---
kind: "section"
citation: "12 U.S.C. § 1835"
title: "12"
title_heading: "Banks and Banking"
number: "1835"
heading: "Insured depository institution capital requirements for transfers of small business obligations"
release: "119-102"
url: "https://uscodex.org/usc/12/1835"
units:
  - "Chapter 16 — Federal Deposit Insurance Corporation"
---

# §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](#i-8) loan or a lease of personal property with [recourse](#i-7) contained in reports or statements required to be filed with [Federal banking agencies](#i-4) by a qualified [insured depository institution](/usc/12/1813.md?p=c-2) shall be consistent with generally accepted accounting principles.
- (b) **Capital and reserve requirements—** With respect to the transfer of a [small business](#i-8) loan or lease of personal property with [recourse](#i-7) that is a sale under generally accepted accounting principles, each qualified [insured depository institution](/usc/12/1813.md?p=c-2) shall—
  - (1) establish and maintain a reserve equal to an amount sufficient to meet the reasonable estimated liability of the institution under the [recourse](#i-7) arrangement; and
  - (2) include, for purposes of applicable [capital standards](#i-3) and [other capital measures](#i-6), only the amount of the retained [recourse](#i-7) in the risk-weighted assets of the institution.
- (c) **Qualified institutions criteria—** An [insured depository institution](/usc/12/1813.md?p=c-2) is a qualified [insured depository institution](/usc/12/1813.md?p=c-2) for purposes of this section if, without regard to the accounting principles or [capital](/usc/12/51c.md) requirements referred to in subsections [(a)](#a) and [(b)](#b), the institution is—
  - (1) [well capitalized](/usc/12/24a.md?p=g-5); or
  - (2) with the approval, by regulation or order, of the [appropriate Federal banking agency](/usc/12/1813.md?p=q), [adequately capitalized](/usc/12/1787.md?p=k-4-C-i).
- (d) **Aggregate amount of recourse—** The total outstanding amount of [recourse](#i-7) retained by a qualified [insured depository institution](/usc/12/1813.md?p=c-2) with respect to transfers of [small business](#i-8) loans and leases of personal property under subsections [(a)](#a) and [(b)](#b) shall not exceed—
  - (1) 15 percent of the risk-based [capital](/usc/12/51c.md) of the institution; or
  - (2) such greater amount, as established by the [appropriate Federal banking agency](/usc/12/1813.md?p=q) by regulation or order.
- (e) **Institutions that cease to be qualified or exceed aggregate limits—** If an [insured depository institution](/usc/12/1813.md?p=c-2) ceases to be a qualified [insured depository institution](/usc/12/1813.md?p=c-2) or exceeds the limits under [subsection (d)](#d), this section shall remain applicable to any transfers of [small business](#i-8) 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](/usc/12/51c.md) of an [insured depository institution](/usc/12/1813.md?p=c-2) shall be computed without regard to this section in determining whether the institution is [adequately capitalized](/usc/12/1787.md?p=k-4-C-i), undercapitalized, significantly undercapitalized, or [critically undercapitalized](/usc/12/347b.md?p=b-5-B) under [section 1831o](/usc/12/1831o.md) of this title.
- (g) **Regulations required—** Not later than 180 days after September 23, 1994, each [appropriate Federal banking agency](/usc/12/1813.md?p=q) shall promulgate final regulations implementing this section.
- (h) **Alternative system permitted—**
  - (1) **In general—** At the discretion of the [appropriate Federal banking agency](/usc/12/1813.md?p=q), this section shall not apply if the regulations of the [agency](/usc/12/1422.md?p=12) provide that the aggregate amount of [capital](/usc/12/51c.md) and reserves required with respect to the transfer of [small business](#i-8) loans and leases of personal property with [recourse](#i-7) does not exceed the aggregate amount of [capital](/usc/12/51c.md) and reserves that would be required under [subsection (b)](#b).
  - (2) **Existing transactions not affected—** Notwithstanding [paragraph (1)](#h-1), this section shall remain in effect with respect to transfers of [small business](#i-8) loans and leases of personal property with [recourse](#i-7) by qualified [insured depository institutions](/usc/12/1813.md?p=c-2) occurring before the effective date of regulations referred to in [paragraph (1)](#h-1).
- (i) **Definitions—** For purposes of this section—
  - (1) the term “[adequately capitalized](/usc/12/1787.md?p=k-4-C-i)” has the same meaning as in [section 1831o(b)](/usc/12/1831o.md?p=b) of this title;
  - (2) the term “[appropriate Federal banking agency](/usc/12/1813.md?p=q)” has the same meaning as in [section 1813 of this title](/usc/12/1813.md);
  - (3) the term “capital standards” has the same meaning as in [section 1831o(c)](/usc/12/1831o.md?p=c) of this title;
  - (4) the term “Federal banking agencies” has the same meaning as in [section 1813 of this title](/usc/12/1813.md);
  - (5) the term “[insured depository institution](/usc/12/1813.md?p=c-2)” has the same meaning as in [section 1813 of this title](/usc/12/1813.md);
  - (6) the term “other capital measures” has the meaning as in [section 1831o(c)](/usc/12/1831o.md?p=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](/usc/15/632.md?p=a); and
  - (9) the term “[well capitalized](/usc/12/24a.md?p=g-5)” has the same meaning as in [section 1831o(b)](/usc/12/1831o.md?p=b) of this title.

## Source credit

(Pub. L. 103–325, title II, § 208, Sept. 23, 1994, 108 Stat. 2201.)

## Notes

### Editorial Notes

### Codification

Section was enacted as part of the Small Business Loan Securitization and Secondary Market Enhancement Act of 1994 and as part of the Riegle Community Development and Regulatory Improvement Act of 1994, and not as part of the Federal Deposit Insurance Act which comprises this chapter.