12 U.S.C. § 4616 — Supervisory actions applicable to signifi-

Page 1693 TITLE 12—BANKS AND BANKING § 4616 (Pub. L. 102–550, title XIII, § 1365, Oct. 28, 1992, 106 Stat. 3978; Pub. L. 110–289, div. A, title I, § 1143, July 30, 2008, 122 Stat. 2732.) 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 en- tity’’ for ‘‘An enterprise’’. Subsec. (a)(2). Pub. L. 110–289, § 1143(4)(A), redesig- nated par. (1) as (2). Former par. (2) redesignated (3). Pub. L. 110–289, § 1143(1), (2), substituted ‘‘the regu- lated entity’’ for ‘‘the enterprise’’ and ‘‘A regulated en- tity’’ for ‘‘An enterprise’’. Subsec. (a)(3). Pub. L. 110–289, § 1143(4)(A), redesig- nated 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), sub- stituted ‘‘Reclassification’’ for ‘‘Discretionary reclassi- fication’’ in heading and ‘‘shall’’ for ‘‘may’’ in introduc- tory 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 re- spect’’ 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.’’ § 4616. Supervisory actions applicable to signifi- cantly undercapitalized regulated entities (a) Mandatory supervisory actions (1) Capital restoration plan A regulated entity that is classified as sig- nificantly undercapitalized shall, within the time period under section 4622(b) and (d) of this title, submit to the Director a capital res- toration plan that complies with section 4622 of this title and carry out the plan after ap- proval. (2) Restrictions on capital distributions (A) Prior approval A regulated entity that is classified as sig- nificantly undercapitalized may not make any capital distribution that would result in the regulated entity being reclassified as critically undercapitalized. A regulated enti- ty that is classified as significantly under- capitalized may not make any other capital distribution unless the Director approves the distribution. (B) Standard for approval The Director may approve a capital dis- tribution by a regulated entity classified as significantly undercapitalized only if the Di- rector determines that the distribution (i) will enhance the ability of the regulated en- tity to meet the risk-based capital level and the minimum capital level for the regulated entity promptly, (ii) will contribute to the long-term financial safety and soundness of the regulated entity, or (iii) is otherwise in the public interest. (b) Specific actions In addition to any other actions taken by the Director (including actions under subsection (a)), the Director shall carry out this section by taking, at any time, 1 or more of the following actions with respect to a regulated entity that is classified as significantly undercapitalized: (1) Limitation on increase in obligations Limit any increase in, or order the reduction of, any obligations of the regulated entity, in- cluding off-balance sheet obligations. (2) Limitation on growth Limit or prohibit the growth of the assets of the regulated entity or require contraction of the assets of the regulated entity. (3) Acquisition of new capital Require the regulated entity to acquire new capital in a form and amount determined by the Director. (4) Restriction of activities Require the regulated entity to terminate, reduce, or modify any activity that the Direc- tor determines creates excessive risk to the regulated entity. (5) Improvement of management Take 1 or more of the following actions: (A) New election of board Order a new election for the board of direc- tors of the regulated entity. (B) Dismissal of directors or executive offi- cers Require the regulated entity to dismiss from office any director or executive officer who had held office for more than 180 days immediately before the date on which the regulated entity became undercapitalized. Dismissal under this subparagraph shall not be construed to be a removal pursuant to the enforcement powers of the Director under section 4636a of this title. (C) Employ qualified executive officers Require the regulated entity to employ qualified executive officers (who, if the Di- rector so specifies, shall be subject to ap- proval by the Director). (6) Reclassification from significantly to criti- cally undercapitalized The Director may reclassify as critically undercapitalized a regulated entity that is classified as significantly undercapitalized (and the regulated entity shall be subject to the provisions of section 4617 of this title) if— (A) 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 Page 1694 TITLE 12—BANKS AND BANKING § 4617 (B) the Director determines that the regu- lated entity has failed to make, in good faith, reasonable efforts necessary to comply with the capital restoration plan and fulfill the schedule for the plan approved by the Di- rector. (7) Other action Require the regulated entity to take any other action that the Director determines will better carry out the purpose of this section than any of the other actions specified in this subsection. (c) Restriction on compensation of executive offi- cers A regulated entity that is classified as signifi- cantly undercapitalized in accordance with sec- tion 4614 of this title may not, without prior written approval by the Director— (1) pay any bonus to any executive officer; or (2) provide compensation to any executive officer at a rate exceeding the average rate of compensation of that officer (excluding bo- nuses, stock options, and profit sharing) dur- ing the 12 calendar months preceding the cal- endar month in which the regulated entity be- came significantly undercapitalized. (Pub. L. 102–550, title XIII, § 1366, Oct. 28, 1992, 106 Stat. 3978; Pub. L. 110–289, div. A, title I, § 1144, July 30, 2008, 122 Stat. 2733.) Editorial Notes AMENDMENTS 2008—Subsec. (a)(1). Pub. L. 110–289, § 1144(3), sub- stituted ‘‘A regulated entity’’ for ‘‘An enterprise’’. Subsec. (a)(2)(A). Pub. L. 110–289, § 1144(1)–(3), sub- stituted ‘‘A regulated entity’’ for ‘‘An enterprise’’ in two places, ‘‘the regulated entity’’ for ‘‘the enterprise’’, and, in second sentence, ‘‘undercapitalized’’ for ‘‘under- capitalized enterprise’’. Subsec. (a)(2)(B). Pub. L. 110–289, § 1144(2), (4), sub- stituted ‘‘a regulated entity’’ for ‘‘an enterprise’’ and ‘‘the regulated entity’’ for ‘‘the enterprise’’ wherever appearing. Subsec. (b). Pub. L. 110–289, § 1144(4), (5)(A), (B), sub- stituted ‘‘Specific’’ for ‘‘Discretionary supervisory’’ in heading and ‘‘shall carry out this section by taking, at any time, 1 or more’’ for ‘‘may, at any time, take any’’ and ‘‘a regulated entity’’ for ‘‘an enterprise’’ in intro- ductory provisions. Subsec. (b)(1) to (4). Pub. L. 110–289, § 1144(2), sub- stituted ‘‘the regulated entity’’ for ‘‘the enterprise’’ wherever appearing. Subsec. (b)(5). Pub. L. 110–289, § 1144(5)(E), added par. (5). Former par. (5) redesignated (6). Pub. L. 110–289, § 1144(2), (4), substituted ‘‘a regulated entity’’ for ‘‘an enterprise’’ in introductory provisions and ‘‘the regulated entity’’ for ‘‘the enterprise’’ wher- ever appearing. Subsec. (b)(6). Pub. L. 110–289, § 1144(5)(C), (D), redesig- nated par. (5) as (6) and struck out former par. (6) which permitted the Director to appoint a conservator. Subsec. (b)(7). Pub. L. 110–289, § 1144(5)(F), added par. (7). Subsec. (c). Pub. L. 110–289, § 1144(6), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: ‘‘This section shall take effect upon the first classification of the enterprises within capital classifications that occurs under section 4614 of this title.’’ § 4617. Authority over critically undercapitalized regulated entities (a) Appointment of the Agency as conservator or receiver (1) In general Notwithstanding any other provision of Fed- eral or State law, the Director may appoint the Agency as conservator or receiver for a regulated entity in the manner provided under paragraph (2) or (4). All references to the con- servator or receiver under this section are ref- erences to the Agency acting as conservator or receiver. (2) Discretionary appointment The Agency may, at the discretion of the Di- rector, be appointed conservator or receiver for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity. (3) Grounds for discretionary appointment of conservator or receiver The grounds for appointing conservator or receiver for any regulated entity under para- graph (2) are as follows: (A) Assets insufficient for obligations The assets of the regulated entity are less than the obligations of the regulated entity to its creditors and others. (B) Substantial dissipation Substantial dissipation of assets or earn- ings due to— (i) any violation of any provision of Fed- eral or State law; or (ii) any unsafe or unsound practice. (C) Unsafe or unsound condition An unsafe or unsound condition to trans- act business. (D) Cease and desist orders Any willful violation of a cease and desist order that has become final. (E) Concealment Any concealment of the books, papers, records, or assets of the regulated entity, or any refusal to submit the books, papers, records, or affairs of the regulated entity, for inspection to any examiner or to any lawful agent of the Director. (F) Inability to meet obligations The regulated entity is likely to be unable to pay its obligations or meet the demands of its creditors in the normal course of busi- ness. (G) Losses The regulated entity has incurred or is likely to incur losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the regulated en- tity to become adequately capitalized (as de- fined in section 4614(a)(1) of this title). (H) Violations of law Any violation of any law or regulation, or any unsafe or unsound practice or condition that is likely to— (i) cause insolvency or substantial dis- sipation of assets or earnings; or