Supervision & Ratings
Prompt Corrective Action
Also known as PCA
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
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 growth; deeper categories force capital-raising, halt distributions, and ultimately set a 90-day clock to receivership for critically undercapitalized banks.
How to interpret
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 and growth restrictions bite; the buffer over the PCA lines is what gives a bank strategic freedom.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| 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
Frequently asked
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
See PCA across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by PCA, refreshed quarterly within 48 hours of FFIEC release.