Full text of District Notices (Federal Reserve Bank of Dallas) : FFIEC Report to Congress, Circular No. 83-58

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F ederal

reserve

Ba n k

DALLAS, TEXAS

of

Dallas

75222

Circular No. 83-58
April 11, 1983

FFIEC REPORT TO CONGRESS
TO ALL MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Attached is a press release of the Federal Financial Institutions
Examination Council and its report and recommendation to Congress with respect
to the Bank Export Services Act.
Questions regarding the material contained in this circular should be
directed to the Legal Department, Extension 6171.
Additional copies of this circular will be furnished upon request to the
Public Affairs Department, Extension 6289.
Sincerely yours,

William H. Wallace
First Vice President

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

Federal Financial Institutions Examination Council, Washington, D.C. 20219

________________________________________________________________________

Press Release
For immediate release

March 30, 1983

Chairman J. Charles Partee has submitted the attached report
and recommendations to Congress with respect to the Bank Export Services
Act (BESA), on behalf of the Federal Financial Institutions Examination
Council.
The report was made in accordance with the Conference Report
on the Export Trading Company Act of 1982, of which the BESA is part,
which requested that the Council send to committees of Congress within
eighteen months results of its analysis, a report of regulatory actions
and legislative recommendations.

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Board of Governors o f the Federal Reserve System, Federal Deposit Insurance Corporation, Federal Home Loan Bank Board,
National Credit Union Administration, O ffice of the Comptroller of the Currency

Federal Financial Institutions Examination Council, Washington, D.C. 20219

March 25, 1983

The Hon ora ble Fernand J. St Germain
Chai rman
Committ ee on Banking, H ousing &
Urban Affairs
House of R e p r esen tat ives
Wa shin gton , DC 20515
Dear Mr. Chairman:
On b eha l f of the Exa mina tion Council, I am pl eased to submit the Co uncil's
report on section 207 of the Bank Ex port Services Act (BESA — Tit le II of
P.L. 97-290) in accor dan ce with the C o nf eren ce Repo rt on the Export Tra ding
Com pan y Act of 1982.
The confer ees re quested that the Council “ report to the
respect ive committ ees of j u r i s d i c t i o n w i t h i n 18 months a f t e r the date of
enactment, the results of its analysis, a s ummary of any individual r e g ulat ory
agency action viewed as needed, and any leg i s l a t i v e r e c o m m e nd ati ons relating
to safety and soundness c o n s i d e rat ions ."
In a letter to you of July 23, 1982, I ex p r e s s e d my concerns wit h the
e x p l a n a t i o n in the House Banking Co m m i t t e e Report of the bankers' accep tanc es
pro vis ions of H.R. 6016.
In the letter, I r e q u e sted that Congress clarify
w h e t h e r certain "risk" p a r t i c i p a t i o n s wer e inten ded to be au tho r i z e d for
certain types of d e p o s i t o r y institutions.
Risk p ar t i c i p a t i o n s involve the
a c c ep ting bank co nvey ing to others part of its cre dit risk in the transaction.
The a ccep tin g bank, however, remains legally and d i r e c t l y liable to the hold er
for the full amou nt of the acc ep t a n c e at maturity.
The p a r ti cipa tin g bank
must pay the amo unt of its p a r t i c i p a t i o n share to the a c c e p ting bank when the
ac c e p t a n c e matures in the even t the a c c ount party defaults on its obligations.
The su bse q u e n t l e gis lati ve h i s tor y of
the bankers'
acc ep t a n c e provision
appears to clari fy the intent of C ongress in this area.
The Council has
re cently c o n s i d e r e d this issue and has con c l u d e d that section 207 of the BESA
aut hor izes m e m b e r banks and U.S. branches and age ncie s of f oreign banks that
are subject
to
the
lim itations
of
this
section
to
en gage in
such
participations.
My
letter
also
e x p r e ssed
the
concern
about
the
i mpl ications
of
risk
par tic i p a t i o n s in bankers' a ccep tan ces for the safety and so undness of banks.
The Council, however, has r e ce ntly takenaction wit h regard to the
reporting
of such parti cipa tio ns w h i c h we b elieve will e nable the agencies to m o n i t o r
more e f f e c t i v e l y deve lop ment s in this area that may have implications for
safety and soundness.
Und er these reporting requirements, the a c c epti ng bank
will report on the balance sheet of its Report of Co ndit ion the total a mount
Board of Governors of the Federal Reserve System. Federal D eposit Insurance Corporation, Federal Hom e Loan Bank Board,
N ational Credit Union Adm inistration, O ffice of the Com ptroller of the Currency

The H o n o r a b l e Fernand J. St Germain

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of
its acce p t a n c e s
o u t s t a n d i n g w h e t h e r or not p a r t i cip ati ons
in those
a c c e p t a n c e s have been c o nve yed to others.
This
reporting tre atm ent is
c o n s i d e r e d by the Council to be app r o p r i a t e because the a cce ptin g bank is
liable to the
ac cep t a n c e h ol d e r for the full
amount,
of the a c c ep tanc e
ir r e s pect ive of the riskp a r t i c i p a t i o n arrangement.
The
s u p e r vi sory agencies
will, however, haveinfo rma tion on
such p arti ci p a t i o n s because of the
data
that banks will be required to provide on Schedu le L of the Report of
Condition, " C o mmit ment s and C o n t inge nci es," b egin ning with the June 30, 1983
report.
Accepting
banks that have c o nve yed p a r t i ci pati ons to others
will
report the amo unt of such p arti ci p a t i o n s on Sche dule L, and the banks that
have a c q u i r e d such p ar t i c i p a t i o n s will also report the total amount for which
they are c o n t i n g e n t l y liable on the same schedule.
As we gain exp er i e n c e with
this appro ach, we may find it d e s ir abl e to m o d i f y the re porting procedures.
Such ch anges ma y also be w a r r a n t e d
in the ev ent of future regulator y
clarifi cat ions .
Th e r e remains the q ue sti on of the defin itio n of an a cce p t a n c e part ici pati on
for p urposes of d e t e r mini ng c o m p l i a n c e with the limits on the aggrega te amount
of e l i g i b l e bankers' a c c epta nce s that may be issued by an individual m e m b e r
bank and by U.S. b ranches and agencies of a foreign bank subject to the
l i m i t atio ns of
the Act.
Becau se the statute s peci f i c a l l y au thorizes the
Federal R eserve Board todefine f u r t h e r any of the terms
used in section 207
of the BESA, the Councilis not a d d r essi ng this m a t t e r
in this report.
The
Council u n der sta nds
that the Board will take up this ques tio n in the
near
future.
If yo u or y o u r staff have any questi ons about this report, pl ease contact Mr.
Robert J. Lawrence, the Co unc il's Execu tive Secretary, on 447-0939.

cc:

The Ho n o r a b l e Chalmers P. Wylie

(Also to Senator Jake Garn, Chairman of the Senate Committee on
and Urban Affairs, and to The Honorable William Proxmire.)

Banking, Housing