12 U.S.C. § 3907 — Capital adequacy

Page 1576 TITLE 12—BANKS AND BANKING § 3905 1 See References in Text note below. (4) shall consider as indicators of risk, where appropriate, the average reserve levels main- tained by or required of banking institutions in foreign countries and secondary market prices for such loans. (c) Timing and report (1) Determined by agency Except as provided in paragraph (3), each ap- propriate Federal banking agency shall deter- mine the timing of any addition to reserves re- quired by subsection (a). (2) Report Each appropriate Federal banking agency shall include in each report required to be made under section 3912(d) 1 of this title after 1989 a report on the actions taken pursuant to this section. (3) Deadline Each Federal agency required to undertake a review described in subsection (a) shall com- plete the review not later than December 31, 1990. (d) ‘‘Highly indebted country’’ defined As used in this section, the term ‘‘highly in- debted country’’ means any country designated as a ‘‘Highly Indebted Country’’ in the annual World Debt Tables most recently published by the International Bank for Reconstruction and Development before December 19, 1989. (Pub. L. 98–181, title I [title IX, § 905A], as added Pub. L. 101–240, title IV, § 402(b), Dec. 19, 1989, 103 Stat. 2501.) Editorial Notes REFERENCES IN TEXT Section 3912(d) of this title, referred to in subsec. (c)(2), was repealed by Pub. L. 104–208, div. A, title II, § 2224(c), Sept. 30, 1996, 110 Stat. 3009–415. Statutory Notes and Related Subsidiaries CONGRESSIONAL FINDINGS Pub. L. 101–240, title IV, § 402(a), Dec. 19, 1989, 103 Stat. 2501, provided that: ‘‘The Congress finds that— ‘‘(1) since the adoption of the International Lending Supervision Act of 1983 [12 U.S.C. 3901 et seq.], the credit quality of loans by United States banking in- stitutions to highly indebted countries has deterio- rated and the prospects for full repayment of such loans have diminished; ‘‘(2) in general during this period, the level of coun- try exposure and transfer risk associated with loans by United States banking institutions to highly in- debted countries has not been adequately reflected in the reserve levels established by many individual United States banking institutions or the reserve re- quirements imposed by Federal banking agencies pur- suant to such Act; ‘‘(3) during the last 3 years and particularly in re- cent months, United States banking institutions have increased their reserves for possible losses from loans to highly indebted countries but such reserves remain, in some cases, significantly lower than re- serves established by banking institutions in a num- ber of foreign countries and may not be adequate to deal with potential risks; and ‘‘(4) in order to fulfill the purposes of such Act, the Federal banking agencies should take a more active role in reviewing reserve levels established by United States banking institutions for potential losses from loans to highly indebted countries and in requiring appropriate levels of both special and general re- serves to reflect the increased risk of such loans.’’ § 3905. Accounting for fees on international loans (a)(1) In order to avoid excessive debt service burdens on debtor countries, no banking institu- tion shall charge, in connection with the re- structuring of an international loan, any fee ex- ceeding the administrative cost of the restruc- turing unless it amortizes such fee over the ef- fective life of each such loan. (2)(A) Each appropriate Federal banking agen- cy shall promulgate such regulations as are nec- essary to further carry out the provisions of this subsection. (B) The requirement of paragraph (1) shall take effect on November 30, 1983. (b)(1) Subject to subsection (a), the appro- priate Federal banking agencies shall promul- gate regulations for accounting for agency, com- mitment, management and other fees charged by a banking institution in connection with an international loan. (2) Such regulations shall establish the ac- counting treatment of such fees for regulatory, supervisory, and disclosure purposes to assure that the appropriate portion of such fees is ac- crued in income over the effective life of each such loan. (3) The appropriate Federal banking agencies shall promulgate regulations or orders nec- essary to implement this subsection within one hundred and twenty days after November 30, 1983. (Pub. L. 98–181, title I [title IX, § 906], Nov. 30, 1983, 97 Stat. 1279.) § 3906. Collection and disclosure of international lending data (a) Submission of information to Federal bank- ing agencies Each appropriate Federal banking agency shall require, by regulation, each banking insti- tution with foreign country exposure to submit, no fewer than four times each calendar year, in- formation regarding such exposure in a format prescribed by such regulations. (b) Disclosure of information to the public Each appropriate Federal banking agency shall require, by regulation, banking institu- tions to disclose to the public information re- garding material foreign country exposure in re- lation to assets and to capital. (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, § 907], Nov. 30, 1983, 97 Stat. 1280.) § 3907. Capital adequacy (a)(1) Each appropriate Federal banking agen- cy shall cause banking institutions to achieve Page 1577 TITLE 12—BANKS AND BANKING § 3908 1 So in original. Probably should be ‘‘capital’’. and maintain adequate capital by establishing minimum levels of capital for such banking in- stitutions and by using such other methods as the appropriate Federal banking agency deems appropriate. Each appropriate Federal banking agency shall seek to make the capital standards required under this section or other provisions of Federal law for insured depository institu- tions countercyclical so that the amount of cap- ital required to be maintained by an insured de- pository institution increases in times of eco- nomic expansion and decreases in times of eco- nomic contraction, consistent with the safety and soundness of the insured depository institu- tion. (2) Each appropriate Federal banking agency shall have the authority to establish such min- imum level of capital for a banking institution as the appropriate Federal banking agency, in its discretion, deems to be necessary or appro- priate in light of the particular circumstances of the banking institution. (b)(1) Failure of a banking institution to main- tain capital at or above its minimum level as es- tablished pursuant to subsection (a) may be deemed by the appropriate Federal banking agency, in its discretion, to constitute an unsafe and unsound practice within the meaning of sec- tion 1818 of this title. (2)(A) In addition to, or in lieu of, any other action authorized by law, including paragraph (1), the appropriate Federal banking agency may issue a directive to a banking institution that fails to maintain captial 1 at or above its re- quired level as established pursuant to sub- section (a). (B)(i) Such directive may require the banking institution to submit and adhere to a plan ac- ceptable to the appropriate Federal banking agency describing the means and timing by which the banking institution shall achieve its required capital level. (ii) Any such directive issued pursuant to this paragraph, including plans submitted pursuant thereto, shall be enforceable under the provi- sions of section 1818(i) of this title to the same extent as an effective and outstanding order issued pursuant to section 1818(b) of this title which has become final. (3)(A) Each appropriate Federal banking agen- cy may consider such banking institution’s progress in adhering to any plan required under this subsection whenever such banking institu- tion, or an affiliate thereof, or the holding com- pany which controls such banking institution, seeks the requisite approval of such appropriate Federal banking agency for any proposal which would divert earnings, diminish capital, or oth- erwise impede such banking institution’s progress in achieving its minimum capital level. (B) Such appropriate Federal banking agency may deny such approval where it determines that such proposal would adversely affect the ability of the banking institution to comply with such plan. (C) The Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury shall encourage governments, central banks, and regulatory authorities of other major banking countries to work toward maintaining and, where appropriate, strength- ening the capital bases of banking institutions involved in international lending. (Pub. L. 98–181, title I [title IX, § 908], Nov. 30, 1983, 97 Stat. 1280; Pub. L. 111–203, title VI, § 616(c), July 21, 2010, 124 Stat. 1615.) Editorial Notes AMENDMENTS 2010—Subsec. (a)(1). Pub. L. 111–203 inserted at end ‘‘Each appropriate Federal banking agency shall seek to make the capital standards required under this sec- tion or other provisions of Federal law for insured de- pository institutions countercyclical so that the amount of capital required to be maintained by an in- sured depository institution increases in times of eco- nomic expansion and decreases in times of economic contraction, consistent with the safety and soundness of the insured depository institution.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the trans- fer date, see section 616(e) of Pub. L. 111–203, set out as a note under section 1467a of this title. § 3908. Foreign loan evaluations (a) Projects requiring an economic feasibility evaluation; content of evaluation (1) In any case in which one or more banking institutions extend credit, whether by loan, lease, guarantee, or otherwise, which individ- ually or in the aggregate exceeds $20,000,000, to finance any project which has as a major objec- tive the construction or operation of any mining operation, any metal or mineral primary proc- essing operation, any fabricating facility or op- eration, or any metal-making operations (semi and finished) located outside the United States or its territories and possessions, a written eco- nomic feasibility evaluation of such foreign project shall be prepared and approved in writ- ing by a senior official of the banking institu- tion, or, if more than one banking institution is involved, the lead banking institution, prior to the extension of such credit. (2) Such evaluation shall— (A) take into account the profit potential of the project, the impact of the project on world markets, the inherent competitive advantages and disadvantages of the project over the en- tire life of the project, and the likely effect of the project upon the overall long-term eco- nomic development of the country in which the project is located; and (B) consider whether the extension of credit can reasonably be expected to be repaid from revenues generated by such foreign project without regard to any subsidy, as defined in international agreements, provided by the government involved or any instrumentality of any country. (b) Review of evaluation by Federal banking agencies Such economic feasibility evaluations shall be reviewed by representatives of the appropriate Federal banking agencies whenever an examina- tion by such appropriate Federal banking agen- cy is conducted.