[Federal Register Volume 63, Number 206 (Monday, October 26, 1998)]
[Rules and Regulations]
[Pages 57047-57048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28593]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 28
[Docket No. 98-16]
RIN 1557-AB58
International Banking Activities
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
amending its regulation governing international lending. This amendment
removes the lengthy discussion concerning the accounting for fees on
international loans and instead states that the accounting for these
fees is to conform to generally accepted accounting principles (GAAP).
The amendment is intended to simplify the rule and eliminate
unnecessary burden.
EFFECTIVE DATE: This final rule is effective January 1, 1999.
FOR FURTHER INFORMATION CONTACT: Tom Rees, Senior Accountant, Bank
Supervision Policy, (202) 874-5180; Frank Carbone, Senior International
Advisor, International Banking & Finance, (202) 874-4730; Raija
Bettauer, Counselor for International Activities, (202) 874-0680; or
Mark Tenhundfeld, Assistant Director, Legislative and Regulatory
Activities, (202) 874-5090, Office of the Comptroller of the Currency,
250 E Street, S.W., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
Background
The International Lending Supervision Act of 1983 (ILSA), 12 U.S.C.
3901 et seq., requires, among other things, that the OCC and other
Federal banking agencies issue regulations governing accounting for
fees charged by banks in connection with international loans (i.e.,
those loans reported on a bank's Country Exposure Report, form FFIEC
009). In order to avoid excessive debt service burden on debtor
countries, section 906(a) of ILSA (12 U.S.C. 3905(a)) prohibits a bank,
in connection with restructuring an international loan, from charging
fees in an amount that exceeds the administrative costs of
restructuring the loan, unless the fee is amortized over the life of
the loan. Section 906(b) of ILSA (12 U.S.C. 3905(b)) requires that the
OCC prescribe the accounting treatment for agency, commitment,
management, and other fees in connection with international loans to
assure that the appropriate portion of these fees is accrued in income
over the effective life of each loan.
When the OCC first published its rules on accounting for
international loan fees in 1984 (see 49 FR 12192 (March 29, 1984)), the
OCC determined that the application of the fee accounting principles
for banks then set out in GAAP did not ensure a uniform accounting
treatment for international loan fees. Accordingly, the OCC adopted
detailed rules governing the accounting treatment for various types of
fees generated in connection with international loans. The preamble to
the 1984 rule stated, however, that the OCC would reexamine whether the
rule needed to discuss the accounting treatment if the Financial
Accounting Standards Board (FASB) were to issue further guidance on the
accounting for fees on international loans. Since then, FASB has
amended GAAP to provide that guidance.
Proposal
In April of this year, the OCC published a proposed rule that
invited comment on whether the OCC should remove the lengthy discussion
in Sec. 28.53 concerning the accounting treatment for fees on
international loans and replace it with a statement that the accounting
is to conform to GAAP. See 63 FR 16708 (April 6, 1998). The OCC
received one comment, from an individual who supported the proposal in
its entirety.
Final Rule
The OCC is adopting the proposal without change. Accordingly, upon
the effective date of this final rule, national banks will be required
to follow GAAP in accounting for fees on international loans, subject
to the amortization requirement for fees charged in connection with
restructuring an international loan that exceed the administrative cost
of the restructuring. In the event that GAAP rules regarding fee
accounting for international loans changes, the OCC will reexamine its
rule to assess the need for further revision.
The final rule reduces the regulatory burden on banks and
simplifies the OCC's requirements by replacing the discussion of the
separate accounting methods for different types of fees on
international loans with a reference to GAAP. As noted in the preamble
to the proposed rule, while there are some differences between the
language in Sec. 28.53 that is being removed and the GAAP standard
(Financial Accounting Standard No. 91), these differences are
relatively minor. For instance, GAAP requires a method for recognizing
fees and administrative costs of originating, restructuring, or
syndicating international loans that is slightly different from the
method required by former Sec. 28.53. However, adoption of the GAAP
standard will not impose additional burden on banks, and will reduce
burden in some instances.
This final rule does not affect, in any way, the standards by which
a bank recognizes loss on international assets affected by transfer
risk,1 nor does it change the accounting treatment of a
bank's transfer risk reserve. As discussed earlier, the final rule
merely changes the accounting treatment of fees that banks collect on
international loans
[[Page 57048]]
by adopting GAAP accounting requirements for fee income on loans.
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\1\ ``Transfer risk'' arises from an obligor's inability to
perform on its debt obligations using the agreed-upon currency
because of a lack of, or restraints on the availability of, needed
foreign exchange in the country of the obligor.
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The change summarized above removes the need to define the terms
``international syndicated loan'' and ``loan agreement,'' which are
used only in the discussion in former Sec. 28.53. Accordingly, the rule
amends Sec. 28.51 by removing the definitions of ``international
syndicated loan'' and ``loan agreement'' from Sec. 28.51 (e) and (f),
respectively, and redesignating the remaining definitions as
appropriate.
Regulatory Flexibility Act
It is hereby certified that this final rule will not have a
significant economic impact on a substantial number of small entities.
As is explained in the preamble to this final rule, there is only one
substantive change, and this change will simplify the regulation to
make it consistent with GAAP. The rule reduces the regulatory burden on
all national banks that make international loans, regardless of size.
Accordingly, a regulatory flexibility analysis is not required.
Executive Order 12866
The OCC has determined that this final rule is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Act of 1995
The OCC has determined that this final rule will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of more than $100 million in any one year. Accordingly,
consistent with section 202 of the Unfunded Mandates Act of 1995 (2
U.S.C. 1532), the OCC has not prepared a budgetary impact statement or
specifically addressed the regulatory alternatives considered. As
discussed in the preamble, the rule simplifies the discussion
concerning the accounting for fees on international loans to make the
regulation consistent with generally accepted accounting principles.
The rule also makes other nonsubstantive changes to subpart C of Part
28 that are intended to clarify and simplify the rule.
List of Subjects in 12 CFR Part 28
Foreign banking, National banks, Reporting and recordkeeping
requirements.
Authority and Issuance
For the reasons set out in the preamble, the OCC amends part 28 of
chapter I of title 12 of the Code of Federal Regulations as set forth
below:
PART 28--INTERNATIONAL BANKING ACTIVITIES
1. The authority citation for part 28 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 93a, 161, 602, 1818, 3102, 3108,
and 3901 et seq.
Sec. 28.51 [Amended]
2. Section 28.51 is amended by removing paragraphs (e) and (f), and
redesignating paragraphs (g) and (h) as paragraphs (e) and (f),
respectively.
3. Section 28.53 is revised to read as follows:
Sec. 28.53 Accounting for fees on international loans.
(a) Restrictions on fees for restructured international loans. No
banking institution shall charge, in connection with the restructuring
of an international loan, any fee exceeding the administrative costs of
the restructuring unless it amortizes the amount of the fee exceeding
the administrative cost over the effective life of the loan.
(b) Accounting treatment. Subject to paragraph (a) of this section,
a banking institution is to account for fees in accordance with
generally accepted accounting principles.
Dated: October 14, 1998.
Julie L. Williams,
Acting Comptroller of the Currency.
[FR Doc. 98-28593 Filed 10-23-98; 8:45 am]
BILLING CODE 4810-33-P
