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Financial Institution Letters

[Federal Register: April 21, 2005 (Volume 70, Number 76)]
[Rules and Regulations]               
[Page 20704-20706]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ap05-6]                         

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 347

RIN 3064-AC85

 
International Banking

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule; correction.

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SUMMARY: The Federal Deposit Insurance Corporation published in the 
Federal Register of April 6, 2005, a final rule amending parts 303, 
325, and 327 and revising subparts A and B of part 347. The regulations 
contained in subpart C of part 347 were not included in the 
publication. This document corrects the final rule by adding the 
regulations in subpart C of part 347 to the regulatory text.

DATES: Effective on July 1, 2005.

FOR FURTHER INFORMATION CONTACT: Rodney D. Ray, Counsel, Legal 
Division, (202) 898-3556 or rray@fdic.gov, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION: The Federal Deposit Insurance Corporation 
published in the Federal Register of April 6, 2005, a final rule 
amending parts 303, 325, and 327 and revising subparts A and B of part 
347. Although the regulations in subpart C of part 347 were listed in 
the Table of Contents for part 347, the regulatory text of subpart C 
was not contained in the final rule. This document corrects the final 
rule by adding the regulations in subpart C of part 347 to the 
regulatory text.

0
In the final rule published on April 6, 2005, (70 FR 17550) make the 
following correction. On page 17572, in the third column after section 
347.216, add Subpart C to read as follows:

Subpart C--International Lending


Sec.  347.301  Purpose, authority, and scope.

    Under the International Lending Supervision Act of 1983 (Title IX, 
Pub. L. 98-181, 97 Stat. 1153) (12 U.S.C. 3901 et seq.) (ILSA), the 
Federal Deposit Insurance Corporation prescribes the regulations in 
this subpart relating to international lending activities of banks.


Sec.  347.302  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

[[Page 20705]]

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 an insured state nonmember bank.
    (c) Federal banking agencies means the Board of Governors of the 
Federal Reserve System, the Office of 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'' form (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, 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.
    (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) Either:
    (i) The terms of the existing loan are amended to reduce stated 
interest or extend the schedule of payments; or
    (ii) 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.


Sec.  347.303  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 FDIC 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; 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) FDIC notification. Based on the joint agency determinations 
under paragraph (b)(1) of this section, the FDIC 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 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 Nos. 031, 032, 033 and 034).
    (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 (c)(4), 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 and lease portfolio.
    (5) Reduction of ATRR. A banking institution may reduce an ATRR 
when notified by the FDIC or, at any time, by writing down such amount 
of the international asset for which the ATRR was established.


Sec.  347.304  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 restructuring unless it amortizes the amount of the fee

[[Page 20706]]

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.


Sec.  347.305  Reporting and disclosure of international assets.

    (a) Requirements. (1) Pursuant to section 907(a) of ILSA, a banking 
institution shall submit to the FDIC, 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 FDIC 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 FDIC 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 federal banking agencies may include changes to 
existing forms (such as revisions to the Country Exposure Report, Form 
FFIEC No. 009) or such other requirements as the federal banking 
agencies deem appropriate. The federal banking 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 subpart 
shall preclude the FDIC from requiring from a banking institution such 
additional or more frequent information on the institution's holdings 
of international assets as the agency may consider necessary.

    Dated: April 15, 2005.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05-7983 Filed 4-20-05; 8:45 am]

BILLING CODE 6714-01-P

Last Updated 05/06/2005 communications@fdic.gov