Introduction to Problem Banks

Prompt Corrective Action (PCA)

• Five capital categories • Specific legal ramifications

PCA Ratios – Minimums

PCA Designation

Total Risk Based Capital

Tier 1 Risk Based Capital

Tier 1 Leverage

Well-Capitalized

10%

6% 4%

5% 4%

Adequately Capitalized

8%

Undercapitalized Significantly Undercapitalized

<8% <6%

<4% <3%

<4% <3%

<2% tangible equity to total assets

Critically Undercapitalized