12 C.F.R. Subpart C—International Lending Supervision
Title 12 - Banks and Banking
(a) Authority. This subpart is issued pursuant to 12 U.S.C. 1 et seq., 93a, 161, and 1818; and the International Lending Supervision Act of 1983 (Pub. L. 98–181, title IX, 97 Stat. 1153, 12 U.S.C. 3901 et seq.). (b) Purpose. This subpart implements the requirements of the International Lending Supervision Act of 1983 (12 U.S.C. 3901 et seq.), (c) Scope. This subpart requires national banks and District of Columbia banks to establish reserves against the risks presented in certain international assets and sets forth the accounting for various fees received by the banks when making international loans. For the purposes of this subpart: (a) Banking institution means a national bank or a District of Columbia bank. (b) Federal banking agencies means the OCC, the FRB, and the FDIC. (c) International assets means those assets required to be included in banking institutions' Country Exposure Report forms (FFIEC 009). (d) International loan means a loan as defined in the instructions to the Report of Condition and Income for the respective banking institution (FFIEC 031, 032, 033 and 034) 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. (e) 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. (f) 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. [61 FR 19532, May 2, 1996, as amended at 63 FR 57048, Oct. 26, 1998] (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 OCC 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: (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; (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 10 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 15 percent of the principal amount of each specified international asset, or such greater or lesser percentage determined by the Federal banking agencies. (3) Notification. Based on the joint agency determinations under paragraph (b)(1) of this section, the OCC 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 to be 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 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. 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, 032, 033 and 034). For bank holding companies, the consolidation shall be in accordance with the principles set forth in the “Instructions to the Bank Holding Company Financial Supplement to Report F.R. Y–6” (Form F.R. Y–9). Edge corporations and Agreement corporations engaged in banking shall report in accordance with instructions for preparation of the Report of Condition for Edge corporations 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 such asset. For purposes of this paragraph, international assets may be written down by a charge to the Allowance for Possible Loan Losses or a reduction in the principal amount of the asset by application of interest payments or other collections on the asset. However, the Allowance for Possible Loan 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 OCC or, at any time, by writing down such amount of the international asset for which the ATRR was established. (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 costs of the restructuring 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, a banking institution is to account for fees in accordance with generally accepted accounting principles. [63 FR 57048, Oct. 26, 1998] (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, 12 U.S.C. 3906) (ILSA) a banking institution shall submit to the OCC, at least quarterly, information regarding the amounts and composition of its holdings of international assets. (2) Pursuant to section 907(b) of ILSA (12 U.S.C. 3906), a banking institution shall submit to the OCC 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 OCC 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, FFIEC 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 agencies' judgment, have de minimis holdings of international assets. (c) Reservation of authority. Nothing contained in this part shall preclude the OCC from requiring from a banking institution such additional or more frequent information on the institution's holdings of international assets as the OCC may consider necessary.
Title 12: Banks and Banking
PART 28—INTERNATIONAL BANKING ACTIVITIES
Subpart C—International Lending Supervision
§ 28.50 Authority, purpose, and scope.
§ 28.51 Definitions.
§ 28.52 Allocated transfer risk reserve.
§ 28.53 Accounting for fees on international loans.
§ 28.54 Reporting and disclosure of international assets.
