated entity that is classified as undercapitalized may not make any capital distribution that would result in the regulated entity being reclassified as significantly undercapitalized or critically undercapitalized.

(4)Restriction of asset growth

An undercapitalized regulated entity shall not permit its average total assets during any calendar quarter to exceed its average total assets during the preceding calendar quarter, unless—

(A)the Director has accepted the capital restoration plan of the regulated entity;

(B)any increase in total assets is consistent with the capital restoration plan; and

(C)the ratio of tangible equity to assets of the regulated entity increases during the calendar quarter at a rate sufficient to enable the regulated entity to become adequately capitalized within a reasonable time.

(5)Prior approval of acquisitions and new activities

An undercapitalized regulated entity shall not, directly or indirectly, acquire any interest in any entity or engage in any new activity, unless—

(A)the Director has accepted the capital restoration plan of the regulated entity, the regulated entity is implementing the plan, and the Director determines that the proposed action is consistent with and will further the achievement of the plan; or

(B)the Director determines that the proposed action will further the purpose of this subchapter.

(b)Reclassification from undercapitalized to significantly undercapitalized

The Director shall reclassify as significantly undercapitalized a regulated entity that is classified as undercapitalized (and the regulated entity shall be subject to the provisions of section 4616 of this title) if—

(1)the regulated entity does not submit a capital restoration plan that is substantially in compliance with section 4622 of this title within the applicable period or the Director does not approve the capital restoration plan submitted by the regulated entity; or

(2)the Director determines that the regulated entity has failed to comply with the capital restoration plan and fulfill the schedule for the plan approved by the Director in any material respect.

(c)Other discretionary safeguards

The Director may take, with respect to an undercapitalized regulated entity, any of the actions authorized to be taken under section 4616 of this title with respect to a significantly undercapitalized regulated entity, if the Director determines that such actions are necessary to carry out the purpose of this subchapter.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2008—Subsec. (a)(1). Pub. L. 110–289, § 1143(4)(B), added par. (1). Former par. (1) redesignated (2). Pub. L. 110–289, § 1143(2), substituted “A regulated entity” for “An enterprise”. Subsec. (a)(2). Pub. L. 110–289, § 1143(4)(A), redesignated par. (1) as (2). Former par. (2) redesignated (3). Pub. L. 110–289, § 1143(1), (2), substituted “the regulated entity” for “the enterprise” and “A regulated entity” for “An enterprise”. Subsec. (a)(3). Pub. L. 110–289, § 1143(4)(A), redesignated par. (2) as (3). Subsec. (a)(4), (5). Pub. L. 110–289, § 1143(4)(C), added pars. (4) and (5). Subsec. (b). Pub. L. 110–289, § 1143(5)(A), (B), substituted “Reclassification” for “Discretionary reclassification” in heading and “shall” for “may” in introductory provisions. Pub. L. 110–289, § 1143(1), (3), substituted “a regulated entity” for “an enterprise” and “the regulated entity” for “the enterprise” in introductory provisions. Subsec. (b)(1). Pub. L. 110–289, § 1143(1), substituted “the regulated entity” for “the enterprise” in two places. Subsec. (b)(2). Pub. L. 110–289, § 1143(5)(C), struck out “make, in good faith, reasonable efforts necessary to” before “comply with” and inserted “in any material respect” before period at end. Pub. L. 110–289, § 1143(1), substituted “the regulated entity” for “the enterprise”. Subsec. (c). Pub. L. 110–289, § 1143(6), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: “This section shall take effect upon the expiration of the 1-year period beginning on the date of the effectiveness of the

Regulations

issued under section 4611(e) of this title establishing the risk-based capital test.”

§4615 Supervisory Actions Applicable to Undercapitalized Regulated Entities