Prompt Corrective Action

Overview

Written directive that may be issued with or without notice requiring a depository institution to take certain actions or adhere to certain proscriptions which become more severe as the institution's capital situation worsens

In general, the early intervention by the regulators requires the banks in question to promptly improve their capital ratios

Depository institutions can seek to have the agencies modify or not issue the directive

Directives can be enforced either in Federal court or by the imposition of civil money penalties by the appropriate agency

Authorized by Section 38 of the FDIA, 12 U.S.C. 1831o, (banks and thrifts) and Section 216 of the FCUA 12 USC 1790d credit unions

Examples of PCA Directives

FDIC - Southern Pacific Bank no prior notice to bank
FDIC - Provident Bank (bank files response to notice)
FDIC - Commercial Bank and Trust Company bank does not file response to notice
FRB - Zia New Mexico Bank joint with state of New Mexico

Recent and proposed regulatory amendments

In November, 2005, the NCUA requested that Congress amend the legislation in order to make the PCA categories risk based. This would make the treatment of credit unions more closely parallel to that of FDIC insured banks

S ummary of NCUA proposal
Text of proposal as of March, 2005

PCA Regulations

OCC - 12 CFR Part 6 - Prompt Corrective Action

FRB - 12 CFR Part 208, Subpart D Reg H bases for actions

FRB - 12 CFR Part 263, Subpart H - Issuance and review
of orders pursuant to prompt corrective action
provisions of the Federal Deposit Insurance Act

FDIC - 12 CFR Part 308, Subpart Q - Prompt Corrective
Action

OTS - 12 CFR Part 565 - Prompt Corrective Action

NCUA - 12 CFR Part 702 - Prompt Corrective Action
12 CFR. Part 747, Subpart L review of PCA orders

Interpretive materials

Prompt Corrective Action Guidelines OTS

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