12 U.S.C. § 3904a — Additional reserve requirements

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 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