US LAWS, STATUTES & CODES ON-LINE

US Supreme Court Decisions On-Line | US Laws



§ 1831n. —  Accounting objectives, standards, and requirements.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC1831n]

 
                       TITLE 12--BANKS AND BANKING
 
            CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
 
Sec. 1831n. Accounting objectives, standards, and requirements


(a) In general

                           (1) Objectives

        Accounting principles applicable to reports or statements 
    required to be filed with Federal banking agencies by insured 
    depository institutions should--
            (A) result in financial statements and reports of condition 
        that accurately reflect the capital of such institutions;
            (B) facilitate effective supervision of the institutions; 
        and
            (C) facilitate prompt corrective action to resolve the 
        institutions at the least cost to the insurance funds.

                            (2) Standards

        (A) Uniform accounting principles consistent with GAAP

            Subject to the requirements of this chapter and any other 
        provision of Federal law, the accounting principles applicable 
        to reports or statements required to be filed with Federal 
        banking agencies by all insured depository institutions shall be 
        uniform and consistent with generally accepted accounting 
        principles.

        (B) Stringency

            If the appropriate Federal banking agency or the Corporation 
        determines that the application of any generally accepted 
        accounting principle to any insured depository institution is 
        inconsistent with the objectives described in paragraph (1), the 
        agency or the Corporation may, with respect to reports or 
        statements required to be filed with such agency or Corporation, 
        prescribe an accounting principle which is applicable to such 
        institutions which is no less stringent than generally accepted 
        accounting principles.

       (3) Review and implementation of accounting principles 
                                  required

        Before the end of the 1-year period beginning on December 19, 
    1991, each appropriate Federal banking agency shall take the 
    following actions:

        (A) Review of accounting principles

            Review--
                (i) all accounting principles used by depository 
            institutions with respect to reports or statements required 
            to be filed with a Federal banking agency;
                (ii) all requirements established by the agency with 
            respect to such accounting procedures; and
                (iii) the procedures and format for reports to the 
            agency, including reports of condition.

        (B) Modification of noncomplying measures

            Modify or eliminate any accounting principle or reporting 
        requirement of such Federal agency which the agency determines 
        fails to comply with the objectives and standards established 
        under paragraphs (1) and (2).

        (C) Inclusion of ``off balance sheet'' items

            Develop and prescribe regulations which require that all 
        assets and liabilities, including contingent assets and 
        liabilities, of insured depository institutions be reported in, 
        or otherwise taken into account in the preparation of any 
        balance sheet, financial statement, report of condition, or 
        other report of such institution, required to be filed with a 
        Federal banking agency.

(b) Uniform accounting of capital standards

                           (1) In general

        Each appropriate Federal banking agency shall maintain uniform 
    accounting standards to be used for determining compliance with 
    statutory or regulatory requirements of depository institutions.

                      (2) Transition provision

        Any standards in effect on December 19, 1991, under section 
    1833d \1\ of this title shall continue in effect after December 19, 
    1991, until amended by the appropriate Federal banking agency under 
    paragraph (1).
---------------------------------------------------------------------------
    \1\ See References in Text note below.
---------------------------------------------------------------------------

(c) Reports to banking committees

                     (1) Annual reports required

        The Federal banking agencies shall jointly submit an annual 
    report to the Committee on Banking, Finance and Urban Affairs of the 
    House of Representatives and the Committee on Banking, Housing, and 
    Urban Affairs of the Senate containing a description of any 
    difference between any accounting or capital standard used by any 
    such agency and any accounting or capital standard used by any other 
    agency.

             (2) Explanation of reasons for discrepancy

        Each report submitted under paragraph (1) shall contain an 
    explanation of the reasons for any discrepancy between any 
    accounting or capital standard used by any such agency and any 
    accounting or capital standard used by any other agency.

                           (3) Publication

        Each report under this subsection shall be published in the 
    Federal Register.

(Sept. 21, 1950, ch. 967, Sec. 2[37], as added Pub. L. 102-242, title I, 
Sec. 121(a), Dec. 19, 1991, 105 Stat. 2250; amended Pub. L. 106-569, 
title XII, Secs. 1221, 1223, Dec. 27, 2000, 114 Stat. 3036.)

                       References in Text

    Section 1833d, referred to in subsec. (b)(2), was repealed by Pub. 
L. 102-242, title I, Sec. 121(b), Dec. 19, 1991, 105 Stat. 2251.


                               Amendments

    2000--Subsec. (a)(3)(D). Pub. L. 106-569, Sec. 1221, struck out 
heading and text of subpar. (D). Text read as follows: ``Develop jointly 
with the other appropriate Federal banking agencies a method for insured 
depository institutions to provide supplemental disclosure of the 
estimated fair market value of assets and liabilities, to the extent 
feasible and practicable, in any balance sheet, financial statement, 
report of condition, or other report of any insured depository 
institution required to be filed with a Federal banking agency.''
    Subsec. (c)(1). Pub. L. 106-569, Sec. 1223, substituted ``The 
Federal banking agencies shall jointly submit an annual report'' for 
``Each appropriate Federal banking agency shall annually submit a 
report'' and inserted ``any'' before ``such agency''.
    Subsec. (c)(2). Pub. L. 106-569, Sec. 1223(2), inserted ``any'' 
before ``such agency''.

                         Change of Name

    Committee on Banking, Finance and Urban Affairs of House of 
Representatives treated as referring to Committee on Banking and 
Financial Services of House of Representatives by section 1(a) of Pub. 
L. 104-14, set out as a note preceding section 21 of Title 2, The 
Congress. Committee on Banking and Financial Services of House of 
Representatives abolished and replaced by Committee on Financial 
Services of House of Representatives, and jurisdiction over matters 
relating to securities and exchanges and insurance generally transferred 
from Committee on Energy and Commerce of House of Representatives by 
House Resolution No. 5, One Hundred Seventh Congress, Jan. 3, 2001.


  Risk-Weighting of Housing Loans for Purposes of Capital Requirements

    Pub. L. 102-233, title VI, Sec. 618, Dec. 12, 1991, 105 Stat. 1789, 
provided that:
    ``(a) Single Family Housing Loans.--
        ``(1) 50 percent risk-weighted classification.--
            ``(a)[(A)] In general.--To provide consistent regulatory 
        treatment of loans made for the construction of single family 
        housing, not later than the expiration of the 120-day period 
        beginning on the date of this Act [probably means date of 
        enactment, Dec. 12, 1991] each Federal banking agency shall 
        amend the regulations and guidelines of the agency establishing 
        minimum acceptable capital levels to provide that any single 
        family residence construction loan described under subparagraph 
        (B) shall be considered as a loan within the 50 percent risk-
        weighted category.
            ``(B) Requirements.--Subparagraph (A) shall apply to any 
        construction loan--
                ``(i) made for the construction of a residence 
            consisting of 1 to 4 dwelling units;
                ``(ii) under which the lender has acquired from the 
            lender originating the mortgage loan for purchase of the 
            residence, before the making of the construction loan--
          ``(I) documentation demonstrating that the buyer of the 
                residence intends to purchase the residence and has the 
                ability to obtain a mortgage loan sufficient to purchase 
                the residence; and
          ``(II) any other documentation from the mortgage lender that 
                the appropriate Federal banking agency may consider 
                appropriate to provide assurance of the buyer's intent 
                to purchase the property (including written commitments 
                and letters of intent);
                ``(iii) under which the borrower requires the buyer of 
            the residence to make a nonrefundable deposit to the 
            borrower in an amount (as determined by the appropriate 
            Federal banking agency) of not less than 1 percent of the 
            principal amount of mortgage loan obtained by the borrower 
            for purchase of the residence, for use in defraying costs 
            relating to any cancellation of the purchase contract of the 
            buyer; and
                ``(iv) that meets any other underwriting characteristics 
            that the appropriate Federal banking agency may establish, 
            consistent with the purposes of the minimum acceptable 
            capital requirements to maintain the safety and soundness of 
            financial institutions.
        ``(2) 100 percent risk-weighted classification.--Not later than 
    the expiration of the 120-day period beginning on the date of this 
    Act [Dec. 12, 1991] each Federal banking agency shall amend the 
    regulations and guidelines of the agency establishing minimum 
    acceptable capital levels to provide that--
            ``(A) any single family residence construction loan for a 
        residence for which the purchase contract is canceled shall be 
        considered as a loan within the 100 percent risk-weighted 
        category; and
            ``(B) the lender of any single family residence construction 
        loan shall promptly notify the appropriate Federal banking 
        agency of any such cancellation.
    ``(b) Multifamily Housing Loans.--
        ``(1) 50 percent risk-weighted classification.--
            ``(A) In general.--To provide consistent regulatory 
        treatment of loans made for the purchase of multifamily rental 
        and homeowner properties, not later than the expiration of the 
        120-day period beginning on the date of this Act [Dec. 12, 1991] 
        each Federal banking agency shall amend the regulations and 
        guidelines of the agency establishing minimum acceptable capital 
        levels to provide that any multifamily housing loan described 
        under subparagraph (B) and any security collateralized by such a 
        loan shall be considered as a loan or security within the 50 
        percent risk-weighted category.
            ``(B) Requirements.--Subparagraph (A) shall apply to any 
        loan--
                ``(i) secured by a first lien on a residence consisting 
            of more than 4 dwelling units;
                ``(ii) under which--
          ``(I) the rate of interest does not change over the term of 
                the loan, (b) the principal obligation does not exceed 
                80 percent of the appraised value of the property, and 
                (c) the ratio of annual net operating income generated 
                by the property (before payment of any debt service on 
                the loan) to annual debt service on the loan is not less 
                than 120 percent; or
          ``(II) the rate of interest changes over the term of the loan, 
                (b) the principal obligation does not exceed 75 percent 
                of the appraised value of the property, and (c) the 
                ratio of annual net operating income generated by the 
                property (before payment of any debt service on the 
                loan) to annual debt service on the loan is not less 
                than 115 percent;
                ``(iii) under which--
          ``(I) amortization of principal and interest occurs over a 
                period of not more than 30 years;
          ``(II) the minimum maturity for repayment of principal is not 
                less than 7 years; and
          ``(III) timely payment of all principal and interest, in 
                accordance with the terms of the loan, occurs for a 
                period of not less than 1 year; and
                ``(iv) that meets any other underwriting characteristics 
            that the appropriate Federal banking agency may establish, 
            consistent with the purposes of the minimum acceptable 
            capital requirements to maintain the safety and soundness of 
            financial institutions.
        ``(2) Sale pursuant to pro rata loss sharing arrangements.--Not 
    later than the expiration of the 120-day period beginning on the 
    date of this Act [Dec. 12, 1991], each Federal banking agency shall 
    amend the regulations and guidelines of the agency establishing 
    minimum acceptable capital levels to provide that any loan fully 
    secured by a first lien on a multifamily housing property that is 
    sold subject to a pro rata loss sharing arrangement by an 
    institution subject to the jurisdiction of the agency shall be 
    treated as sold to the extent that loss is incurred by the purchaser 
    of the loan. For purposes of this paragraph, the term `pro rata loss 
    sharing arrangement' means an agreement providing that the purchaser 
    of a loan shares in any loss incurred on the loan with the selling 
    institution on a pro rata basis.
        ``(3) Sale pursuant to other arrangements for loss.--Not later 
    than the expiration of the 180-day period beginning on the date of 
    the enactment of this Act [Dec. 12, 1991], each Federal banking 
    agency shall amend the regulations and guidelines of the agency 
    establishing minimum acceptable capital levels to take into account 
    other loss sharing arrangements, in connection with the sale by an 
    institution subject to the jurisdiction of the agency of any loan 
    that is fully secured by a first lien on multifamily housing 
    property, for purposes of determining the extent to which such loans 
    shall be treated as sold. For purposes of this paragraph, the term 
    `other loss sharing arrangement' means an agreement providing that 
    the purchaser of a loan shares in any loss incurred on the loan with 
    the selling institution on other than a pro rata basis.
    ``(c) Appropriate Federal Banking Agency.--For purposes of this 
section, the term `Federal banking agency' means the Board of Governors 
of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the Comptroller of the Currency, and the Director of the 
Office of Thrift Supervision.''

                  Section Referred to in Other Sections

    This section is referred to in section 1831m of this title.



chanrobles.com





ChanRobles Legal Resources:

ChanRobles On-Line Bar Review

ChanRobles Internet Bar Review : www.chanroblesbar.com

ChanRobles MCLE On-line

ChanRobles Lawnet Inc. - ChanRobles MCLE On-line : www.chanroblesmcleonline.com