§ 1790d. Prompt corrective action
(a)
Resolving problems to protect Fund
(b)
Regulations required
(1)
Insured credit unions
(A)
In general
The Board shall, by regulation, prescribe a system of prompt corrective action for insured credit unions that is—
(2)
New credit unions
(A)
In general
In addition to regulations under paragraph (1), the Board shall, by regulation, prescribe a system of prompt corrective action that shall apply to new credit unions in lieu of this section and the regulations prescribed under paragraph (1).
(B)
Criteria for alternative system
The Board shall design the system prescribed under subparagraph (A)—
(ii)
to recognize that credit unions (as cooperatives that do not issue capital stock) initially have no net worth, and give new credit unions reasonable time to accumulate net worth;
(iii)
to create adequate incentives for new credit unions to become adequately capitalized by the time that they either—
(c)
Net worth categories
(1)
In general
For purposes of this section the following definitions shall apply:
(2)
Adjusting net worth levels
(A)
In general
If, for purposes of section
1831o
(c) of this title, the Federal banking agencies increase or decrease the required minimum level for the leverage limit (as those terms are used in section
1831o of this title), the Board may, by regulation, and subject to subparagraph (B) of this paragraph, correspondingly increase or decrease 1 or more of the net worth ratios specified in subparagraphs (A) through (D) of paragraph (1) of this subsection in an amount that is equal to not more than the difference between the required minimum level most recently established by the Federal banking agencies and 4 percent of total assets (with respect to institutions regulated by those agencies).
(B)
Determinations required
The Board may increase or decrease net worth ratios under subparagraph (A) only if the Board—
(d)
Risk-based net worth requirement for complex credit unions
(e)
Earnings-retention requirement applicable to credit unions that are not well capitalized
(1)
In general
An insured credit union that is not well capitalized shall annually set aside as net worth an amount equal to not less than 0.4 percent of its total assets.
(f)
Net worth restoration plan required
(1)
In general
Each insured credit union that is undercapitalized shall submit an acceptable net worth restoration plan to the Board within the time allowed under this subsection.
(2)
Assistance to small credit unions
The Board (or the staff of the Board) shall, upon timely request by an insured credit union with total assets of less than $10,000,000, and subject to such regulations or guidelines as the Board may prescribe, assist that credit union in preparing a net worth restoration plan.
(3)
Deadlines for submission and review of plans
The Board shall, by regulation, establish deadlines for submission of net worth restoration plans under this subsection that—
(4)
Failure to submit acceptable plan within time allowed
(A)
Failure to submit any plan
If an insured credit union fails to submit a net worth restoration plan within the time allowed under paragraph (3), the Board shall—
(g)
Restrictions on undercapitalized credit unions
(1)
Restriction on asset growth
An insured credit union that is undercapitalized shall not generally permit its average total assets to increase, unless—
(2)
Restriction on member business loans
Notwithstanding section
1757a
(a) of this title, an insured credit union that is undercapitalized may not make any increase in the total amount of member business loans (as defined in section
1757a
(c) of this title) outstanding at that credit union at any one time, until such time as the credit union becomes adequately capitalized.
(h)
More stringent treatment based on other supervisory criteria
With respect to the exercise of authority by the Board under regulations comparable to section
1831o
(g) of this title—
(i)
Action required regarding critically undercapitalized credit unions
(1)
In general
The Board shall, not later than 90 days after the date on which an insured credit union becomes critically undercapitalized—
(2)
Periodic redeterminations required
Any determination by the Board under paragraph (1)(B) to take any action with respect to an insured credit union in lieu of appointing a conservator or liquidating agent shall cease to be effective not later than the end of the 180-day period beginning on the date on which the determination is made, and a conservator or liquidating agent shall be appointed for that credit union under paragraph (1)(A), unless the Board makes a new determination under paragraph (1)(B) before the end of the effective period of the prior determination.
(3)
Appointment of liquidating agent required if other action fails to restore net worth
(A)
In general
Notwithstanding paragraphs (1) and (2), the Board shall appoint a liquidating agent for an insured credit union if the credit union is critically undercapitalized on average during the calendar quarter beginning 18 months after the date on which the credit union became critically undercapitalized.
(B)
Exception
Notwithstanding subparagraph (A), the Board may continue to take such other action as the Board determines to be appropriate in lieu of appointment of a liquidating agent if—
(j)
Review required when Fund incurs material loss
For purposes of determining whether the Fund has incurred a material loss with respect to an insured credit union (such that the inspector general of the Board must make a report), a loss is material if it exceeds the sum of—
(2)
an amount equal to 10 percent of the total assets of the credit union at the time at which the Board initiated assistance under section
1788 of this title or was appointed liquidating agent.
(k)
Appeals process
Material supervisory determinations, including decisions to require prompt corrective action, made pursuant to this section by Administration officials other than the Board may be appealed to the Board pursuant to the independent appellate process required by section
4806 of this title (or, if the Board so specifies, pursuant to separate procedures prescribed by regulation).
(l)
Consultation and cooperation with State credit union supervisors
(1)
In general
In implementing this section, the Board shall consult and seek to work cooperatively with State officials having jurisdiction over State-chartered insured credit unions.
(2)
Evaluating net worth restoration plan
In evaluating any net worth restoration plan submitted by a State-chartered insured credit union, the Board shall seek the views of the State official having jurisdiction over the credit union.
(3)
Deciding whether to appoint conservator or liquidating agent
With respect to any decision by the Board on whether to appoint a conservator or liquidating agent for a State-chartered insured credit union—
(B)
the Board shall, upon timely request of an official referred to in subparagraph (A), promptly provide the official with—
(C)
if the official referred to in subparagraph (A) makes a timely written response that disagrees with the proposed action and gives reasons for that disagreement, the Board shall not appoint a conservator or liquidating agent for the credit union, unless the Board, after considering the views of the official, has determined that—
(n)
Other authority not affected
This section does not limit any authority of the Board or a State to take action in addition to (but not in derogation of) any action that is required under this section.
(o)
Definitions
For purposes of this section the following definitions shall apply:
(1)
Federal banking agency
The term “Federal banking agency” has the same meaning as in section
1813 of this title.
(2)
Net worth
The term “net worth”—
(A)
with respect to any insured credit union, means the retained earnings balance of the credit union, as determined under generally accepted accounting principles, together with any amounts that were previously retained earnings of any other credit union with which the credit union has combined; and