§3904 Reserves

Summary

Federal banking regulators must make banks set up special reserves when foreign borrowers can’t pay their debts for a long time. Signs include missed interest payments, failing to follow restructured loan terms, or a country not following an IMF or other adjustment plan. Regulators can also require reserves when there is no clear chance that normal debt payments will be restored. Those reserves must come from current income and cannot be counted as capital, surplus, or as regular loan-loss allowances for regulatory or disclosure purposes. Regulators must review foreign loan rescheduling talks, judge the loss risk, and use the powers in section 3907 to make sure banks have enough capital and reserves for possible foreign loan losses. They had to issue rules or orders to do this within 120 days after November 30, 1983.