§ 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).
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\1\ See References in Text note below.
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(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.