FCD5	Capital Adequacy [Section 11-37.5-109, C.R.S.]

A.	Purpose

The Colorado State Banking Board believes that foreign capital depositories should maintain certain minimum capital levels to provide for periods of temporary operating losses, insulate depositors from such losses, and better ensure the ongoing viability of the depository.

B.	Definitions:  For the purpose of this Rule:

1.	“Deposit Liabilities” means customer deposits that are a liability of the foreign capital depository.
2.	“Liquid Assets” means cash, or an investment vehicle with a readily available market price that can be quickly converted into cash without causing a significant movement in the price.
3.	“Fiduciary Assets” means those assets held for benefit of, or in trust for others.  The foreign capital depository may have investment discretion, or the investment authority may remain with the account holder or external manager.  Fiduciary assets are not recorded on the balance sheet of the foreign capital depository.

C.	Initial Capital

No foreign capital depository shall be granted a charter unless it has paid-in capital of at least $5,000,000, or such greater amount as the Banking Board may reasonably require.

D.	Minimum Capital 

1.	A foreign capital depository must maintain core capital of not less than the greater of:  (1) $3,000,000, or (2) an amount calculated based on the following factors and thresholds:

a.	Four (4.0) percent of deposit liabilities

PLUS

b.	One tenth of one percent (.001) of fiduciary assets, such amount not to exceed five million ($5,000,000).  

E.	Liquid Assets

A foreign capital depository must hold liquid assets equal to the greater of $1 million or two (2.0) percent of deposit liabilities. 
 
F.	Establishment of Minimum Capital for an Individual Institution

1.	Applicability

The Banking Board may require higher minimum capital levels for an individual foreign capital depository in view of its circumstances.  For example, higher capital levels may be appropriate for:
a.	A newly chartered foreign capital depository;
b.	A foreign capital depository receiving special supervisory attention;
c.	A foreign capital depository that has, or is expected to have, losses resulting in capital inadequacy;
d.	A foreign capital depository with significant exposure due to risks arising from nontraditional activities, or management's overall inability to monitor and control financial and operating risks;
e.	A foreign capital depository with significant exposure to declines in the economic value of its capital due to changes in interest rates;
f.	A foreign capital depository with significant exposure due to fiduciary or operational risk;
g.	A foreign capital depository that is growing rapidly, either internally or through acquisition; or,
h.	A foreign capital depository that may be adversely affected by the activities or condition of its parent company, affiliate(s), or other persons, with which it has significant business relationships.

G.	Effect on Existing Foreign Capital Depositories 

The minimum capital requirement for foreign capital depositories organized and existing prior to April 30, 2007 is $2 million, or such higher amount that the Banking Board may have imposed, until June 30, 2008.  All foreign capital depositories must comply with the minimum capital requirements set forth in this rule on and after July 1, 2008.

H.	Failure to Meet Minimum Capital Levels

A foreign capital depository that fails to comply with the minimum capital requirements set forth in this rule shall promptly notify the Commissioner, but in no event shall such notification occur later than 15 calendar days after the month end wherein the deficiency occurred.  If the institution’s core capital is at or above $2,000,000, the Commissioner will, prior to initiating formal enforcement action, consider a capital restoration plan that reasonably projects a restoration of capital compliance within ninety (90) days of the initial capital deficiency.  Such capital restoration plan shall be submitted within forty-five (45) days of the capital deficiency.  In the event core capital is less than $2,000,000, the Commissioner, may, but is not required to, accept a capital restoration plan prior to initiating formal corrective action.