[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR225.83]

[Page 135-136]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (REGULATION Y)--Table of Contents
 
                 Subpart I--Financial Holding Companies
 
Sec. 225.83  What are the consequences of failing to continue to meet applicable capital and management requirements?

    (a) Notice by the Board. If the Board finds that a financial holding 
company controls any depository institution that is not well capitalized 
or well managed, the Board will notify the company in writing that it is 
not in compliance with the applicable requirement(s) for a financial 
holding company and identify the area(s) of noncompliance. The Board may 
provide this notice at any time before or after receiving notice from 
the financial holding company under paragraph (b) of this section.
    (b) Notification by a financial holding company required--(1) Notice 
to Board. A financial holding company must notify the Board in writing 
within 15 calendar days of becoming aware that any depository 
institution controlled by the company has ceased to be well capitalized 
or well managed. This notification must identify the depository 
institution involved and the area(s) of noncompliance.
    (2) Triggering events for notice to the Board--(i) Well capitalized. 
A company becomes aware that a depository institution it controls is no 
longer well capitalized upon the occurrence of any material event that 
would change the category assigned to the institution for purposes of 
section 38 of the Federal Deposit Insurance Act (12 U.S.C. 1831o). See 
12 CFR 6.3(b)-(c), 208.42(b)-(c), and 325.102(b)-(c).
    (ii) Well managed. A company becomes aware that a depository 
institution it controls is no longer well managed at the time the 
depository institution receives written notice from the appropriate 
Federal or state banking agency that either its composite rating or its 
rating for management is not at least satisfactory.
    (c) Execution of agreement acceptable to the Board--(1) Agreement 
required; time period. Within 45 days after receiving a notice from the 
Board under paragraph (a) of this section, the company must execute an 
agreement acceptable to the Board to comply with all applicable capital 
and management requirements.

[[Page 136]]

    (2) Extension of time for executing agreement. Upon request by a 
company, the Board may extend the 45-day period under paragraph (c)(1) 
of this section if the Board determines that granting additional time is 
appropriate under the circumstances. A request by a company for 
additional time must include an explanation of why an extension is 
necessary.
    (3) Agreement requirements. An agreement required by paragraph 
(c)(1) of this section to correct a capital or management deficiency 
must:
    (i) Explain the specific actions that the company will take to 
correct all areas of noncompliance;
    (ii) Provide a schedule within which each action will be taken;
    (iii) Provide any other information that the Board may require; and
    (iv) Be acceptable to the Board.
    (d) Limitations during period of noncompliance--Until the Board 
determines that a company has corrected the conditions described in a 
notice under paragraph (a) of this section:
    (1) The Board may impose any limitations or conditions on the 
conduct or activities of the company or any of its affiliates as the 
Board finds to be appropriate and consistent with the purposes of the 
BHC Act; and
    (2) The company and its affiliates may not commence any additional 
activity or acquire control or shares of any company under section 4(k) 
of the BHC Act without prior approval from the Board.
    (e) Consequences of failure to correct conditions within 180 days--
(1) Divestiture of depository institutions. If a company does not 
correct the conditions described in a notice under paragraph (a) of this 
section within 180 days of receipt of the notice or such additional time 
as the Board may permit, the Board may order the company to divest 
ownership or control of any depository institution owned or controlled 
by the company. Such divestiture must be done in accordance with the 
terms and conditions established by the Board.
    (2) Alternative method of complying with a divestiture order. A 
company may comply with an order issued under paragraph (e)(1) of this 
section by ceasing to engage (both directly and through any subsidiary 
that is not a depository institution or a subsidiary of a depository 
institution) in any activity that may be conducted only under section 
4(k), (n), or (o) of the BHC Act (12 U.S.C. 1843(k), (n), or (o)). The 
termination of activities must be completed within the time period 
referred to in paragraph (e)(1) of this section and in accordance with 
the terms and conditions acceptable to the Board.
    (f) Consultation with other agencies. In taking any action under 
this section, the Board will consult with the relevant Federal and state 
regulatory authorities.