12 CFR § 702.204 - Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions.

---
identifier: "/us/cfr/t12/s702.204"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "12 CFR § 702.204 - Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions."
title_number: 12
title_name: "Banks and Banking"
section_number: "702.204"
section_name: "Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions."
chapter_name: "NATIONAL CREDIT UNION ADMINISTRATION"
subchapter_number: "A"
subchapter_name: "REGULATIONS AFFECTING CREDIT UNIONS"
part_number: "702"
part_name: "CAPITAL ADEQUACY"
positive_law: false
currency: "2026-04-05"
last_updated: "2026-04-05"
format_version: "1.1.0"
generator: "[email protected]"
authority: "12 U.S.C. 1757(9), 1766(a), 1784(a), 1786(e), 1790d."
regulatory_source: "65 FR 8584, Feb. 18, 2000, unless otherwise noted."
cfr_part: "702"
---


# 702.204 Prompt corrective action for moderately capitalized, marginally capitalized, or minimally capitalized new credit unions.

(a) *Mandatory supervisory actions by new credit union.* Beginning on the date of classification as moderately capitalized, marginally capitalized or minimally capitalized (including by reclassification under § 702.202(d)), a new credit union must—

(1) *Earnings retention.* Increase the dollar amount of its net worth by the amount reflected in its approved initial or revised business plan;

(2) *Submit revised business plan.* Submit a revised business plan within the time provided by § 702.206 if the credit union either:

(i) Has not increased its net worth ratio consistent with its then-present approved business plan;

(ii) Has no then-present approved business plan; or

(iii) Has failed to comply with paragraph (a)(3) of this section; and

(3) *Restrict member business loans.* Not increase the total dollar amount of member business loans (defined as loans outstanding and unused commitments to lend) as of the preceding quarter-end unless it is granted an exception under 12 U.S.C. 1757a(b).

(b) *Discretionary supervisory actions by NCUA.* Subject to the applicable procedures set forth in subpart L of part 747 of this chapter for issuing, reviewing and enforcing directives, the NCUA Board may, by directive, take one or more of the actions prescribed in § 702.109(b) if the credit union's net worth ratio has not increased consistent with its then-present business plan, or the credit union has failed to undertake any mandatory supervisory action prescribed in paragraph (a) of this section.

(c) *Discretionary conservatorship or liquidation.* Notwithstanding any other actions required or permitted to be taken under this section, the NCUA Board may place a new credit union which is moderately capitalized, marginally capitalized or minimally capitalized (including by reclassification under § 702.202(d)) into conservatorship pursuant to 12 U.S.C. 1786(h)(1)(F), or into liquidation pursuant to 12 U.S.C. 1787(a)(3)(A)(i), provided that the credit union has no reasonable prospect of becoming adequately capitalized.