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U.S. Code as of:
01/19/04
Section 1831p-1. Standards for safety and soundness
(a) Operational and managerial standards
Each appropriate Federal banking agency shall, for all insured
depository institutions, prescribe -
(1) standards relating to -
(A) internal controls, information systems, and internal
audit systems, in accordance with section 1831m of this title;
(B) loan documentation;
(C) credit underwriting;
(D) interest rate exposure;
(E) asset growth; and
(F) compensation, fees, and benefits, in accordance with
subsection (c) of this section; and
(2) such other operational and managerial standards as the
agency determines to be appropriate.
(b) Asset quality, earnings, and stock valuation standards
Each appropriate Federal banking agency shall prescribe
standards, by regulation or guideline, for all insured depository
institutions relating to asset quality, earnings, and stock
valuation that the agency determines to be appropriate.
(c) Compensation standards
Each appropriate Federal banking agency shall, for all insured
depository institutions, prescribe -
(1) standards prohibiting as an unsafe and unsound practice any
employment contract, compensation or benefit agreement, fee
arrangement, perquisite, stock option plan, postemployment
benefit, or other compensatory arrangement that -
(A) would provide any executive officer, employee, director,
or principal shareholder of the institution with excessive
compensation, fees or benefits; or
(B) could lead to material financial loss to the institution;
(2) standards specifying when compensation, fees, or benefits
referred to in paragraph (1) are excessive, which shall require
the agency to determine whether the amounts are unreasonable or
disproportionate to the services actually performed by the
individual by considering -
(A) the combined value of all cash and noncash benefits
provided to the individual;
(B) the compensation history of the individual and other
individuals with comparable expertise at the institution;
(C) the financial condition of the institution;
(D) comparable compensation practices at comparable
institutions, based upon such factors as asset size, geographic
location, and the complexity of the loan portfolio or other
assets;
(E) for postemployment benefits, the projected total cost and
benefit to the institution;
(F) any connection between the individual and any fraudulent
act or omission, breach of trust or fiduciary duty, or insider
abuse with regard to the institution; and
(G) other factors that the agency determines to be relevant;
and
(3) such other standards relating to compensation, fees, and
benefits as the agency determines to be appropriate.
(d) Standards to be prescribed
(1) In general
Standards under subsections (a), (b), and (c) of this section
shall be prescribed by regulation or guideline. Such regulations
or guidelines may not prescribe standards that set a specific
level or range of compensation for directors, officers, or
employees of insured depository institutions.
(2) Applicability of other laws
Paragraph (1) shall not affect the authority of any appropriate
Federal banking agency to restrict the level of compensation,
including golden parachute payments (as defined in section
1828(k)(4) of this title), paid to any director, officer, or
employee of an insured depository institution under any other
provision of law.
(3) Senior executive officers at undercapitalized institutions
Paragraph (1) shall not affect the authority of any appropriate
Federal banking agency to restrict compensation paid to any
senior executive officer of an undercapitalized insured
depository institution pursuant to section 1831o of this title.
(4) Safety and soundness or enforcement actions
Paragraph (1) shall not be construed as affecting the authority
of any appropriate Federal banking agency under any provision of
this chapter other than this section, or under any other
provision of law, to prescribe a specific level or range of
compensation for any director, officer, or employee of an insured
depository institution -
(A) to preserve the safety and soundness of the institution;
or
(B) in connection with any action under section 1818 of this
title or any order issued by the agency, any agreement between
the agency and the institution, or any condition imposed by the
agency in connection with the agency's approval of an
application or other request by the institution, which is
enforceable under section 1818 of this title.
(e) Failure to meet standards
(1) Plan required
(A) In general
If the appropriate Federal banking agency determines that an
insured depository institution fails to meet any standard
prescribed under subsection (a) or (b) of this section -
(i) if such standard is prescribed by regulation of the
agency, the agency shall require the institution to submit an
acceptable plan to the agency within the time allowed by the
agency under subparagraph (C); and
(ii) if such standard is prescribed by guideline, the
agency may require the institution to submit a plan described
in clause (i).
(B) Contents of plan
Any plan required under subparagraph (A) shall specify the
steps that the institution will take to correct the deficiency.
If the institution is undercapitalized, the plan may be part of
a capital restoration plan.
(C) Deadlines for submission and review of plans
The appropriate Federal banking agency shall by regulation
establish deadlines that -
(i) provide institutions and companies with reasonable time
to submit plans required under subparagraph (A), and
generally require the institution to submit a plan not later
than 30 days after the agency determines that the institution
fails to meet any standard prescribed under subsection (a),
(b), or (c) of this section; and
(ii) require the agency to act on plans expeditiously, and
generally not later than 30 days after the plan is submitted.
(2) Order required if institution fails to submit or implement
plan
If an insured depository institution fails to submit an
acceptable plan within the time allowed under paragraph (1)(C),
or fails in any material respect to implement a plan accepted by
the appropriate Federal banking agency, the agency, by order -
(A) shall require the institution to correct the deficiency;
and
(B) may do 1 or more of the following until the deficiency
has been corrected:
(i) Prohibit the institution from permitting its average
total assets during any calendar quarter to exceed its
average total assets during the preceding calendar quarter,
or restrict the rate at which the average total assets of the
institution may increase from one calendar quarter to
another.
(ii) Require the institution to increase its ratio of
tangible equity to assets.
(iii) Take the action described in section 1831o(f)(2)(C)
of this title.
(iv) Require the institution to take any other action that
the agency determines will better carry out the purpose of
section 1831o of this title than any of the actions described
in this subparagraph.
(3) Restrictions mandatory for certain institutions
In complying with paragraph (2), the appropriate Federal
banking agency shall take 1 or more of the actions described in
clauses (i) through (iii) of paragraph (2)(B) if -
(A) the agency determines that the insured depository
institution fails to meet any standard prescribed under
subsection (a)(1) or (b)(1) of this section;
(B) the institution has not corrected the deficiency; and
(C) either -
(i) during the 24-month period before the date on which the
institution first failed to meet the standard -
(I) the institution commenced operations; or
(II) 1 or more persons acquired control of the
institution; or
(ii) during the 18-month period before the date on which
the institution first failed to meet the standard, the
institution underwent extraordinary growth, as defined by the
agency.
(f) Definitions
For purposes of this section, the terms "average" and "capital
restoration plan" have the same meanings as in section 1831o of
this title.
(g) Other authority not affected
The authority granted by this section is in addition to any other
authority of the Federal banking agencies.
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