Title 12, Banks and BankingRelease 119-102
§56 Prohibition on Withdrawal of Capital; Unearned Dividends
Title 12 › CHAPTER 2 — NATIONAL BANKS › SUBCHAPTER II — CAPITAL, STOCK, AND STOCKHOLDERS › § 56
Summary
A banking association must not take out any of its capital while it is still doing banking business, whether as dividends or in any other way. If the association has losses that are as large as or larger than its undivided profits (profits not yet paid out), it cannot pay any dividend, and it may never pay a dividend larger than its undivided profits while operating. Reducing the capital under section 59 is still allowed.
Full Legal Text
Title 12, §56
Banks and Banking, Source: USLM XML via OLRC
No association, or any member thereof, shall, during the time it shall continue its banking operations, withdraw, or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. If losses have at any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no dividend shall ever be made by any association, while it continues its banking operations, to an amount greater than its undivided profits, subject to other applicable provisions of law. But nothing in this section shall prevent the reduction of the capital stock of the association under section 59 of this title.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Codification R.S. § 5204 derived from act June 3, 1864, ch. 106, § 38, 13 Stat. 110, which was the National Bank Act. See section 38 of this title.
Amendments
1994—Pub. L. 103–325 substituted “undivided profits, subject to other applicable provisions of law” for “net profits then on hand, deducting therefrom its losses and bad debts” in second sentence and struck out after second sentence “All debts due to any associations, on which interest is past due and unpaid for a period of six months, unless the same are well secured, and in process of collection, shall be considered bad debts within the meaning of this section.”
Reference
Citations & Metadata
Citation
12 U.S.C. § 56
Title 12, Banks and Banking
Last Updated
Aug 21, 2026
Release point: 119-102