12 U.S.C. § 4616 — Supervisory actions applicable to significantly undercapitalized regulated entities

(a) Mandatory actions. (1) A significantly undercapitalized entity must timely submit a section 4622-compliant capital-restoration plan and carry it out after approval. (2)(A) It may not make a distribution that would make it critically undercapitalized, and may not make another distribution without the Director’s approval. (B) Approval is allowed only if the distribution will promptly improve ability to meet risk-based and minimum capital levels, contribute to long-term financial safety and soundness, or otherwise serve the public interest.

(b) Specific actions. In addition to other actions, the Director^* must at any time take one or more of these actions: (1) limit increases in obligations or order reductions, including for off-balance-sheet obligations; (2) limit or prohibit asset growth or require asset contraction; (3) require new capital in the form and amount the Director sets; (4) require ending, reducing, or changing an activity creating excessive risk; (5) improve management by (A) ordering a new board^* election, (B) requiring dismissal of a director or executive officer^* who held office more than 180 days immediately before the entity became undercapitalized (not a removal under section 4636a), or (C) requiring qualified executive officers, subject to Director approval if specified; (6) the Director may reclassify the entity as critically undercapitalized, subject to section 4617, if (A) a substantially compliant plan is not timely submitted or approved, or (B) the entity fails in good faith to make reasonable efforts to comply with the approved plan and schedule; or (7) require another action the Director finds better serves this section than the listed actions.

(c) Without the Director’s prior written approval, an entity classified under section 4614 as significantly undercapitalized may not (1) pay an executive officer a bonus or (2) pay an executive officer above that officer’s average nonbonus, non-stock-option, non-profit-sharing compensation^* rate during the 12 calendar months before the month in which the entity became significantly undercapitalized. This section does not define the quoted technical terms.