---
kind: "section"
citation: "12 C.F.R. § 702.204"
title: "12"
number: "702.204"
heading: "Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions."
url: "https://uscodex.org/cfr/12/702.204"
---

# §702.204. Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions.

- (a) **Mandatory supervisory actions by new credit union.** Beginning on the date of classification as moderately capitalized, marginally capitalized or minimally capitalized (including by reclassification under [§ 702.202(d)](/cfr/12/702.202.md?p=d)), a new credit union must—
  - (1) **Earnings retention.** Increase the dollar amount of its net worth by the amount reflected in its approved initial or revised business plan;
  - (2) **Submit revised business plan.** Submit a revised business plan within the time provided by [§ 702.206](/cfr/12/702.206.md) if the credit union either:
    - (i) Has not increased its net worth ratio consistent with its then-present approved business plan;
    - (ii) Has no then-present approved business plan; or
    - (iii) Has failed to comply with [paragraph (a)(3)](#a-3) of this section; and
  - (3) **Restrict member business loans.** Not increase the total dollar amount of member business loans (defined as loans outstanding and unused commitments to lend) as of the preceding quarter-end unless it is granted an exception under [12 U.S.C. 1757a(b)](/usc/12/1757a.md?p=b).
- (b) **Discretionary supervisory actions by NCUA.** Subject to the applicable procedures set forth in [subpart L of part 747](/cfr/12/part747-subpartL.md) of this chapter for issuing, reviewing and enforcing directives, the NCUA Board may, by directive, take one or more of the actions prescribed in [§ 702.109(b)](/cfr/12/702.109.md?p=b) if the credit union's net worth ratio has not increased consistent with its then-present business plan, or the credit union has failed to undertake any mandatory supervisory action prescribed in [paragraph (a)](#a) of this section.
- (c) **Discretionary conservatorship or liquidation.** Notwithstanding any other actions required or permitted to be taken under this section, the NCUA Board may place a new credit union which is moderately capitalized, marginally capitalized or minimally capitalized (including by reclassification under [§ 702.202(d)](/cfr/12/702.202.md?p=d)) into conservatorship pursuant to [12 U.S.C. 1786(h)(1)(F)](/usc/12/1786.md?p=h-1-F), or into liquidation pursuant to [12 U.S.C. 1787(a)(3)(A)(i)](/usc/12/1787.md?p=a-3-A-i), provided that the credit union has no reasonable prospect of becoming adequately capitalized.

## Notes

### Source

Source: 80 FR 66706, Oct. 29, 2015, unless otherwise noted.

### Authority

Authority: 12 U.S.C. 1757(9), 1766(a), 1784(a), 1786(e), 1790d.

### Source

Source: 65 FR 8584, Feb. 18, 2000, unless otherwise noted.