12 U.S.C. § 3904 — Reserves

Page 1575 TITLE 12—BANKS AND BANKING § 3904a (B) to the extent determined by the appro- priate Federal banking agency, any agency or branch of a foreign bank, and any com- mercial lending company owned or con- trolled by one or more foreign banks or com- panies that control a foreign bank as those terms are defined in the International Bank- ing Act of 1978 [12 U.S.C. 3101 et seq.]. The term ‘‘banking institution’’ shall not in- clude a foreign bank. (Pub. L. 98–181, title I [title IX, § 903], Nov. 30, 1983, 97 Stat. 1278.) Editorial Notes REFERENCES IN TEXT Section 25(a) of the Federal Reserve Act, referred to in pars. (1) and (2)(A), which is classified to subchapter II (§ 611 et seq.) of chapter 6 of this title, was renum- bered section 25A of that act by Pub. L. 102–242, title I, § 142(e)(2), Dec. 19, 1991, 105 Stat. 2281. Section 25 of the Federal Reserve Act is classified to subchapter I (§ 601 et seq.) of chapter 6 of this title. The International Banking Act of 1978, referred to in par. (2)(B), is Pub. L. 95–369, Sept. 17, 1978, 92 Stat. 607, which enacted chapter 32 (§ 3101 et seq.) and sections 347d and 611a of this title, amended sections 72, 378, 614, 615, 618, 619, 1813, 1815, 1817, 1818, 1820, 1821, 1822, 1823, 1828, 1829b, 1831b, and 1841 of this title, and enacted pro- visions set out as notes under sections 247, 611a, and 3101 of this title and formerly set out as notes under sections 36, 247, and 601 of this title. For definitions, see section 3101 of this title. For complete classification of this Act to the Code, see Short Title note set out under section 3101 of this title and Tables. § 3903. Strengthened supervision of international lending (a) Each appropriate Federal banking agency shall evaluate banking institution foreign coun- try exposure and transfer risk for use in banking institution examination and supervision. (b) Each such agency shall establish examina- tion and supervisory procedures to assure that factors such as foreign country exposure and transfer risk are taken into account in evalu- ating the adequacy of the capital of banking in- stitutions. (Pub. L. 98–181, title I [title IX, § 904], Nov. 30, 1983, 97 Stat. 1279.) § 3904. Reserves (a) Establishment and maintenance of special re- serves (1) Each appropriate Federal banking agency shall require a banking institution to establish and maintain a special reserve whenever, in the judgment of such appropriate Federal banking agency— (A) the quality of such banking institution’s assets has been impaired by a protracted in- ability of public or private borrowers in a for- eign country to make payments on their ex- ternal indebtedness as indicated by such fac- tors, among others, as— (i) a failure by such public or private bor- rowers to make full interest payments on external indebtedness; (ii) a failure to comply with the terms of any restructured indebtedness; or (iii) a failure by the foreign country to comply with any International Monetary Fund or other suitable adjustment program; or (B) no definite prospects exist for the or- derly restoration of debt service. (2) Such reserves shall be charged against cur- rent income and shall not be considered as part of capital and surplus or allowances for possible loan losses for regulatory, supervisory, or dis- closure purposes. (b) Accommodation of potential losses on foreign loans by United States banks The appropriate Federal banking agencies shall analyze the results of foreign loan resched- uling negotiations, assess the loan loss risk re- flected in rescheduling agreements, and, using the powers set forth in section 3907 of this title (regarding capital adequacy), ensure that the capital and reserve positions of United States banks are adequate to accommodate potential losses on their foreign loans. (c) Regulations and orders of Federal banking agencies The appropriate Federal banking agencies shall promulgate regulations or orders nec- essary to implement this section within one hundred and twenty days after November 30, 1983. (Pub. L. 98–181, title I [title IX, § 905], Nov. 30, 1983, 97 Stat. 1279.) § 3904a. Additional reserve requirements (a) In general Each appropriate Federal banking agency shall review the exposure to risk of United States banking institutions arising from the medium- and long-term loans made by such in- stitutions that are outstanding to any highly in- debted country. Each agency shall provide direc- tion to such institutions regarding additions to general reserves maintained by each banking in- stitution for potential loan losses and special re- serves required by such agency arising from such review. (b) Determination of institutional exposure to risk In determining the exposure of an institution to risk for purposes of subsection (a), the appro- priate Federal banking agency— (1) shall determine whether any country ex- posure that is, and has been for at least 2 years, rated in the category ‘‘Other Transfer Risk Problems’’ or the category ‘‘Sub- standard’’ by the Interagency Country Expo- sure Review Committee should be reevaluated; (2) may exempt, in full or in part, from re- serve requirements established pursuant to subsection (a), any loan— (A) to a country that enters into a debt re- duction, debt service reduction, or financing program with its bank creditors that is sup- ported by the International Bank for Recon- struction and Development or the Inter- national Monetary Fund; or (B) secured, in whole or in part, by appro- priate collateral for payment of interest or principal; (3) take into account any other factors which bear on such exposure and the par- ticular circumstances of the institution; and