---
kind: "section"
citation: "12 U.S.C. § 3904"
title: "12"
title_heading: "Banks and Banking"
number: "3904"
heading: "Reserves"
release: "119-102"
url: "https://uscodex.org/usc/12/3904"
units:
  - "Chapter 40 — International Lending Supervision"
---

# §3904. Reserves

- (a) **Establishment and maintenance of special reserves—**
  - (1) Each [appropriate Federal banking agency](/usc/12/3902.md?p=1) shall require a [banking institution](/usc/12/3902.md?p=2) to establish and maintain a special reserve whenever, in the judgment of such [appropriate Federal banking agency](/usc/12/3902.md?p=1)—
    - (A) the quality of such [banking institution](/usc/12/3902.md?p=2)’s assets has been impaired by a protracted inability of public or private borrowers in a foreign country to make payments on their external indebtedness as indicated by such factors, among others, as—
      - (i) a failure by such public or private borrowers to make full interest payments on external indebtedness;
      - (ii) a failure to comply with the terms of any restructured indebtedness; or
      - (iii) a failure by the foreign country to comply with any International Monetary [Fund](/usc/12/4702.md?p=10) or other suitable adjustment program; or
    - (B) no definite prospects exist for the orderly restoration of debt service.
  - (2) Such reserves shall be charged against current income and shall not be considered as part of [capital](/usc/12/51c.md) and surplus or allowances for possible loan losses for regulatory, supervisory, or disclosure purposes.
- (b) **Accommodation of potential losses on foreign loans by United States banks—** The [appropriate Federal banking agencies](/usc/12/3902.md?p=1) shall analyze the results of foreign loan rescheduling negotiations, assess the loan loss risk reflected in rescheduling agreements, and, using the powers set forth in [section 3907 of this title](/usc/12/3907.md) (regarding [capital](/usc/12/51c.md) adequacy), ensure that the [capital](/usc/12/51c.md) and reserve positions of United States [banks](/usc/12/221a.md?p=a) are adequate to accommodate potential losses on their foreign loans.
- (c) **Regulations and orders of Federal banking agencies—** The [appropriate Federal banking agencies](/usc/12/3902.md?p=1) shall promulgate regulations or orders necessary to implement this section within one hundred and twenty days after November 30, 1983.

## Source credit

(Pub. L. 98–181, title I [title IX, § 905], Nov. 30, 1983, 97 Stat. 1279.)