---
title: "Prompt Corrective Action: definition, formula, and thresholds"
description: "Prompt Corrective Action (PCA) is the framework that sorts banks into capital categories (from well capitalized to critically undercapitalized) and imposes escalating mandatory restrictions as capital falls. It defines the 'well capitalized' threshold banks aim to clear."
canonical_url: https://www.bankregreports.com/glossary/prompt-corrective-action/
source: BankRegReports
category: "Supervision & Ratings"
units: "ratio"
schedule: "Schedule RC-R"
---

# Prompt Corrective Action

> Prompt Corrective Action (PCA) is the framework that sorts banks into capital categories (from well capitalized to critically undercapitalized) and imposes escalating mandatory restrictions as capital falls. It defines the 'well capitalized' threshold banks aim to clear.

## Formula

```
PCA Category = f(CET1 ratio, Tier 1 ratio, Total Capital ratio, Leverage ratio)
```

A bank's PCA category is set by its lowest-qualifying capital ratio. 'Well capitalized' generally requires CET1 ≥ 6.5%, Tier 1 ≥ 8%, Total ≥ 10%, and leverage ≥ 5%. Falling short drops the bank a category and triggers increasingly severe supervisory constraints.

## Why it matters

PCA is the rulebook that turns a capital ratio into consequences. Slipping below 'well capitalized' restricts brokered deposits and deposit rates; falling to undercapitalized adds asset-growth limits; deeper categories force capital-raising, halt distributions, and ultimately set a 90-day clock to receivership for critically undercapitalized banks.

## How to read it

Read a bank's capital ratios against the PCA thresholds, not just against zero. Operating only marginally above 'well capitalized' leaves little room before brokered-deposit restrictions bite; the buffer over the PCA lines is what gives a bank strategic freedom.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| Well capitalized | Strong | Clears all PCA ratios with a buffer; no restrictions. |
| Adequately capitalized | Adequate | Meets minimums but cannot accept brokered deposits freely. |
| Undercapitalized | Watch | Growth restricted; capital-restoration plan required. |
| Significantly / critically | Concern | Severe restrictions; receivership clock for critical cases. |


## Worked example

A bank with a 6.0% CET1 ratio is below the 6.5% 'well capitalized' line, so it falls to 'adequately capitalized', and immediately loses the freedom to accept or roll over brokered deposits without an FDIC waiver, a constraint that can itself accelerate funding stress.

## Questions

### What are the prompt corrective action capital categories?

Well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. A bank's category is determined by its weakest capital ratio, with mandatory restrictions escalating as it falls.

### What does 'well capitalized' require?

Generally a CET1 ratio of at least 6.5%, a Tier 1 risk-based ratio of at least 8%, a total capital ratio of at least 10%, and a leverage ratio of at least 5%, and no PCA directive in force.

## Sources

- 12 U.S.C. 1831o (Prompt Corrective Action)
- [12 CFR Part 6](https://www.ecfr.gov/current/title-12/part-6)

## Related metrics

- [Common Equity Tier 1 Capital Ratio](https://www.bankregreports.com/glossary/cet1-ratio/): The CET1 ratio measures a bank's highest-quality capital (common stock and surplus, retained earnings and, for banks that have not opted out, accumulated other comprehensive income, less regulatory deductions) against its risk-weighted assets. It is the most-watched single capital indicator in US bank supervision after the 2013 Basel III reforms.
- [Tier 1 Risk-Based Capital Ratio](https://www.bankregreports.com/glossary/tier1-rbc/): The Tier 1 Risk-Based Capital ratio measures a bank's Tier 1 capital (CET1 plus Additional Tier 1 instruments) against its risk-weighted assets. It is the broader of the two Tier-1 capital measures and is still the headline capital metric for most banking comparisons.
- [Total Risk-Based Capital Ratio](https://www.bankregreports.com/glossary/total-rbc/): The total risk-based capital ratio is a bank's total regulatory capital (tier 1 plus tier 2) divided by its risk-weighted assets. US rules require at least 8%, 10% to be well capitalized, and 10.5% including the capital conservation buffer.
- [Tier 1 Leverage Ratio](https://www.bankregreports.com/glossary/leverage-ratio/): The tier 1 leverage ratio is a bank's tier 1 capital divided by its average total consolidated assets. Unlike the risk-based ratios it gives every asset the same weight, so it caps how far a bank can stretch its balance sheet whatever the asset mix.
- [CAMELS Rating](https://www.bankregreports.com/glossary/camels-rating/): CAMELS is the supervisory rating system examiners use to grade a bank's safety and soundness across six components (Capital, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk) on a 1 (best) to 5 (worst) scale.

## About this document

This is the markdown twin of the page named in `canonical_url` above. Source filings are public record; the cleaning, normalization, cross-source linkage, and derived metrics are BankRegReports' own. Attribute with a link to the canonical URL.

Markdown twins are published for editorial content only. Institution data pages do not have them. For data at scale use the API, which is documented at https://www.bankregreports.com/api/ and specified at https://www.bankregreports.com/openapi.json. It returns typed JSON with explicit units and periods, and one call replaces hundreds of page fetches.


## Sitemap

- [Glossary](https://www.bankregreports.com/glossary/): every metric, with formula and thresholds
- [Blog](https://www.bankregreports.com/blog/): analysis and explainers
- [API documentation](https://www.bankregreports.com/api/): the programmatic way to get this data
- [XML sitemap](https://www.bankregreports.com/sitemap.xml): the complete crawlable index