CAPITAL CLASSIFICATIONS.

SEC. 1142. CAPITAL CLASSIFICATIONS.(a) In General.—Section 1364 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4614) is amended—(1) in the heading for subsection (a) by striking “In General” and inserting “Enterprises”;(2) in subsection (c)—(A) by striking “subsection (b)” and inserting “subsection (c)”;(B) by striking “enterprises” and inserting “regulated entities”; and(C) by striking the last sentence;(3) by redesignating subsections (c) (as so amended by paragraph (2) of this subsection) and (d) as subsections (d) and (f), respectively;(4) by striking subsection (b) and inserting the following:“(b) Federal Home Loan Banks.—122 STAT. 2731“(1) Establishment and criteria.—For purposes of this subtitle, the Director shall, by regulation—“(A) establish the capital classifications specified under paragraph (2) for the Federal Home Loan Banks;“(B) establish criteria for each such capital classification based on the amount and types of capital held by a bank and the risk-based, minimum, and critical capital levels for the banks and taking due consideration of the capital classifications established under subsection (a) for the enterprises, with such modifications as the Director determines to be appropriate to reflect the difference in operations between the banks and the enterprises; and“(C) shall classify the Federal Home Loan Banks according to such capital classifications.“(2) Classifications.—The capital classifications specified under this paragraph are—“(A) adequately capitalized;“(B) undercapitalized;“(C) significantly undercapitalized; and“(D) critically undercapitalized.“(c) Discretionary Classification.—“(1) Grounds for reclassification.—The Director may reclassify a regulated entity under paragraph (2) if—“(A) at any time, the Director determines in writing that the regulated entity is engaging in conduct that could result in a rapid depletion of core or total capital or the value of collateral pledged as security has decreased significantly or that the value of the property subject to mortgages held by the regulated entity (or securitized in the case of an enterprise) has decreased significantly;“(B) after notice and an opportunity for hearing, the Director determines that the regulated entity is in an unsafe or unsound condition; or“(C) pursuant to section 1371(b), the Director deems the regulated entity to be engaging in an unsafe or unsound practice.“(2) Reclassification.—In addition to any other action authorized under this title, including the reclassification of a regulated entity for any reason not specified in this subsection, if the Director takes any action described in paragraph (1), the Director may classify a regulated entity—“(A) as undercapitalized, if the regulated entity is otherwise classified as adequately capitalized;“(B) as significantly undercapitalized, if the regulated entity is otherwise classified as undercapitalized; and“(C) as critically undercapitalized, if the regulated entity is otherwise classified as significantly undercapitalized.”; and(5) by inserting after subsection (d) (as so redesignated by paragraph (3) of this subsection), the following new subsection:“(e) Restriction on Capital Distributions.—“(1) In general.—A regulated entity shall make no capital distribution if, after making the distribution, the regulated entity would be undercapitalized.122 STAT. 2732“(2) Exception.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition—“(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and“(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.”.(b) Regulations.—Not later than the expiration of the 180-day period beginning on the date of enactment of this Act, the Director of the Federal Housing Finance Agency shall issue regulations to carry out section 1364(b) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (as added by this section), relating to capital classifications for the Federal Home Loan Banks.