12 U.S.C. § 347b — Advances to individual member banks on time or demand notes; maturities; time notes secured by mortgage loans covering one-to-four family residences
submitted 113 years ago by ch. 6 to r/title-12-BANKS-AND-BANKING · 937 words · no verdicts yet
A Federal Reserve Bank may lend money to a member bank on notes lasting up to four months. Longer loans are allowed if backed by a mortgage on a one-to-four family home. Loans to weak banks face time limits, though regulators can extend them if the bank is found financially sound. If a very weak bank keeps getting loans and this later costs the FDIC extra money, the Federal Reserve Board must cover that extra loss.
(a) In general: Any Federal Reserve Bank, following rules set by the Board of Governors, may advance money to a member bank on the bank's own time or demand notes. Normally these notes cannot mature more than four months out, and must be secured to the Federal Reserve Bank's satisfaction. There is an exception: notes secured by a mortgage on a one-to-four family home can have longer maturities, whatever the Board allows. Either way, the interest rate equals the lowest discount rate in effect at that Federal Reserve Bank on the day the note is made.
(b) Limitations on advances:
(1) Limitation on extended periods: Except as paragraph (2) allows, advances to an "undercapitalized" depository institution cannot stay outstanding for more than 60 days within any 120-day period.
(2) Viability exception: (A) If the head of the institution's federal banking regulator certifies in writing, in advance, that the institution is "viable," or if the Board examines the institution and its Chairman certifies in writing that it is viable, the 60-day limit in paragraph (1) does not apply during the 60 days after that certification. (B) That 60-day period can be extended for further 60-day periods each time a new written certification arrives. (C) The authority to certify viability cannot be delegated to anyone else. (D) Even without a viability certificate, the Board can let an undercapitalized institution keep advances outstanding beyond 60 days by choosing to treat the institution as "critically undercapitalized" under paragraph (3), with the advance treated the way paragraph (3)(A)(i) describes.
(3) Advances to critically undercapitalized depository institutions: (A) If a critically undercapitalized institution still has an advance outstanding and unpaid 5 days after becoming critically undercapitalized, or gets a new advance after that point, and the FDIC's Deposit Insurance Fund later loses more money than it would have lost by liquidating the institution right then, the Board must pay the FDIC that extra loss — regardless of the advance's terms or collateral. (B) The Board's liability is capped at the smaller of: (i) what the loss would have been on the increased advances if they had been unsecured, or (ii) the interest actually received on those increased advances. (C) The Board must pay the FDIC whatever it owes under (A). (D) The Board must report to Congress on any such excess-loss payment, and the reasons for it, within 6 months of incurring the liability.
(4) No obligation to make advances: A Federal Reserve Bank is never required to make, increase, renew, or extend any advance or discount to any depository institution.
(5) Definitions: (A) "appropriate Federal banking agency" has the meaning given in section 1813; (B) "critically undercapitalized" has the meaning given in section 1831o; (C) "depository institution" has the meaning given in section 1813; (D) "undercapitalized depository institution" means an institution that is undercapitalized under section 1831o, or that received a composite CAMEL rating of 5 (or an equivalent rating) at its most recent examination; (E) an institution is "viable" if the Board or its regulator determines, given the economic conditions where it operates, that the institution is not critically undercapitalized, is not expected to become critically undercapitalized, and is not expected to be placed into conservatorship or receivership.
Any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time or demand notes having maturities of not more than four months and which are secured to the satisfaction of such Federal Reserve bank.
Notwithstanding the foregoing, any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time notes having such maturities as the Board may prescribe and which are secured by mortgage loans covering a one-to-four family residence. Such advances shall bear interest at a rate equal to the lowest discount rate in effect at such Federal Reserve bank on the date of such note.
Except as provided in paragraph (2), no advances to any undercapitalized depository institution by any Federal Reserve bank under this section may be outstanding for more than 60 days in any 120-day period.
If—
the head of the appropriate Federal banking agency certifies in advance in writing to the Federal Reserve bank that any depository institution is viable; or
the Board conducts an examination of any depository institution and the Chairman of the Board certifies in writing to the Federal Reserve bank that the institution is viable,
the limitation contained in paragraph (1) shall not apply during the 60-day period beginning on the date such certification is received.
The 60-day period may be extended for additional 60-day periods upon receipt by the Federal Reserve bank of additional written certifications under subparagraph (A) with respect to each such additional period.
The authority of the head of any agency to issue a written certification of viability under this paragraph may not be delegated to any other person*.
Notwithstanding paragraph (1), an undercapitalized depository institution which does not have a certificate of viability in effect under this paragraph may have advances outstanding for more than 60 days in any 120-day period if the Board elects to treat—
such institution as critically undercapitalized under paragraph (3); and
any such advance as an advance described in subparagraph (A)(i) of paragraph (3).
Notwithstanding any other provision of this section, if—
in the case of any critically undercapitalized depository institution—
any advance under this section to such institution is outstanding without payment having been demanded as of the end of the 5-day period beginning on the date the institution becomes a critically undercapitalized depository institution; or
any new advance is made to such institution under this section after the end of such period; and
after the end of that 5-day period, the Deposit Insurance Fund of the Federal Deposit Insurance Corporation incurs a loss exceeding the loss that the Corporation would have incurred if it had liquidated that institution as of the end of that period,
the Board shall, subject to the limitations in subparagraph (B), be liable to the Federal Deposit Insurance Corporation for the excess loss, without regard to the terms of the advance or any collateral pledged to secure the advance.
The liability of the Board under subparagraph (A) shall not exceed the lesser of the following:
The amount of the loss the Board or any Federal Reserve bank would have incurred on the increases in the amount of advances made after the 5-day period referred to in subparagraph (A) if those increased advances had been unsecured.
The interest received on the increases in the amount of advances made after the 5-day period referred to in subparagraph (A).
The Board shall pay the Federal Deposit Insurance Corporation the amount of any liability of the Board under subparagraph (A).
The Board shall report to the Congress on any excess loss liability it incurs under subparagraph (A), as limited by subparagraph (B)(i), and the reasons therefore, not later than 6 months after incurring the liability.
A Federal Reserve bank shall have no obligation to make, increase, renew, or extend any advance or discount under this chapter to any depository institution.
The term “appropriate Federal banking agency” has the same meaning as in section 1813 of this title.
The term “critically undercapitalized” has the same meaning as in section 1831o of this title.
The term “depository institution” has the same meaning as in section 1813 of this title.
The term “undercapitalized depository institution” means any depository institution which—
is undercapitalized, as defined in section 1831o of this title; or
has a composite CAMEL rating of 5 under the Uniform Financial Institutions Rating System (or an equivalent rating by any such agency under a comparable rating system) as of the most recent examination of such institution.
A depository institution is “viable” if the Board or the appropriate Federal banking agency determines, giving due regard to the economic conditions and circumstances in the market in which the institution operates, that the institution—
is not critically undercapitalized;
is not expected to become critically undercapitalized; and
is not expected to be placed in conservatorship or receivership.
Source credit: (Dec. 23, 1913, ch. 6, § 10B, formerly § 10(b), as added Feb. 27, 1932, ch. 58, § 2, 47 Stat. 56; amended Feb. 3, 1933, ch. 34, 47 Stat. 794; Mar. 9, 1933, ch. 1, title IV, § 402, 48 Stat. 7; Aug. 23, 1935, ch. 614, title II, § 204, 49 Stat. 705; Pub. L. 93–449, § 5, Oct. 18, 1974, 88 Stat. 1368; Pub. L. 96–221, title I, § 106, Mar. 31, 1980, 94 Stat. 140; renumbered § 10B and amended Pub. L. 102–242, title I, § 142(a)(2), (b), Dec. 19, 1991, 105 Stat. 2279; Pub. L. 104–208, div. A, title II, § 2704(d)(9), Sept. 30, 1996, 110 Stat. 3009–489; Pub. L. 109–171, title II, § 2102(b), Feb. 8, 2006, 120 Stat. 9; Pub. L. 109–173, § 9(c), Feb. 15, 2006, 119 Stat. 3616.)
- 1913Enacted · Act of Dec. 23, 1913, ch. 6 · 47 Stat. 56
- 1933Amended · Act of Feb. 3, 1933, ch. 34 · 47 Stat. 794
- 1933Amended · Act of Mar. 9, 1933, ch. 1 · 48 Stat. 7
- 1935Amended · Act of Aug. 23, 1935, ch. 614 · 49 Stat. 705
- 1974Amended · Pub. L. 93-449 · 88 Stat. 1368
- 1980Amended · Pub. L. 96-221 · 94 Stat. 140
- 1991Amended · Pub. L. 102-242 · 105 Stat. 2279
- 1996Amended · Pub. L. 104-208 · 110 Stat. 3009
- 2006Amended · Pub. L. 109-171 · 120 Stat. 9
- 2006Amended · Pub. L. 109-173 · 119 Stat. 3616
A history note hasn’t been published yet. The record shows enactment by ch. 6 on 1913-12-23.
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