Question

What does the prompt corrective action of FDIC involve? Explain this particular policy in detail.

Answer 1

Answer: Section 38 of the FDI Act authorizes the FDIC to take PCA against IDIs based on their capital
levels. It may include following actions:
• Reclassifying (downgrading) an IDI’s capital category.
• Issuing supervisory directives to IDIs in certain capital categories.
• Dismissing directors or senior executive officers of IDIs.
Under certain circumstances, the FDIC may delay resolution of a critically undercapitalized IDI if
a determination is made that it is in the best interest of the DIF. FDIC have authority to appoint itself as conservator or receiver. PCA is intended to resolve various issues concerning problem IDI's in an expeditious manner through early intervention in such problem banks.

Final decisions to appoint the FDIC as receiver or conservator are made by the FDIC BOD after consultation with the appropriate federal bank regulatory agency and state authority. The FDIC will monitor the condition of the IDI and compliance with capital restoration
plans, restrictions, and requirements imposed by Section 38.

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