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7500 - FRB Regulations
Subpart D—International Lending
Supervision
§ 211.41 Authority, purpose and scope.
(a) Authority. This subpart is issued by the Board of
Governors of the Federal Reserve System (Board) under the authority of
the International Lending Supervision Act of 1983 (Pub. L. 98--181,
title IX, 97 Stat. 1153) (International Lending Supervision Act); the
Federal Reserve Act (12 U.S.C. 221 et seq.) (FRA), and the
Bank Holding Company Act of 1956, as amended (12 U.S.C. 1841 et
seq.) (BHC Act).
(b) Purpose and scope. This subpart is issued in
furtherance of the purposes of the International Lending Supervision
Act. It applies to State banks that are members of the Federal Reserve
System (State member banks); corporations organized under section 25(A)
of the FRA (12 U.S.C.
611--631) (Edge Corporations); corporations operating subject
to an agreement with the Board under section 25 of the FRA (12 U.S.C.
601 through 604a) (Agreement Corporations); and bank holding companies
(as defined in section 2 of the BHC Act
(12 U.S.C. 1841(a)) but not
including a bank holding company that is a foreign banking organization
as defined in
§ 211.21(o).
{{6-30-05 p.7628.25}}
[Codified to 12 C.F.R. § 211.41]
[Section 211.41 added at 49 Fed. Reg. 5591, February 13, 1984;
amended at 58 Fed. Reg. 46076, September 1, 1993, effective August 30,
1993; 68 Fed. Reg. 1159, January 9, 2003, effective February 10,
2003]
§ 211.42 Definitions.
For the purposes of this subpart:
(a) Administrative cost means those costs which are
specifically identified with negotiating, processing and consummating
the loan. These costs include, but are not necessarily limited to:
legal fees; costs of preparing and processing loan documents; and an
allocable portion of salaries and related benefits of employees engaged
in the international lending function. No portion of supervisory and
administrative expenses or other indirect expenses such as occupancy
and other similar overhead costs shall be included.
(b) Banking institution means a State member bank; bank
holding company; Edge Corporation and Agreement Corporation engaged in
banking. Banking institution does not include a foreign banking
organization as defined in § 211.21(o).
(c) Federal banking agencies means the Board of
Governors of the Federal Reserve System, the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation.
(d) International assets means those assets required to
be included in banking institutions' Country Exposure Report
forms (FFIEC No. 009).
(e) International loan means a loan as defined in the
instructions to the Report of Condition and Income for the
respective banking institution (FFIEC Nos. 031 and 041) and made to a
foreign government, or to an individual, a corporation, or other entity
not a citizen of, resident in, or organized or incorporated in the
United States.
(f) Restructured international loan means a loan that
meets the following criteria:
(1) The borrower is unable to service the existing loan according
to its terms and is a resident of a foreign country in which there is a
generalized inability of public and private sector obligors to meet
their external debt obligations on a timely basis because of a lack of,
or restraints on the availability of, needed foreign exchange in the
country; and
(2) The terms of the existing loan are amended to reduce stated
interest or extend the schedule of payments; or
(3) A new loan is made to, or for the benefit of, the borrower,
enabling the borrower to service or refinance the existing debt.
(g) Transfer risk means the possibility that an asset
cannot be serviced in the currency of payment because of a lack of, or
restraints on the availability of, needed foreign exchange in the
country of the obligor.
[Codified to 12 C.F.R. § 211.42]
[Section 211.42 added at 49 Fed. Reg. 5592, February 13,
1984; amended at 49 Fed. Reg. 12197, March 29, 1984, effective June 30,
1984; 58 Fed. Reg. 46076, September 1, 1993, effective August 30, 1993;
68 Fed. Reg. 1159, January 9, 2003, effective February 10,
2003]
§ 211.43 Allocated transfer risk reserve.
(a) Establishment of Allocated Transfer Risk Reserve. A
banking institution shall establish an allocated transfer risk reserve
(ATRR) for specified international assets when required by the Board in
accordance with this section.
(b) Procedures and standards.--(1) Joint agency
determination. At least annually, the Federal banking agencies
shall determine jointly, based on the standards set forth in paragraph
(b)(2) of this section, the following:
{{6-30-05 p.7629}}
(i) Which international assets subject to transfer risk warrant
establishment of an ATRR;
(ii) The amount of the ATRR for the specified assets; and
(iii) Whether an ATRR established for specified assets may be
reduced.
(2) Standards for requiring ATRR.--(i)
Evaluation of assets. The Federal banking agencies shall apply
the following criteria in determining whether an ATRR is required for
particular international assets:
(A) Whether the quality of a banking institution's assets has
been impaired by a protracted inability of public or private obligors
in a foreign country to make payments on their external indebtedness as
indicated by such factors, among others, as whether:
(1) Such obligors have failed to make full
interest payments on external indebtedness; or
(2) Such obligors have failed to comply with
the terms of any restructured indebtedness; or
(3) A foreign country has failed to comply with
any International Monetary Fund or other suitable adjustment program;
or
(B) Whether no definite prospects exist for the orderly
restoration of debt service.
(ii) Determination of amount of ATRR. (A) In
determining the amount of the ATRR, the Federal banking agencies shall
consider:
(1) The length of time the quality of the asset
has been impaired;
(2) Recent actions taken to restore debt
service capability;
(3) Prospects for restored asset quality; and
(4) Such other factors as the Federal banking
agencies may consider relevant to the quality of the asset.
(B) The initial year's provision for the ATRR shall be ten
percent of the principal amount of each specified international asset,
or such greater or lesser percentage determined by the Federal banking
agencies. Additional provision, if any, for the ATRR in subsequent
years shall be fifteen percent of the principal amount of each
specified international asset, or such greater or lesser percentage
determined by the Federal banking agencies.
(3) Board notification. Based on the joint agency
determinations under paragraph (b)(1) of this section, the Board shall
notify each banking institution holding assets subject to an ATRR:
(i) Of the amount of the ATRR to be established by the
institution for specified international assets; and
(ii) That an ATRR established for specified assets may be
reduced.
(c) Accounting treatment of ATRR.--(1) Charge to
current income. A banking institution shall establish an ATRR by
a charge to current income and the amounts so charged shall not be
included in the banking institution's capital or surplus.
(2) Separate accounting. A banking institution shall
account for an ATRR separately from the Allowance for Possible Loan and
Lease Losses, and shall deduct the ATRR from "gross loans and
leases" to arrive at "net loans and leases." The ATRR must be
established for each asset subject to the ATRR in the percentage amount
specified.
(3) Consolidation. A banking institution shall
establish an ATRR, as required, on a consolidated basis. For banks,
consolidation should be in accordance with the procedures and tests of
significance set forth in the instructions for preparation of
Consolidated Reports of Condition and Income (FFIEC 031 and 041). For
bank holding companies, the consolidation shall be in accordance with
the principles set forth in the "Instructions to Consolidated
Financial Statements for Bank Holding Company" (Form F.R. Y-9c).
Edge and Agreement corporations engaged in banking shall report in
accordance with instructions for preparation of the Report of Condition
for Edge and Agreement Corporations (Form F.R. 2886b).
(4) Alternative accounting treatment. A banking
institution need not establish an ATRR if it writes down in the period
in which the ATRR is required, or has written down in prior periods,
the value of the specified international assets in the requisite amount
for each
{{6-30-05 p.7630}}such asset. For purposes of
this paragraph, international assets may be written down by a charge to
the Allowance for Loan and Lease Losses or a reduction in the principal
amount of the asset by application of interest payments or other
collections on the asset; provided, that only those international
assets that may be charged to the Allowance for Loan and Lease Losses
pursuant to generally accepted accounting principles may be written
down by a charge to the Allowance for Loan and Lease Losses. However,
the Allowance for Loan and Lease Losses must be replenished in such
amount necessary to restore it to a level which adequately provides for
the estimated losses inherent in the banking institution's loan
portfolio.
(5) Reduction of ATRR. A banking institution may
reduce an ATRR when notified by the Board or, at any time, by writing
down such amount of the international asset for which the ATRR was
established.
[Codified to 12 C.F.R. § 211.43]
[Section 211.43 added at 49 Fed. Reg. 5592, February 13,
1984; amended at 68 Fed. Reg. 1159, January 9, 2003, effective,
February 10, 2003]
§ 211.44 Reporting and disclosure of international assets.
(a) Requirements. (1) Pursuant to
section 907(a) of the
International Lending Supervision Act of 1983 (Title IX, Pub. L.
98-181, 97 Stat. 1153) (ILSA), a banking institution shall submit to
the Board, at least quarterly, information regarding the amounts and
composition of its holdings of international assets.
(2) Pursuant to section 907(b) of ILSA, a banking institution
shall submit to the Board information regarding concentrations in its
holdings of international assets that are material in relation to total
assets and to capital of the institution, such information to be made
publicly available by the Board on request.
(b) Procedures. The format, content and reporting and
filing dates of the reports required under paragraph (a) of this
section shall be determined jointly by the Federal banking agencies.
The requirements to be prescribed by the agencies may include changes
to existing reporting forms (such as the Country exposure Report, form
FFIEC No. 009) or such other requirements as the agencies deem
appropriate. The agencies also may determine to exempt from the
requirements of paragraph (a) of this section banking institutions
that, in the Federal banking agencies' judgment, have de minimis
holdings of international assets.
(c) Reservation of authority. Nothing contained in this
rule shall preclude the Board from requiring from a banking institution
such additional or more frequent information on the institution's
holding of international assets as the Board may consider necessary.
[Codified to 12 C.F.R. § 211.44]
[Section 211.44 added at 49 Fed. Reg. 5587, February 13,
1984; amended at 68 Fed. Reg. 1160, January 9, 2003, effective February
10, 2003]
§ 211.45 Accounting for fees on international loans.
(a) Restrictions on fees for restructured international
loans. No banking institution shall charge, in connection with
the restructuring of an international loan, any fee exceeding the
administrative cost of the restrucuring unless it amortizes the amount
of the fee exceeding the administrative cost over the effective life of
the loan.
(b) Accounting treatment. Subject to paragraph (a) of
this section, banking institutions shall account for fees on
international loans in accordance with generally accepted accounting
principles.
[Codified to 12 C.F.R. § 211.45]
[Section 211.45 added at 49 Fed. Reg. 12197, March 29,
1984, effective June 30, 1984, except for § 211.45(a) which is
effective March 29, 1984; amended at 68 Fed. Reg. 1161, January 9,
2003, effective February 10, 2003]
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