Guidelines and rescissions for “prompt corrective action” (PCA) for national banks and federal savings associations have been updated by the institutions’ federal regulator in a bulletin issued Friday – but it does not reflect changes for qualifying community banks made under recent regulatory relief law.
The bulletin (2018-33), issued by the Office of the Comptroller of the Currency (OCC), notes that this year’s Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) requires the agency – along with the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) – “to establish a simplified leverage ratio capital framework for qualifying community banks.”
But the bulletin also notes that the framework – which would specify a minimum leverage ratio that would deem a qualifying bank to be well-capitalized for PCA purposes – “as of the publication of this OCC bulletin” was not yet established.
The bulletin, it also states, rescinds OCC Banking Circular 268, “Prompt Corrective Action,” and OCC Bulletin 1994-43, “Prompt Corrective Action – Capital Restoration Plans Guidelines: Guidelines.”
PCA capital category ratios for national banks and FSAs outlined in the bulletin are:
| PCA capital category | Threshold ratios | |||
| Total RBC ratio | Tier 1 RBC rati | CET1 RBC ratio | Tier 1 leverage ratio | |
| Well capitalized | 10% | 8% | 6.5% | 5% |
| Adequately capitalized | 8% | 6% | 4.5% | 4% |
| Undercapitalized | < 8% | < 6% | < 4.5% | < 4% |
| Significantly undercapitalized | < 6% | < 4% | < 3% | < 3% |
| Critically undercapitalized | Tangible equity to total assets ≤ 2%
Tangible equity means the amount of tier 1 capital, as calculated in accordance with 12 CFR 3, plus the amount of outstanding perpetual preferred stock (including related surplus) not included in tier 1 capital. Total assets means quarterly average total assets as reported on the bank’s call report. The OCC reserves the right to require a bank to compute and maintain its tangible equity ratio on the basis of actual, rather than average, total assets. Refer to 12 CFR 6.2. |
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