The Federal Reserve Board is calling on CIT Group Inc. to submit concrete plans to maintain sufficient capital and improve its overall financial condition.
The struggling commercial lender faces limits on how it can pay dividends and restructure debt under a Fed enforcement action.
The order requires the New York bank holding company to submit to the Fed a written plan within 15 days for maintaining sufficient capital, along with a business plan to improve its overall financial condition. The financial plan has to be submitted within 75 days.
The goal of the action is to "maintain the financial soundness" of CIT Group so that it can serve as a source of strength to its Salt Lake City state-chartered bank, according to the Fed order, released Wednesday.
The century-old commercial lender, whose liquidity crisis is worsening as its customers draw down credit lines amid fears that the lines might disappear, has been working to avoid filing for Chapter 11 bankruptcy protection.
CIT secured a $3 billion emergency loan last month from a group of its six largest bondholders. But it has said more than once that a host of issues have left "substantial doubt" about its ability to continue as a going concern.
The enforcement order also calls for CIT Group to improve its "liquidity position and funds management practices."
