§3904 Reserves

Summary

Each federal banking agency must make a bank set up and keep a special reserve when the agency decides the bank’s assets are harmed because borrowers in a foreign country cannot make their external debt payments for a long time. Signs include missed interest payments, failing to follow restructured loan terms, or the country not following an IMF or similar adjustment program. Reserves must be taken from current income and may not be counted as capital, surplus, or as allowances for possible loan losses for regulatory, supervisory, or disclosure purposes. The agencies must review foreign loan rescheduling talks, judge the loss risk in those deals, and, using the powers in section 3907, make sure U.S. banks have enough capital and reserves to cover possible losses on foreign loans. They must create the needed rules or orders within 120 days after November 30, 1983.