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§ 1831o. —  Prompt corrective action.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC1831o]

 
                       TITLE 12--BANKS AND BANKING
 
            CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
 
Sec. 1831o. Prompt corrective action


(a) Resolving problems to protect deposit insurance funds

                             (1) Purpose

        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.

                (2) Prompt corrective action required

        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.

(b) Definitions

    For purposes of this section:

                       (1) Capital categories

        (A) Well capitalized

            An insured depository institution is ``well capitalized'' if 
        it significantly exceeds the required minimum level for each 
        relevant capital measure.

        (B) Adequately capitalized

            An insured depository institution is ``adequately 
        capitalized'' if it meets the required minimum level for each 
        relevant capital measure.

        (C) Undercapitalized

            An insured depository institution is ``undercapitalized'' if 
        it fails to meet the required minimum level for any relevant 
        capital measure.

        (D) Significantly undercapitalized

            An insured depository institution is ``significantly 
        undercapitalized'' if it is significantly below the required 
        minimum level for any relevant capital measure.

        (E) Critically undercapitalized

            An insured depository institution is ``critically 
        undercapitalized'' if it fails to meet any level specified under 
        subsection (c)(3)(A) of this section.

                        (2) Other definitions

        (A) Average

            (i) In general

                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.
            (ii) Agency may permit weekly averaging for certain 
                    institutions

                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.

        (B) Capital distribution

            The term ``capital distribution'' means--
                (i) a distribution of cash or other property by any 
            insured depository institution or company to its owners made 
            on account of that ownership, but not including--
                    (I) any dividend consisting only of shares of the 
                institution or company or rights to purchase such 
                shares; or
                    (II) any amount paid on the deposits of a mutual or 
                cooperative institution that the appropriate Federal 
                banking agency determines is not a distribution for 
                purposes of this section;

                (ii) a payment by an insured depository institution or 
            company to repurchase, redeem, retire, or otherwise acquire 
            any of its shares or other ownership interests, including 
            any extension of credit to finance an affiliated company's 
            acquisition of those shares or interests; or
                (iii) 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.

        (C) Capital restoration plan

            The term ``capital restoration plan'' means a plan submitted 
        under subsection (e)(2) of this section.

        (D) Company

            The term ``company'' has the same meaning as in section 1841 
        of this title.

        (E) Compensation

            The term ``compensation'' includes any payment of money or 
        provision of any other thing of value in consideration of 
        employment.

        (F) Relevant capital measure

            The term ``relevant capital measure'' means the measures 
        described in subsection (c) of this section.

        (G) Required minimum level

            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.

        (H) Senior executive officer

            The term ``senior executive officer'' has the same meaning 
        as the term ``executive officer'' in section 375b of this title.

        (I) Subordinated debt

            The term ``subordinated debt'' means debt subordinated to 
        the claims of general creditors.

(c) Capital standards

                    (1) Relevant capital measures

        (A) In general

            Except as provided in subparagraph (B)(ii), the capital 
        standards prescribed by each appropriate Federal banking agency 
        shall include--
                (i) a leverage limit; and
                (ii) a risk-based capital requirement.

        (B) Other capital measures

            An appropriate Federal banking agency may, by regulation--
                (i) establish any additional relevant capital measures 
            to carry out the purpose of this section; or
                (ii) 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.

                  (2) Capital categories generally

        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.

                        (3) Critical capital

        (A) Agency to specify level

            (i) Leverage limit

                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.
            (ii) Other relevant capital measures

                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.

        (B) Leverage limit range

            The level specified under subparagraph (A)(i) shall require 
        tangible equity in an amount--
                (i) not less than 2 percent of total assets; and
                (ii) except as provided in clause (i), not more than 65 
            percent of the required minimum level of capital under the 
            leverage limit.

        (C) FDIC's concurrence required

            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.

(d) Provisions applicable to all institutions

                (1) Capital distributions restricted

        (A) In general

            An insured depository institution shall make no capital 
        distribution if, after making the distribution, the institution 
        would be undercapitalized.

        (B) Exception

            Notwithstanding subparagraph (A), the appropriate Federal 
        banking agency may permit, after consultation with the 
        Corporation, an insured depository institution to repurchase, 
        redeem, retire, or otherwise acquire shares or ownership 
        interests if the repurchase, redemption, retirement, or other 
        acquisition--
                (i) is made in connection with the issuance of 
            additional shares or obligations of the institution in at 
            least an equivalent amount; and
                (ii) will reduce the institution's financial obligations 
            or otherwise improve the institution's financial condition.

                   (2) Management fees restricted

        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.

(e) Provisions applicable to undercapitalized institutions

                       (1) Monitoring required

        Each appropriate Federal banking agency shall--
            (A) closely monitor the condition of any undercapitalized 
        insured depository institution;
            (B) closely monitor compliance with capital restoration 
        plans, restrictions, and requirements imposed under this 
        section; and
            (C) 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.

                (2) Capital restoration plan required

        (A) In general

            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).

        (B) Contents of plan

            The capital restoration plan shall--
                (i) specify--
                    (I) the steps the insured depository institution 
                will take to become adequately capitalized;
                    (II) the levels of capital to be attained during 
                each year in which the plan will be in effect;
                    (III) how the institution will comply with the 
                restrictions or requirements then in effect under this 
                section; and
                    (IV) the types and levels of activities in which the 
                institution will engage; and

                (ii) contain such other information as the appropriate 
            Federal banking agency may require.

        (C) Criteria for accepting plan

            The appropriate Federal banking agency shall not accept a 
        capital restoration plan unless the agency determines that--
                (i) the plan--
                    (I) complies with subparagraph (B);
                    (II) is based on realistic assumptions, and is 
                likely to succeed in restoring the institution's 
                capital; and
                    (III) would not appreciably increase the risk 
                (including credit risk, interest-rate risk, and other 
                types of risk) to which the institution is exposed; and

                (ii) if the insured depository institution is 
            undercapitalized, each company having control of the 
            institution has--
                    (I) guaranteed that the institution will comply with 
                the plan until the institution has been adequately 
                capitalized on average during each of 4 consecutive 
                calendar quarters; and
                    (II) provided appropriate assurances of performance.

        (D) Deadlines for submission and review of plans

            The appropriate Federal banking agency shall by regulation 
        establish deadlines that--
                (i) provide insured depository institutions with 
            reasonable time to submit capital restoration plans, and 
            generally require an institution to submit a plan not later 
            than 45 days after the institution becomes undercapitalized;
                (ii) require the agency to act on capital restoration 
            plans expeditiously, and generally not later than 60 days 
            after the plan is submitted; and
                (iii) 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.

        (E) Guarantee liability limited

            (i) In general

                The aggregate liability under subparagraph (C)(ii) of 
            all companies having control of an insured depository 
            institution shall be the lesser of--
                    (I) an amount equal to 5 percent of the 
                institution's total assets at the time the institution 
                became undercapitalized; or
                    (II) 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.
            (ii) Certain affiliates not affected

                This paragraph may not be construed as--
                    (I) requiring any company not having control of an 
                undercapitalized insured depository institution to 
                guarantee, or otherwise be liable on, a capital 
                restoration plan;
                    (II) requiring any person other than an insured 
                depository institution to submit a capital restoration 
                plan; or
                    (III) 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.

                     (3) Asset growth restricted

        An undercapitalized insured depository institution 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 appropriate Federal banking agency has accepted the 
        institution's capital restoration plan;
            (B) any increase in total assets is consistent with the 
        plan; and
            (C) 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.

    (4) Prior approval required for acquisitions, branching, and 
                            new lines of business

        An undercapitalized insured depository institution shall not, 
    directly or indirectly, acquire any interest in any company or 
    insured depository institution, establish or acquire any additional 
    branch office, or engage in any new line of business unless--
            (A) the appropriate Federal banking agency has accepted the 
        insured depository institution's capital restoration plan, the 
        institution is implementing the plan, and the agency determines 
        that the proposed action is consistent with and will further the 
        achievement of the plan; or
            (B) the Board of Directors determines that the proposed 
        action will further the purpose of this section.

                    (5) Discretionary safeguards

        The appropriate Federal banking agency may, with respect to any 
    undercapitalized insured depository institution, take actions 
    described in any subparagraph of subsection (f)(2) of this section 
    if the agency determines that those actions are necessary to carry 
    out the purpose of this section.

(f) Provisions applicable to significantly undercapitalized institutions 
        and undercapitalized institutions that fail to submit and 
        implement capital restoration plans

                           (1) In general

        This subsection shall apply with respect to any insured 
    depository institution that--
            (A) is significantly undercapitalized; or
            (B) is undercapitalized and--
                (i) fails to submit an acceptable capital restoration 
            plan within the time allowed by the appropriate Federal 
            banking agency under subsection (e)(2)(D) of this section; 
            or
                (ii) fails in any material respect to implement a plan 
            accepted by the agency.

                   (2) Specific actions authorized

        The appropriate Federal banking agency shall carry out this 
    section by taking 1 or more of the following actions:

        (A) Requiring recapitalization

            Doing 1 or more of the following:
                (i) Requiring the institution to sell enough shares or 
            obligations of the institution so that the institution will 
            be adequately capitalized after the sale.
                (ii) Further requiring that instruments sold under 
            clause (i) be voting shares.
                (iii) 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.

        (B) Restricting transactions with affiliates

            (i) 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.
            (ii) Further restricting the institution's transactions with 
        affiliates.

        (C) Restricting interest rates paid

            (i) In general

                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.
            (ii) Retroactive restrictions prohibited

                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.

        (D) Restricting asset growth

            Restricting the institution's asset growth more stringently 
        than subsection (e)(3) of this section, or requiring the 
        institution to reduce its total assets.

        (E) Restricting activities

            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.

        (F) Improving management

            Doing 1 or more of the following:
            (i) New election of directors

                Ordering a new election for the institution's board of 
            directors.
            (ii) Dismissing directors or senior executive 
                    officers

                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.
            (iii) Employing qualified senior executive officers

                Requiring the institution to employ qualified senior 
            executive officers (who, if the agency so specifies, shall 
            be subject to approval by the agency).

        (G) Prohibiting deposits from correspondent banks

            Prohibiting the acceptance by the institution of deposits 
        from correspondent depository institutions, including renewals 
        and rollovers of prior deposits.

        (H) Requiring prior approval for capital distributions by bank 
                holding company

            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.

        (I) Requiring divestiture

            Doing one or more of the following:
            (i) Divestiture by the institution

                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.
            (ii) Divestiture by parent company of nondepository 
                    affiliate

                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.
            (iii) Divestiture of institution

                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.

        (J) Requiring other action

            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.

             (3) Presumption in favor of certain actions

        In complying with paragraph (2), the agency shall take the 
    following actions, unless the agency determines that the actions 
    would not further the purpose of this section:
            (A) 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).
            (B) The action described in paragraph (2)(B)(i) (relating to 
        restricting transactions with affiliates).
            (C) The action described in paragraph (2)(C) (relating to 
        restricting interest rates).

       (4) Senior executive officers' compensation restricted

        (A) In general

            The insured depository institution shall not do any of the 
        following without the prior written approval of the appropriate 
        Federal banking agency:
                (i) Pay any bonus to any senior executive officer.
                (ii) 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.

        (B) Failing to submit plan

            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.

      (5) Discretion to impose certain additional restrictions

        The agency may impose 1 or more of the restrictions prescribed 
    by regulation under subsection (i) of this section if the agency 
    determines that those restrictions are necessary to carry out the 
    purpose of this section.

               (6) Consultation with other regulators

        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.

(g) More stringent treatment based on other supervisory criteria

                           (1) In general

        If the appropriate Federal banking agency determines (after 
    notice and an opportunity for hearing) that an insured depository 
    institution is in an unsafe or unsound condition or, pursuant to 
    section 1818(b)(8) of this title, deems the institution to be 
    engaging in an unsafe or unsound practice, the agency may--
            (A) if the institution is well capitalized, reclassify the 
        institution as adequately capitalized;
            (B) if the institution is adequately capitalized (but not 
        well capitalized), require the institution to comply with 1 or 
        more provisions of subsections (d) and (e) of this section, as 
        if the institution were undercapitalized; or
            (C) if the institution is undercapitalized, take any 1 or 
        more actions authorized under subsection (f)(2) of this section 
        as if the institution were significantly undercapitalized.

                        (2) Contents of plan

        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).

(h) Provisions applicable to critically undercapitalized institutions

                      (1) Activities restricted

        Any critically undercapitalized insured depository institution 
    shall comply with restrictions prescribed by the Corporation under 
    subsection (i) of this section.

            (2) Payments on subordinated debt prohibited

        (A) In general

            A critically undercapitalized insured depository institution 
        shall not, beginning 60 days after becoming critically 
        undercapitalized, make any payment of principal or interest on 
        the institution's subordinated debt.

        (B) Exceptions

            The Corporation may make exceptions to subparagraph (A) if--
                (i) the appropriate Federal banking agency has taken 
            action with respect to the insured depository institution 
            under paragraph (3)(A)(ii); and
                (ii) the Corporation determines that the exception would 
            further the purpose of this section.

        (C) Limited exemption for certain subordinated debt

            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.

        (D) Accrual of interest

            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.

     (3) Conservatorship, receivership, or other action required

        (A) In general

            The appropriate Federal banking agency shall, not later than 
        90 days after an insured depository institution becomes 
        critically undercapitalized--
                (i) appoint a receiver (or, with the concurrence of the 
            Corporation, a conservator) for the institution; or
                (ii) 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.

        (B) Periodic redeterminations required

            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.

        (C) Appointment of receiver required if other action fails to 
                restore capital

            (i) In general

                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.
            (ii) Exception

                Notwithstanding clause (i), the appropriate Federal 
            banking agency may continue to take such other action as the 
            agency determines to be appropriate in lieu of such 
            appointment if--
                    (I) the agency determines, with the concurrence of 
                the Corporation, that (aa) the insured depository 
                institution has positive net worth, (bb) the insured 
                depository institution has been in substantial 
                compliance with an approved capital restoration plan 
                which requires consistent improvement in the 
                institution's capital since the date of the approval of 
                the plan, (cc) the insured depository institution is 
                profitable or has an upward trend in earnings the agency 
                projects as sustainable, and (dd) the insured depository 
                institution is reducing the ratio of nonperforming loans 
                to total loans; and
                    (II) 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.

(i) Restricting activities of critically undercapitalized institutions

    To carry out the purpose of this section, the Corporation shall, by 
regulation or order--
        (1) restrict the activities of any critically undercapitalized 
    insured depository institution; and
        (2) at a minimum, prohibit any such institution from doing any 
    of the following without the Corporation's prior written approval:
            (A) 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.
            (B) Extending credit for any highly leveraged transaction.
            (C) Amending the institution's charter or bylaws, except to 
        the extent necessary to carry out any other requirement of any 
        law, regulation, or order.
            (D) Making any material change in accounting methods.
            (E) Engaging in any covered transaction (as defined in 
        section 371c(b) of this title).
            (F) Paying excessive compensation or bonuses.
            (G) 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.

(j) Certain Government-controlled institutions exempted

    Subsections (e) through (i) of this section (other than paragraph 
(3) of subsection (e) of this section) shall not apply--
        (1) to an insured depository institution for which the 
    Corporation or the Resolution Trust Corporation is conservator; or
        (2) to a bridge bank, none of the voting securities of which are 
    owned by a person or agency other than the Corporation or the 
    Resolution Trust Corporation.

(k) Review required when deposit insurance fund incurs material loss

                           (1) In general

        If a deposit insurance fund incurs a material loss with respect 
    to an insured depository institution on or after July 1, 1993, the 
    inspector general of the appropriate Federal banking agency shall--
            (A) make a written report to that agency reviewing the 
        agency's supervision of the institution (including the agency's 
        implementation of this section), which shall--
                (i) ascertain why the institution's problems resulted in 
            a material loss to the deposit insurance fund; and
                (ii) make recommendations for preventing any such loss 
            in the future; and

            (B) provide a copy of the report to--
                (i) the Comptroller General of the United States;
                (ii) the Corporation (if the agency is not the 
            Corporation);
                (iii) in the case of a State depository institution, the 
            appropriate State banking supervisor; and
                (iv) upon request by any Member of Congress, to that 
            Member.

                     (2) Material loss incurred

        For purposes of this subsection:

        (A) Loss incurred

            A deposit insurance fund incurs a loss with respect to an 
        insured depository institution--
                (i) if the Corporation provides any assistance under 
            section 1823(c) of this title with respect to that 
            institution; and--
                    (I) it is not substantially certain that the 
                assistance will be fully repaid not later than 24 months 
                after the date on which the Corporation initiated the 
                assistance; or
                    (II) the institution ceases to repay the assistance 
                in accordance with its terms; or

                (ii) if the Corporation is appointed receiver of the 
            institution, and it is or becomes apparent that the present 
            value of the deposit insurance fund's outlays with respect 
            to that institution will exceed the present value of 
            receivership dividends or other payments on the claims held 
            by the Corporation.

        (B) Material loss

            A loss is material if it exceeds the greater of--
                (i) $25,000,000; or
                (ii) 2 percent of the institution's total assets at the 
            time the Corporation initiated assistance under section 
            1823(c) of this title or was appointed receiver.

                       (3) Deadline for report

        The inspector general of the appropriate Federal banking agency 
    shall comply with paragraph (1) expeditiously, and in any event 
    (except with respect to paragraph (1)(B)(iv)) as follows:
            (A) If the institution is described in paragraph (2)(A)(i), 
        during the 6-month period beginning on the earlier of--
                (i) the date on which the institution ceases to repay 
            assistance under section 1823(c) of this title in accordance 
            with its terms, or
                (ii) 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).

            (B) 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 deposit insurance 
        fund's outlays with respect to that institution will exceed the 
        present value of receivership dividends or other payments on the 
        claims held by the Corporation.

                   (4) Public disclosure required

        (A) In general

            The appropriate Federal banking agency shall disclose the 
        report upon request under section 552 of title 5 without 
        excising--
                (i) any portion under section 552(b)(5) of that title; 
            or
                (ii) any information about the insured depository 
            institution under paragraph (4) (other than trade secrets) 
            or paragraph (8) of section 552(b) of that title.

        (B) Exception

            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.

                           (5) GAO review

        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).

                         (6) Transition rule

        During the period beginning on July 1, 1993, and ending on June 
    30, 1997, a loss incurred by the Corporation with respect to an 
    insured depository institution--
            (A) with respect to which the Corporation initiates 
        assistance under section 1823(c) of this title during the period 
        in question, or
            (B) for which the Corporation was appointed receiver during 
        the period in question,

    is material for purposes of this subsection only if that loss 
    exceeds the greater of $25,000,000 or the applicable percentage of 
    the institution's total assets at that time, set forth in the 
    following table:

                                                          The applicable
  For the following period:                               percentage is:
  July 1, 1993-June 30, 1994............                      7 percent 
  July 1, 1994-June 30, 1995............                      5 percent 
  July 1, 1995-June 30, 1996............                      4 percent 
  July 1, 1996-June 30, 1997............                      3 percent.

(l) Implementation

                  (1) Regulations and other actions

        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.

         (2) Written determination and concurrence required

        Any determination or concurrence by an appropriate Federal 
    banking agency or the Corporation required under this section shall 
    be written.

(m) Other authority not affected

    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.

(n) Administrative review of dismissal orders

                    (1) Timely petition required

        A director or senior executive officer dismissed pursuant to an 
    order under subsection (f)(2)(F)(ii) of this section 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.

                            (2) Procedure

        (A) Hearing required

            The agency shall give the petitioner an opportunity to--
                (i) submit written materials in support of the petition; 
            and
                (ii) appear, personally or through counsel, before 1 or 
            more members of the agency or designated employees of the 
            agency.

        (B) Deadline for hearing

            The agency shall--
                (i) schedule the hearing referred to in subparagraph 
            (A)(ii) promptly after the petition is filed; and
                (ii) 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.

        (C) Deadline for decision

            Not later than 60 days after the date of the hearing, the 
        agency shall--
                (i) by order, grant or deny the petition;
                (ii) if the order is adverse to the petitioner, set 
            forth the basis for the order; and
                (iii) notify the petitioner of the order.

             (3) Standard for review of dismissal orders

        The petitioner shall bear the burden of proving that the 
    petitioner's continued employment would materially strengthen the 
    insured depository institution's ability--
            (A) to become adequately capitalized, to the extent that the 
        order is based on the institution's capital level or failure to 
        submit or implement a capital restoration plan; and
            (B) to correct the unsafe or unsound condition or unsafe or 
        unsound practice, to the extent that the order is based on 
        subsection (g)(1) of this section.

(o) Transition rules for savings associations

        (1) RTC's role does not diminish care required of OTS

        (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.

        (B) Reports

            Subparagraph (A) does not require reports under subsection 
        (k) of this section.

     (2) Additional flexibility for certain savings associations

        Subsections (e)(2), (f), and (h) of this section shall not apply 
    before July 1, 1994, to any insured savings association if--
            (A) before December 19, 1991--
                (i) the savings association had submitted a plan meeting 
            the requirements of section 1464(t)(6)(A)(ii) of this title; 
            and
                (ii) the Director of the Office of Thrift Supervision 
            had accepted the plan;

            (B) the plan remains in effect; and
            (C) the savings association remains in compliance with the 
        plan or is operating under a written agreement with the 
        appropriate Federal banking agency.

(Sept. 21, 1950, ch. 967, Sec. 2[38], as added Pub. L. 102-242, title I, 
Sec. 131(a), Dec. 19, 1991, 105 Stat. 2253; amended Pub. L. 102-550, 
title XVI, Sec. 1603(d)(1), Oct. 28, 1992, 106 Stat. 4079; Pub. L. 103-
325, title VI, Sec. 602(a)(64), Sept. 23, 1994, 108 Stat. 2291; Pub. L. 
104-208, div. A, title II, Sec. 2704(d)(14)(AA)-(CC), Sept. 30, 1996, 
110 Stat. 3009-494; Pub. L. 104-316, title I, Sec. 106(d), Oct. 19, 
1996, 110 Stat. 3831.)

                       References in Text

    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 (Sec. 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.


                               Amendments

    1996--Subsec. (a). Pub. L. 104-208, Sec. 2704(d)(14)(AA), which 
directed substitution of ``fund'' for ``funds'' in heading, was not 
executed. See Effective Date of 1996 Amendment note below.
    Subsec. (k)(1). Pub. L. 104-208, Sec. 2704(d)(14)(BB)(i), which 
directed substitution of ``the Deposit Insurance Fund'' for ``a deposit 
insurance fund'', was not executed. See Effective Date of 1996 Amendment 
note below.
    Subsec. (k)(2)(A). Pub. L. 104-208, Sec. 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 not executed. See Effective Date of 1996 Amendment note 
below.
    Subsec. (k)(5). Pub. L. 104-316 amended heading and text of par. (5) 
generally. Prior to amendment, text read as follows: ``The General 
Accounting Office shall annually--
        ``(A) review reports made under paragraph (1) and recommend 
    improvements in the supervision of insured depository institutions 
    (including the implementation of this section); and
        ``(B) verify the accuracy of 1 or more of those reports.''
    Subsec. (o). Pub. L. 104-208, Sec. 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 not executed. See 
Effective Date of 1996 Amendment note below.
    1994--Subsec. (f)(6). Pub. L. 103-325 substituted ``Commission'' for 
``Commisssion''.
    1992--Subsec. (e)(2)(D)(i). Pub. L. 102-550, Sec. 1603(d)(1)(A), 
struck out ``and'' after semicolon at end.
    Subsec. (f)(6). Pub. L. 102-550, Sec. 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, Sec. 1603(d)(1)(C), substituted 
``capitalized (but not well capitalized)'' for ``capitalized''.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-208 effective Jan. 1, 1999, if no insured 
depository institution is a savings association on that date, see 
section 2704(c) of Pub. L. 104-208, set out as a note under section 1821 
of this title.


                    Effective Date of 1992 Amendment

    Amendment by Pub. L. 102-550 effective as if included in the Federal 
Deposit Insurance Corporation Improvement Act of 1991, Pub. L. 102-242, 
as of Dec. 19, 1991, except that where amendment is to any provision of 
law added or amended by Pub. L. 102-242 effective after Dec. 19, 1992, 
then amendment by Pub. L. 102-550 effective on effective date of 
amendment by Pub. L. 102-242, see section 1609 of Pub. L. 102-550, set 
out as a note under section 191 of this title.


                             Effective Date

    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.


                               Regulations

    Section 131(b) of Pub. L. 102-242 provided that: ``Each appropriate 
Federal banking agency (as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813)) (and the Corporation, acting in the 
Corporation's capacity as insurer of depository institutions under that 
Act [12 U.S.C. 1811 et seq.]) shall, after notice and opportunity for 
comment, promulgate final regulations under section 38 of the Federal 
Deposit Insurance Act [12 U.S.C. 1831o] (as added by subsection (a)) not 
later than 9 months after the date of enactment of this Act [Dec. 19, 
1991], and those regulations shall become effective not later than 1 
year after that date of enactment.''


                      Deposit of Insurance Proceeds

    Pub. L. 105-18, title V, Sec. 50003, June 12, 1997, 111 Stat. 211, 
provided that:
    ``(a) In General.--The appropriate Federal banking agency may, by 
order, permit an insured depository institution to subtract from the 
institution's total assets, in calculating compliance with the leverage 
limit prescribed under section 38 of the Federal Deposit Insurance Act 
[12 U.S.C. 1831o], an amount not exceeding the qualifying amount 
attributable to insurance proceeds, if the agency determines that--
        ``(1) the institution--
            ``(A) had its principal place of business within an area in 
        which the President, pursuant to section 401 of the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act [42 U.S.C. 
        5170], has determined, on or after February 28, 1997, that a 
        major disaster exists, or within an area determined to be 
        eligible for disaster relief under other Federal law by reason 
        of damage related to the 1997 flooding of the Red River of the 
        North, the Minnesota River, and the tributaries of such rivers, 
        on the day before the date of any such determination;
            ``(B) derives more than 60 percent of its total deposits 
        from persons who normally reside within, or whose principal 
        place of business is normally within, areas of intense 
        devastation caused by the major disaster;
            ``(C) was adequately capitalized (as defined in section 38 
        of the Federal Deposit Insurance Act) before the major disaster; 
        and
            ``(D) has an acceptable plan for managing the increase in 
        its total assets and total deposits; and
        ``(2) the subtraction is consistent with the purpose of section 
    38 of the Federal Deposit Insurance Act.
    ``(b) Time Limit on Exceptions.--Any exception made under this 
section shall expire not later than February 28, 1999.
    ``(c) Definitions.--For purposes of this section:
        ``(1) Appropriate federal banking agency.--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].
        ``(2) Insured depository institution.--The term `insured 
    depository institution' has the same meaning as in section 3 of the 
    Federal Deposit Insurance Act.
        ``(3) Leverage limit.--The term `leverage limit' has the same 
    meaning as in section 38 of the Federal Deposit Insurance Act [12 
    U.S.C. 1831o].
        ``(4) Qualifying amount attributable to insurance proceeds.--The 
    term `qualifying amount attributable to insurance proceeds' means 
    the amount (if any) by which the institution's total assets exceed 
    the institution's average total assets during the calendar quarter 
    ending before the date of any determination referred to in 
    subsection (a)(1)(A), because of the deposit of insurance payments 
    or governmental assistance made with respect to damage caused by, or 
    other costs resulting from, the major disaster.''
    Similar provisions were contained in the following prior acts:
    Pub. L. 103-76, Sec. 3, Aug. 12, 1993, 107 Stat. 753.
    Pub. L. 102-485, Sec. 4, Oct. 23, 1992, 106 Stat. 2772.


    Transition Rule Regarding Current Directors and Senior Executive 
                                Officers

    Section 131(e) of Pub. L. 102-242 provided that:
    ``(1) Dismissal from office.--Section 38(f)(2)(F)(ii) of the Federal 
Deposit Insurance Act [12 U.S.C. 1831o(f)(2)(F)(ii)] (as added by 
subsection (a)) shall not apply with respect to--
        ``(A) any director whose current term as a director commenced on 
    or before the date of enactment of this Act [Dec. 19, 1991] and has 
    not been extended--
            ``(i) after that date of enactment, or
            ``(ii) to evade section 38(f)(2)(F)(ii); or
        ``(B) any senior executive officer who accepted employment in 
    his or her current position on or before the date of enactment of 
    this Act and whose contract of employment has not been renewed or 
    renegotiated--
            ``(i) after that date of enactment, or
            ``(ii) to evade section 38(f)(2)(F)(ii).
    ``(2) Restricting compensation.--Section 38(f)(4) of the Federal 
Deposit Insurance Act [12 U.S.C. 1831o(f)(4)] (as added by subsection 
(a)) shall not apply with respect to any senior executive officer who 
accepted employment in his or her current position on or before the date 
of enactment of this Act [Dec. 19, 1991] and whose contract of 
employment has not been renewed or renegotiated--
        ``(A) after that date of enactment, or
        ``(B) to evade section 38(f)(4).''

                  Section Referred to in Other Sections

    This section is referred to in sections 24, 24a, 347b, 371d, 1464, 
1790d, 1817, 1818, 1820, 1821, 1828, 1831f, 1831i, 1831p-1, 1831u, 1835, 
1841, 1842, 4806 of this title; title 15 section 1607.



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