12 U.S.C. § 4614 — Capital classifications

(a) Enterprises. (1) Adequately capitalized means total capital^* at least the section 4611 risk-based level and core capital^* at least the section 4612 minimum level. (2) Undercapitalized means (A) total capital below the risk-based level while core capital is at least the minimum level, or (B) classification under (b)(1). (3) Significantly undercapitalized means (A) total capital below the risk-based level, core capital below the minimum level, and core capital at least the section 4613 critical level, or (B) classification under (b)(2) or section 4615(b). (4) Critically undercapitalized means (A) total capital below the risk-based level and core capital below the critical level, or (B) classification under (b)(3) or section 4616(b)(5).

(b) Federal Home Loan Banks. (1) By regulation the Director^* must (A) establish the paragraph (2) classifications, (B) establish criteria based on capital amounts and types and the banks’ risk-based, minimum, and critical levels, considering enterprise^* classifications with appropriate operational modifications, and (C) classify the Banks. (2) The classifications are (A) adequately capitalized, (B) undercapitalized, (C) significantly undercapitalized, and (D) critically undercapitalized.

(c) Discretionary classification. (1) The Director may reclassify under (2) if (A) written findings show conduct could rapidly deplete core or total capital, collateral value significantly decreased, or mortgaged property value significantly decreased; (B) after notice and hearing the entity is unsafe or unsound; or (C) under section 4631(b) it is engaging in an unsafe or unsound practice. (2) In addition to any other action authorized under this chapter, including reclassification for any reason not specified in this subsection, if the Director takes an action described in paragraph (1), the Director may classify an otherwise adequately capitalized entity as undercapitalized, an otherwise undercapitalized entity as significantly undercapitalized, or an otherwise significantly undercapitalized entity as critically undercapitalized.

(d) The Director must determine classifications at least quarterly and as appropriate under (c).

(e) (1) An entity may not make a capital distribution^* if it would thereby become undercapitalized. (2) Despite paragraph (1), the Director may permit an entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if (A) tied to issuing additional shares or obligations in at least an equivalent amount and (B) it reduces financial obligations or improves financial condition.

(f) From October 28, 1992, until section 4615 becomes effective, an enterprise is adequately capitalized if core capital is at least its section 4612 minimum level. This section does not define the quoted capital, entity, condition, practice, or distribution terms.