STANDARDS FOR SAFETY AND SOUNDNESS.

SEC. 132. STANDARDS FOR SAFETY AND SOUNDNESS. (a) In General.— The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding after section 38 (as added by section 131 of this Act) the following new section: “SEC. 39. STANDARDS FOR SAFETY AND SOUNDNESS. “(a) Operational and Managerial Standards.— Each appropriate Federal banking agency shall, for all insured depository institutions and depository institution holding companies, prescribe— “(1) standards relating to— “(A) internal controls, information systems, and internal audit systems, in accordance with section 36; “(B) loan documentation; “(C) credit underwriting; “(D) interest rate exposure; “(E) asset growth; and “(F) compensation, fees, and benefits, in accordance with subsection (c); and “(2) such other operational and managerial standards as the agency determines to be appropriate. 105 STAT. 2268 “(b) Asset Quality, Earnings, and Stock Valuation Standards.— Each appropriate Federal banking agency shall, for all insured depository institutions and depository institution holding companies, prescribe— “(1) standards specifying— “(A) a maximum ratio of classified assets to capital; “(B) minimum earnings sufficient to absorb losses without impairing capital; and “(C) to the extent feasible, a minimum ratio of market value to book value for publicly traded shares of the institution or company; and “(2) such other standards relating to asset quality, earnings, and valuation as 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 post-employment 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 by Regulation.— Standards under subsections (a), (b), and (c) shall be prescribed by regulation. “(e) Failure To Meet Standards.— “(1) Plan required.— “(A) In general.— If the appropriate Federal banking agency determines that an insured depository institution or depository institution holding company fails to meet any standard prescribed under subsection (a), (b), or (c) the agency shall require the institution or company to submit 105 STAT. 2269an acceptable plan to the agency within the time allowed by the agency under subparagraph (C). “(B) Contents of plan.— Any plan required under subparagraph (A) shall specify the steps that the institution or company 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 or company to submit a plan not later than 30 days after the agency determines that the institution or company fails to meet any standard prescribed under subsection (a), (b), or (c); 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 or company fails to submit or implement plan.— If an insured depository institution or depository institution holding company 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 or company to correct the deficiency; and “(B) may do 1 or more of the following until the deficiency has been corrected: “(i) Prohibit the institution or company 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 or company may increase from one calendar quarter to another. “(ii) Require the institution or company to increase its ratio of tangible equity to assets. “(iii) Take the action described in section 38(f)(2)(C). “(iv) Require the institution or company to take any other action that the agency determines will better carry out the purpose of section 38 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); “(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 105 STAT. 2270 “(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 38. “(g) Other Authority Not Affected.— The authority granted by this section is in addition to any other authority of the Federal banking agencies.”. (b) Regulations Required.— Each appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act) shall promulgate final regulations under section 39 of the Federal Deposit Insurance Act (as added by subsection (a)) not later than August 1, 1993. (c) Effective Date.— The amendment made by subsection (a) shall become effective on the earlier of— (1) the date on which final regulations promulgated in accordance with subsection (b) become effective; or (2) December 1, 1993.