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Each depositor insured to at least $250,000 per insured bank

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2000 - Rules and Regulations


Subpart Q—Issuance and Review of Orders Pursuant to the Prompt Corrective Action Provisions of the Federal Deposit Insurance Act

§ 308.200  Scope.

The rules and procedures set forth in this subpart apply to banks, insured branches of foreign banks and senior executive officers and directors of banks that are subject to the provisions of section 38 of the Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and subpart B of part 325 of this chapter or subpart H of part 324 of this chapter, as applicable.

[Codified to 12 C.F.R. § 308.200]

[Section 308.200 added at 57 Fed. Reg. 44897, September 29, 1992, effective December 19, 1992; amended at 57 Fed. Reg. 48426, October 23, 1992; 78 Fed. Reg. 55340, September 10, 2013, effective date: January 1, 2014. Mandatory compliance date: January 1, 2014 for advanced approaches FDIC supervised institutions; January 1, 2015 for all other FDIC-supervised institutions]

§ 308.201  Directives to take prompt corrective action.

(a)  Notice of intent to issue directive.--(1)  In general. The FDIC shall provide an undercapitalized, significantly undercapitalized, or critically undercapitalized bank prior written notice of the FDIC's intention to issue a directive requiring such bank to take actions or to follow proscriptions described in section 38 that are within the FDIC's discretion to require or impose under section 38 of the FDI Act, including sections 38(e)(5), (f)(2), (f)(3), or (f)(5). The bank shall have such time to respond to a proposed directive as provided by the FDIC under paragraph (c) of this section.

(2)  Immediate issuance of final directive. If the FDIC finds it necessary in order to carry out the purposes of section 38 of the FDI Act, the FDIC may without providing the notice prescribed in paragraph (a)(1) of this section, issue a directive requiring a bank immediately to take actions or to follow proscriptions described in section 38 that are within the FDIC's discretion to require or impose under section 38 of the FDI Act, including section 38(e)(5), (f)(2), (f)(3), or (f)(5). A bank that is subject to such an immediately effective directive may submit a written appeal of the directive to the FDIC. Such an appeal must be received by the FDIC within 14 calendar days of the issuance of the directive, unless the FDIC permits a longer period. The FDIC shall consider any such appeal, if filed in a timely matter, within 60 days of receiving the appeal. During such period of review, the directive shall remain in effect unless the FDIC, in its sole discretion, stays the effectiveness of the directive.

(b)  Contents of notice. A notice of intention to issue a directive shall include:

(1)  A statement of the bank's capital measures and capital levels;

(2)  A description of the restrictions, prohibitions or affirmative actions that the FDIC proposes to impose or require;

(3)  The proposed date when such restrictions or prohibitions would be effective or the proposed date for completion of such affirmative actions; and

(4)  The date by which the bank subject to the directive may file with the FDIC a written response to the notice.

(c)  Response to notice.--(1)  Time for response. A bank may file a written response to a notice of intent to issue a directive within the time period set by the FDIC. The date shall be at least 14 calendar days from the date of the notice unless the FDIC determines that a shorter period is appropriate in light of the financial condition of the bank or other relevant circumstances.

(2)  Content of response. The response should include:

(i)  An explanation why the action proposed by the FDIC is not an appropriate exercise of discretion under section 38;

(ii)  Any recommended modification of the proposed directive; and

(iii)  Any other relevant information, mitigating circumstances, documentation, or other evidence in support of the position of the bank regarding the proposed directive.

(d)  FDIC consideration of response. After considering the response, the FDIC may:

(1)  Issue the directive as proposed or in modified form;

(2)  Determine not to issue the directive and so notify the bank; or

(3)  Seek additional information or clarification of the response from the bank or any other relevant source.

(e)  Failure to file response. Failure by a bank to file with the FDIC, within the specified time period, a written response to a proposed directive shall constitute a waiver of the opportunity to respond and shall constitute consent to the issuance of the directive.

(f)  Request for modification or rescission of directive. Any bank that is subject to a directive under this subpart may, upon a change in circumstances, request in writing that the FDIC reconsider the terms of the directive, and may propose that the directive be rescinded or modified. Unless otherwise ordered by the FDIC, the directive shall continue in place while such request is pending before the FDIC.

[Codified to 12 C.F.R. § 308.201]

[Section 308.201 added at 57 Fed. Reg. 44897, September 29, 1992, effective December 19, 1992]

§ 308.202  Procedures for reclassifying a bank based on criteria other than capital.

(a)  Reclassification based on unsafe or unsound condition or practice.--(1)  Issuance of notice of proposed reclassification.--(i)  Grounds for reclassification. (A)  Pursuant to § 325.103(d) of this chapter or § 324.403(d) of this chapter, as applicable, the FDIC may reclassify a well-capitalized bank as adequately capitalized or subject an adequately capitalized or undercapitalized institution to the supervisory actions applicable to the next lower capital category if:

(1)  The FDIC determines that the bank is in unsafe or unsound condition; or

(2)  The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C. 1818(b)(8)), deems the bank to be engaged in an unsafe or unsound practice and not to have corrected the deficiency.

(B)  Any action pursuant to this paragraph (a)(1)(i) shall hereinafter be referred to as "reclassification."

(ii)  Prior notice to institution. Prior to taking action pursuant to § 325.103(d) of this chapter or § 324.403(d) of this chapter, as applicable, the FDIC shall issue and serve on the bank a written notice of the FDIC's intention to reclassify it.

(2)  Contents of notice. A notice of intention to reclassify a bank based on unsafe or unsound condition shall include:

(i)  A statement of the bank's capital measures and capital levels and the category to which the bank would be reclassified;

(ii)  The reasons for reclassification of the bank;

(iii)  The date by which the bank subject to the notice of reclassification may file with the FDIC a written appeal of the proposed reclassification and a request for a hearing, which shall be at least 14 calendar days from the date of service of the notice unless the FDIC determines that a shorter period is appropriate in light of the financial condition of the bank or other relevant circumstances.

(3)  Response to notice of proposed reclassification. A bank may file a written response to a notice of proposed reclassification within the time period set by the FDIC. The response should include:

(i)  An explanation of why the bank is not in an unsafe or unsound condition or otherwise should not be reclassified; and

(ii)  Any other relevant information, mitigating circumstances, documentation, or other evidence in support of the position of the bank regarding the reclassification.

(4)  Failure to file response. Failure by a bank to file, within the specified time period, a written response with the FDIC to a notice of proposed reclassification shall constitute a waiver of the opportunity to respond and shall constitute consent to the reclassification.

(5)  Request for hearing and presentation of oral testimony or witnesses. The response may include a request for an informal hearing before the FDIC under this section. If the bank desires to present oral testimony or witnesses at the hearing, the bank shall include a request to do so with the request for an informal hearing. A request to present oral testimony or witnesses shall specify the names of the witnesses and the general nature of their expected testimony. Failure to request a hearing shall constitute a waiver of any right to a hearing, and failure to request the opportunity to present oral testimony or witnesses shall constitute a waiver of any right to present oral testimony or witnesses.

(6)  Order for informal hearing. Upon receipt of a timely written request that includes a request for a hearing, the FDIC shall issue an order directing an informal hearing to commence no later than 30 days after receipt of the request, unless the bank requests a later date. The hearing shall be held in Washington, D.C. or at such other place as may be designated by the FDIC, before a presiding officer(s) designated by the FDIC to conduct the hearing.

(7)  Hearing procedures. (i)  The bank shall have the right to introduce relevant written materials and to present oral argument at the hearing. The bank may introduce oral testimony and present witnesses only if expressly authorized by the FDIC or the presiding officer(s). Neither the provisions of the Administrative Procedure Act (5 U.S.C. 554--557) governing adjudications required by statute to be determined on the record nor the Uniform Rules of Practice and Procedure in this part apply to an informal hearing under this section unless the FDIC orders that such procedure shall apply.

(ii)  The informal hearing shall be recorded, and a transcript shall be furnished to the bank upon request and payment of the cost thereof. Witnesses need not be sworn, unless specifically requested by a party or the presiding officer(s). The presiding officer(s) may ask questions of any witness.

(iii)  The presiding officer(s) may order that the hearing be continued for a reasonable period (normally five business days) following completion of oral testimony or argument to allow additional written submissions to the hearing record.

(8)  Recommendation of presiding officers. Within 20 calendar days following the date the hearing and the record on the proceeding are closed, the presiding officer(s) shall make a recommendation to the FDIC on the reclassification.

(9)  Time for decision. Not later than 60 calendar days after the date the record is closed or the date of the response in a case where no hearing was requested, the FDIC will decide whether to reclassify the bank and notify the bank of the FDIC's decision.

(b)  Request for rescission of reclassification. Any bank that has been reclassified under this section, may, upon a change in circumstances, request in writing that the FDIC reconsider the reclassification, and may propose that the reclassification be rescinded and that any directives issued in connection with the reclassification be modified, rescinded, or removed. Unless otherwise ordered by the FDIC, the bank shall remain subject to the reclassification and to any directive issued in connection with that reclassification while such request is pending before the FDIC.

[Codified to 12 C.F.R. § 308.202]

[Section 308.202 added at 57 Fed. Reg. 44897, September 29, 1992, effective December 19, 1992; amended at 78 Fed. Reg. 55340, September 10, 2013, effective date: January 1, 2014. Mandatory compliance date: January 1, 2014 for advanced approaches FDIC-supervised institutions; January 1, 2015 for all other FDIC-supervised institutions]

§ 308.203  Order to dismiss a director or senior executive officer.

(a)  Service of notice. When the FDIC issues and serves a directive on a bank pursuant to § 308.201 of this part requiring the bank to dismiss from office any director or senior executive officer under § 38(f)(2)(F)(ii) of the FDI Act, the FDIC shall also serve a copy of the directive, or the relevant portions of the directive where appropriate, upon the person to be dismissed.

(b)  Response to directive.--(1)  Request for reinstatement. A director or senior executive officer who has been served with a directive under paragraph (a) of this section (Respondent) may file a written request for reinstatement. The request for reinstatement shall be filed within 10 calendar days of the receipt of the directive by the Respondent unless further time is allowed by the FDIC at the request of the Respondent.

(2)  Contents of request; informal hearing. The request for reinstatement shall include reasons why the Respondent should be reinstated, and may include a request for an informal hearing before the FDIC under this section. If the Respondent desires to present oral testimony or witnesses at the hearing, the Respondent shall include a request to do so with the request for an informal hearing. The request to present oral testimony or witnesses shall specify the names of the witnesses and the general nature of their expected testimony. Failure to request a hearing shall constitute a waiver of any right to a hearing and failure to request the opportunity to present oral testimony or witnesses shall constitute a waiver of any right or opportunity to present oral testimony or witnesses.

(3)  Effective date. Unless otherwise ordered by the FDIC, the dismissal shall remain in effect while a request for reinstatement is pending.

(c)  Order for informal hearing. Upon receipt of a timely written request from a Respondent for an informal hearing on the portion of a directive requiring a bank to dismiss from office any director or senior executive officer, the FDIC shall issue an order directing an informal hearing to commence no later than 30 days after receipt of the request, unless the Respondent requests a later date. The hearing shall be held in Washington, D.C., or at such other place as may be designated by the FDIC, before a presiding officer(s) designated by the FDIC to conduct the hearing.

(d)  Hearing procedures.--(1)  A Respondent may appear at the hearing personally or through counsel. A Respondent shall have the right to introduce relevant written materials and to present oral argument. A Respondent may introduce oral testimony and present witnesses only if expressly authorized by the FDIC or the presiding officer(s). Neither the provisions of the Administrative Procedure Act governing adjudications required by statute to be determined on the record nor the Uniform Rules of Practice and Procedure in this part apply to an informal hearing under this section unless the FDIC orders that such procedures shall apply.

(2)  The informal hearing shall be recorded, and a transcript shall be furnished to the Respondent upon request and payment of the cost thereof. Witnesses need not be sworn, unless specifically requested by a party or the presiding officer(s). The presiding officer(s) may ask questions of any witness.

(3)  The presiding officer(s) may order that the hearing be continued for a reasonable period (normally five business days) following completion of oral testimony or argument to allow additional written submissions to the hearing record.

(e)  Standard for review. A Respondent shall bear the burden of demonstrating that his or her continued employment by or service with the bank would materially strengthen the bank's ability:

(1)  To become adequately capitalized, to the extent that the directive was issued as a result of the bank's capital level or failure to submit or implement a capital restoration plan; and

(2)  To correct the unsafe or unsound condition or unsafe or unsound practice, to the extent that the directive was issued as a result of classification of the bank based on supervisory criteria other than capital, pursuant to section 38(g) of the FDI Act.

(f)  Recommendation of presiding officers. Within 20 calendar days following the date the hearing and the record on the proceeding are closed, the presiding officer(s) shall make a recommendation to the FDIC concerning the Respondent's request for reinstatement with the bank.

(g)  Time for decision. Not later than 60 calendar days after the date the record is closed or the date of the response in a case where no hearing was requested, the FDIC shall grant or deny the request for reinstatement and notify the Respondent of the FDIC's decision. If the FDIC denies the request for reinstatement, the FDIC shall set forth in the notification the reasons for the FDIC's action.

[Codified to 12 C.F.R. § 308.203]

[Section 308.203 added at 57 Fed. Reg. 44897, September 29, 1992; effective December 19, 1992]

§ 308.204  Enforcement of directives.

(a)  Judicial remedies. Whenever a bank fails to comply with a directive issued under section 38, the FDIC may seek enforcement of the directive in the appropriate United States district court pursuant to section 8(i)(1) of the FDI Act (12 U.S.C. 1818(i)(1)).

(b)  Administrative remedies.--(1)  Failure to comply with directive. Pursuant to section 8(i)(2)(A) of the FDI Act, the FDIC may assess a civil money penalty against any bank that violates or otherwise fails to comply with any final directive issued under section 38 and against any institution-affiliated party who participates in such violation or noncompliance.

(2)  Failure to implement capital restoration plan. The failure of a bank to implement a capital restoration plan required under section 38, or subpart B of part 325 of this chapter or subpart H of part 324 of this chapter, as applicable, or the failure of a company having control of a bank to fulfill a guarantee of a capital restoration plan made pursuant to section 38(e)(2) of the FDI Act shall subject the bank to the assessment of civil money penalties pursuant to section 8(i)(2)(A) of the FDI Act.

(c)  Other enforcement action. In addition to the actions described in paragraphs (a) and (b) of this section, the FDIC may seek enforcement of the provisions of section 38 or subpart B of part 325 of this chapter or subpart H of part 324 of this chapter, as applicable, through any other judicial or administrative proceeding authorized by law.

[Codified to 12 C.F.R. § 308.204]

[Section 308.204 added at 57 Fed. 44897, September 29, 1992, effective December 19, 1992; amended at 57 Fed. Reg. 48426, October 23, 1992; 78 Fed. Reg. 55340, September 10, 2013, effective date: January 1, 2014. Mandatory compliance date: January 1, 2014 for advanced approaches FDIC supervised institutions; January 1, 2015 for all other FDIC-supervised institutions.]


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