Article 7. Statutory Net Worth; Reserve Accounts of California Financial Code >> Division 2. >> Chapter 3. >> Article 7.
(a) Each association shall maintain an adequate statutory net
worth appropriate for the conduct of its business and the protection
of its savings account holders.
(b) The commissioner shall fix a minimum statutory net worth
requirement applicable to all associations, which shall not be less
than 3 percent of an association's total assets. In defining total
assets, the commissioner may issue regulations to exclude from the
total asset figure any asset items deemed appropriate by the
(c) If the statutory net worth falls below the level specified by
the commissioner, the commissioner may require the association to
increase its statutory net worth within the time and in a manner
designated by the commissioner, so as to bring the amount to the
level determined adequate under this section, and may require the
association to do any one or more of the following:
(1) Increase its liquid assets and maintain that increased
liquidity at the level specified by the commissioner.
(2) Cease to:
(A) Accept savings accounts of all classes or categories, except
in exchange for accounts already outstanding.
(B) Accept savings accounts of any particular class, category, or
(C) Receive additional funds upon savings accounts already
outstanding other than installment accounts.
The provisions of paragraph (2) of subdivision (c) shall not
prevent an association from crediting to savings accounts the
interest earned on the accounts.
(3) Cease all lending, lending in a particular area, or making a
particular type or category of loans.
(4) Cease purchase of loans or other investments.
(5) Cease or limit promotional expenditures.
(6) Convene a meeting or meetings of its board of directors with
the commissioner in attendance to accomplish the objectives of this
(7) Take any other steps that the commissioner deems necessary to
safeguard the interests of the association and the public.
Each association shall set up and maintain the reserves
required by, and may set up and maintain any additional reserves that
are permitted by, this division.
The board of directors may make additional transfers to surplus or
other reserve accounts.
Any association which, for the purpose of evading provisions
of this division or any order of the commissioner, knowingly
participates, directly or indirectly, in an exchange with another
association of any loan, investment, or other asset held by either
association in violation of any provision of this division or any
order of the commissioner, shall, upon direction of the commissioner,
set up and maintain a reserve in the full amount of the asset
acquired and shall not include that reserve in its statutory net