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U.S. Code as of:
01/19/04
Section 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.
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