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Banking enforcement orders

The Division of Finance and Corporate Securities issues enforcement orders against banks when it identifies specific concerns that must be immediately addressed to ensure the safety and soundness of the financial institution. The division may issue the orders independently or jointly with other state or federal regulators, such as the Federal Deposit Insurance Corporation (FDIC).

The orders result from an examination or investigation and require the financial institution to take corrective action or stop certain activities. They typically include timelines for making required changes or improvements. For example, an order may contain a requirement that the institution improve capital levels and return to a "well-capitalized" status within 120 days.

The number of administrative enforcement orders tends to increase during economic downturns and recessions because of the economy's impact on financial institutions, especially around increases in problem loans, and a reduction in earnings and capital.

In most cases, the division negotiates the order with the financial institution, and the institution has agreed to make the changes and meet the timelines. Because it takes time for the institution to make the changes and ensure it is back on solid financial footing, an enforcement order is typically in place for at least 18 to 24 months. If the institution does not make the requested changes within the timelines, the division may consider other regulatory action, depending on the situation and the institution's efforts to correct the areas of concern. Many institutions that are the subject of an order eventually have the order lifted and continue to operate successfully in their communities.

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