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.
How is Prompt Corrective Action defined?
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 does Prompt Corrective Action matter?
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 do you interpret Prompt Corrective Action?
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.
What do Prompt Corrective Action levels indicate?
| 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
Explore 4,196 FDIC-insured banks
Browse every FDIC-insured institution by state, asset tier, or name, with quarterly FFIEC filing data behind each profile.