Capital Plan time frame

Someone asked about the time frame for the capital plan.  It always seems to take longer than one would suspect, and I don’t know if  this is for Citizens First National Bank or Princeton National Bancorp, Inc., or both. This is from the FDIC site and can be found in full by clicking here.

(2)  CAPITAL RESTORATION PLAN REQUIRED.–

(A)  IN GENERAL.–Any undercapitalized insured depository institution shall submit an acceptable capital restoration plan to the appropriate Federal banking agency within the time allowed by the agency under subparagraph (D).

(B)  CONTENTS OF PLAN.–The capital restoration plan shall–

(i)  specify–

(I)  the steps the insured depository institution will take to become adequately capitalized;

(II)  the levels of capital to be attained during each year in which the plan will be in effect;

(III)  how the institution will comply with the restrictions or requirements then in effect under this section; and

(IV)  the types and levels of activities in which the institution will engage; and

(ii)  contain such other information as the appropriate Federal banking agency may require.

(C)  CRITERIA FOR ACCEPTING PLAN.–The appropriate Federal banking agency shall not accept a capital restoration plan unless the agency determines that–

(i)  the plan–

(I)  complies with subparagraph (B);

(II)  is based on realistic assumptions, and is likely to succeed in restoring the institution’s capital; and

(III)  would not appreciably increase the risk (including credit risk, interest-rate risk, and other types of risk) to which the institution is exposed; and

(ii)  if the insured depository institution is undercapitalized, each company having control of the institution has–

(I)  guaranteed that the institution will comply with the plan until the institution has been adequately capitalized on average during each of 4 consecutive calendar quarters; and

(II)  provided appropriate assurances of performance.

(D)  DEADLINES FOR SUBMISSION AND REVIEW OF PLANS.–The appropriate Federal banking agency shall by regulation establish deadlines that–

(i)  provide insured depository institutions with reasonable time to submit capital restoration plans, and generally require an institution to submit a plan not later than 45 days after the institution becomes undercapitalized;

(ii)  require the agency to act on capital restoration plans expeditiously, and generally not later than 60 days after the plan is submitted; and

(iii) require the agency to submit a copy of any plan approved by the agency to the Corporation before the end of the 45-day period beginning on the date such approval is granted.

2 comments on “Capital Plan time frame

  1. As I recall, the three alternatives that were being studied were:

    Selling more stock, presumably senior to the common.

    Selling assets, such as some bank branches or loans.

    Finding another bank to come in and prop up Citizens.

    I may not have those alternatives exactly right.

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