---
kind: "section"
citation: "12 U.S.C. § 4616"
title: "12"
title_heading: "Banks and Banking"
number: "4616"
heading: "Supervisory actions applicable to significantly undercapitalized regulated entities"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/4616"
units:
  - "Chapter 46 — Government Sponsored Enterprises"
  - "Subchapter II — Required Capital Levels for Regulated Entities, Special Enforcement Powers, and Reviews of Assets and Liabilities"
---

# §4616. Supervisory actions applicable to significantly undercapitalized regulated entities

- (a) **Mandatory supervisory actions—**
  - (1) **Capital restoration plan—** A [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized shall, within the time period under [section 4622(b)](/usc/12/4622.md?p=b) and (d) of this title, submit to the [Director](/usc/12/4502.md?p=9) a capital restoration plan that complies with [section 4622 of this title](/usc/12/4622.md) and carry out the plan after approval.
  - (2) **Restrictions on capital distributions—**
    - (A) **Prior approval—** A [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized may not make any [capital distribution](/usc/12/4502.md?p=5-A) that would result in the [regulated entity](/usc/12/4502.md?p=20) being reclassified as critically undercapitalized. A [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized may not make any other [capital distribution](/usc/12/4502.md?p=5-A) unless the [Director](/usc/12/4502.md?p=9) approves the distribution.
    - (B) **Standard for approval—** The [Director](/usc/12/4502.md?p=9) may approve a [capital distribution](/usc/12/4502.md?p=5-A) by a [regulated entity](/usc/12/4502.md?p=20) classified as significantly undercapitalized only if the [Director](/usc/12/4502.md?p=9) determines that the distribution (i) will enhance the ability of the [regulated entity](/usc/12/4502.md?p=20) to meet the risk-based capital level and the minimum capital level for the [regulated entity](/usc/12/4502.md?p=20) promptly, (ii) will contribute to the long-term financial safety and soundness of the [regulated entity](/usc/12/4502.md?p=20), or (iii) is otherwise in the public interest.
- (b) **Specific actions—** In addition to any other actions taken by the [Director](/usc/12/4502.md?p=9) (including actions under [subsection (a)](#a)), the [Director](/usc/12/4502.md?p=9) shall carry out this section by taking, at any time, 1 or more of the following actions with respect to a [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized:
  - (1) **Limitation on increase in obligations—** Limit any increase in, or order the reduction of, any obligations of the [regulated entity](/usc/12/4502.md?p=20), including off-balance sheet obligations.
  - (2) **Limitation on growth—** Limit or prohibit the growth of the assets of the [regulated entity](/usc/12/4502.md?p=20) or require contraction of the assets of the [regulated entity](/usc/12/4502.md?p=20).
  - (3) **Acquisition of new capital—** Require the [regulated entity](/usc/12/4502.md?p=20) to acquire new capital in a form and amount determined by the [Director](/usc/12/4502.md?p=9).
  - (4) **Restriction of activities—** Require the [regulated entity](/usc/12/4502.md?p=20) to terminate, reduce, or modify any activity that the [Director](/usc/12/4502.md?p=9) determines creates excessive risk to the [regulated entity](/usc/12/4502.md?p=20).
  - (5) **Improvement of management—** Take 1 or more of the following actions:
    - (A) **New election of board—** Order a new election for the [board](/usc/12/4502.md?p=4) of [directors](/usc/12/4502.md?p=9) of the [regulated entity](/usc/12/4502.md?p=20).
    - (B) **Dismissal of directors or executive officers—** Require the [regulated entity](/usc/12/4502.md?p=20) to dismiss from office any [director](/usc/12/4502.md?p=9) or [executive officer](/usc/12/4502.md?p=12) who had held office for more than 180 days immediately before the date on which the [regulated entity](/usc/12/4502.md?p=20) became undercapitalized. Dismissal under this subparagraph shall not be construed to be a removal pursuant to the enforcement powers of the [Director](/usc/12/4502.md?p=9) under [section 4636a of this title](/usc/12/4636a.md).
    - (C) **Employ qualified executive officers—** Require the [regulated entity](/usc/12/4502.md?p=20) to employ qualified [executive officers](/usc/12/4502.md?p=12) (who, if the [Director](/usc/12/4502.md?p=9) so specifies, shall be subject to approval by the [Director](/usc/12/4502.md?p=9)).
  - (6) **Reclassification from significantly to critically undercapitalized—** The [Director](/usc/12/4502.md?p=9) may reclassify as critically undercapitalized a [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized (and the [regulated entity](/usc/12/4502.md?p=20) shall be subject to the provisions of [section 4617 of this title](/usc/12/4617.md)) if—
    - (A) the [regulated entity](/usc/12/4502.md?p=20) does not submit a capital restoration plan that is substantially in compliance with [section 4622 of this title](/usc/12/4622.md) within the applicable period or the [Director](/usc/12/4502.md?p=9) does not approve the capital restoration plan submitted by the [regulated entity](/usc/12/4502.md?p=20); or
    - (B) the [Director](/usc/12/4502.md?p=9) determines that the [regulated entity](/usc/12/4502.md?p=20) has failed to make, in good faith, reasonable efforts necessary to comply with the capital restoration plan and fulfill the schedule for the plan approved by the [Director](/usc/12/4502.md?p=9).
  - (7) **Other action—** Require the [regulated entity](/usc/12/4502.md?p=20) to take any other action that the [Director](/usc/12/4502.md?p=9) determines will better carry out the purpose of this section than any of the other actions specified in this subsection.
- (c) **Restriction on compensation of executive officers—** A [regulated entity](/usc/12/4502.md?p=20) that is classified as significantly undercapitalized in accordance with [section 4614 of this title](/usc/12/4614.md) may not, without prior written approval by the [Director](/usc/12/4502.md?p=9)—
  - (1) pay any bonus to any [executive officer](/usc/12/4502.md?p=12); or
  - (2) provide [compensation](/usc/12/4502.md?p=6) to any [executive officer](/usc/12/4502.md?p=12) at a rate exceeding the average rate of [compensation](/usc/12/4502.md?p=6) of that officer (excluding bonuses, stock options, and profit sharing) during the 12 calendar months preceding the calendar month in which the [regulated entity](/usc/12/4502.md?p=20) became significantly undercapitalized.

## Source credit

(Pub. L. 102–550, title XIII, § 1366, Oct. 28, 1992, 106 Stat. 3978; Pub. L. 110–289, div. A, title I, § 1144, July 30, 2008, 122 Stat. 2733.)

## Notes

### Editorial Notes

### Amendments

2008—Subsec. (a)(1). Pub. L. 110–289, § 1144(3), substituted “A regulated entity” for “An enterprise”.

Subsec. (a)(2)(A). Pub. L. 110–289, § 1144(1)–(3), substituted “A regulated entity” for “An enterprise” in two places, “the regulated entity” for “the enterprise”, and, in second sentence, “undercapitalized” for “undercapitalized enterprise”.

Subsec. (a)(2)(B). Pub. L. 110–289, § 1144(2), (4), substituted “a regulated entity” for “an enterprise” and “the regulated entity” for “the enterprise” wherever appearing.

Subsec. (b). Pub. L. 110–289, § 1144(4), (5)(A), (B), substituted “Specific” for “Discretionary supervisory” in heading and “shall carry out this section by taking, at any time, 1 or more” for “may, at any time, take any” and “a regulated entity” for “an enterprise” in introductory provisions.

Subsec. (b)(1) to (4). Pub. L. 110–289, § 1144(2), substituted “the regulated entity” for “the enterprise” wherever appearing.

Subsec. (b)(5). Pub. L. 110–289, § 1144(5)(E), added par. (5). Former par. (5) redesignated (6).

Pub. L. 110–289, § 1144(2), (4), substituted “a regulated entity” for “an enterprise” in introductory provisions and “the regulated entity” for “the enterprise” wherever appearing.

Subsec. (b)(6). Pub. L. 110–289, § 1144(5)(C), (D), redesignated par. (5) as (6) and struck out former par. (6) which permitted the Director to appoint a conservator.

Subsec. (b)(7). Pub. L. 110–289, § 1144(5)(F), added par. (7).

Subsec. (c). Pub. L. 110–289, § 1144(6), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: “This section shall take effect upon the first classification of the enterprises within capital classifications that occurs under section 4614 of this title.”