§ 1835. — Insured depository institution capital requirements for transfers of small business obligations.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1835]
TITLE 12--BANKS AND BANKING
CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
Sec. 1835. Insured depository institution capital requirements
for transfers of small business obligations
(a) Accounting principles
The accounting principles applicable to the transfer of a small
business loan or a lease of personal property with recourse contained in
reports or statements required to be filed with Federal banking agencies
by a qualified insured depository institution shall be consistent with
generally accepted accounting principles.
(b) Capital and reserve requirements
With respect to the transfer of a small business loan or lease of
personal property with recourse that is a sale under generally accepted
accounting principles, each qualified insured depository institution
shall--
(1) establish and maintain a reserve equal to an amount
sufficient to meet the reasonable estimated liability of the
institution under the recourse arrangement; and
(2) include, for purposes of applicable capital standards and
other capital measures, only the amount of the retained recourse in
the risk-weighted assets of the institution.
(c) Qualified institutions criteria
An insured depository institution is a qualified insured depository
institution for purposes of this section if, without regard to the
accounting principles or capital requirements referred to in subsections
(a) and (b) of this section, the institution is--
(1) well capitalized; or
(2) with the approval, by regulation or order, of the
appropriate Federal banking agency, adequately capitalized.
(d) Aggregate amount of recourse
The total outstanding amount of recourse retained by a qualified
insured depository institution with respect to transfers of small
business loans and leases of personal property under subsections (a) and
(b) of this section shall not exceed--
(1) 15 percent of the risk-based capital of the institution; or
(2) such greater amount, as established by the appropriate
Federal banking agency by regulation or order.
(e) Institutions that cease to be qualified or exceed aggregate limits
If an insured depository institution ceases to be a qualified
insured depository institution or exceeds the limits under subsection
(d) of this section, this section shall remain applicable to any
transfers of small business loans or leases of personal property that
occurred during the time that the institution was qualified and did not
exceed such limit.
(f) Prompt corrective action not affected
The capital of an insured depository institution shall be computed
without regard to this section in determining whether the institution is
adequately capitalized, undercapitalized, significantly
undercapitalized, or critically undercapitalized under section 1831o of
this title.
(g) Regulations required
Not later than 180 days after September 23, 1994, each appropriate
Federal banking agency shall promulgate final regulations implementing
this section.
(h) Alternative system permitted
(1) In general
At the discretion of the appropriate Federal banking agency,
this section shall not apply if the regulations of the agency
provide that the aggregate amount of capital and reserves required
with respect to the transfer of small business loans and leases of
personal property with recourse does not exceed the aggregate amount
of capital and reserves that would be required under subsection (b)
of this section.
(2) Existing transactions not affected
Notwithstanding paragraph (1), this section shall remain in
effect with respect to transfers of small business loans and leases
of personal property with recourse by qualified insured depository
institutions occurring before the effective date of regulations
referred to in paragraph (1).
(i) Definitions
For purposes of this section--
(1) the term ``adequately capitalized'' has the same meaning as
in section 1831o(b) of this title;
(2) the term ``appropriate Federal banking agency'' has the same
meaning as in section 1813 of this title;
(3) the term ``capital standards'' has the same meaning as in
section 1831o(c) of this title;
(4) the term ``Federal banking agencies'' has the same meaning
as in section 1813 of this title;
(5) the term ``insured depository institution'' has the same
meaning as in section 1813 of this title;
(6) the term ``other capital measures'' has the meaning as in
section 1831o(c) of this title;
(7) the term ``recourse'' has the meaning given to such term
under generally accepted accounting principles;
(8) the term ``small business'' means a business that meets the
criteria for a small business concern established by the Small
Business Administration under section 632(a) of title 15; and
(9) the term ``well capitalized'' has the same meaning as in
section 1831o(b) of this title.
(Pub. L. 103-325, title II, Sec. 208, Sept. 23, 1994, 108 Stat. 2201.)
Codification
Section was enacted as part of the Small Business Loan
Securitization and Secondary Market Enhancement Act of 1994 and as part
of the Riegle Community Development and Regulatory Improvement Act of
1994, and not as part of the Federal Deposit Insurance Act which
comprises this chapter.
Section Referred to in Other Sections
This section is referred to in section 4808 of this title.
