TITLE 38: FINANCIAL INSTITUTIONS
CHAPTER II: OFFICE OF BANKS AND REAL ESTATE
PART 335 UNIMPAIRED CAPITAL AND UNIMPAIRED SURPLUS

Section 335.10 Purpose

Section 335.20 Definitions

Section 335.30 General Rule


AUTHORITY: Implementing Section 2 of the Illinois Banking Act [205 ILCS 5/2].


SOURCE: Emergency rule adopted at 18 Ill. Reg. 11662, effective July 8, 1994, for a maximum of 150 days; adopted at 18 Ill. Reg. 17882, effective December 2, 1994; recodified from Chapter II, Commissioner of Banks and Trust Companies, to Chapter II, Office of Banks and Real Estate, pursuant to PA 89-508, at 20 Ill. Reg. 12645.

 

Section 335.10  Purpose

 

Section 2 of the Illinois Banking Act defines "unimpaired capital and unimpaired surplus" as including a bank's "Tier 1 Capital and Tier 2 Capital plus such other shareholder equity as may be included by regulation of the Commissioner."  "Unimpaired capital and unimpaired surplus" is used as the basis for determining a state bank's legal lending and investment limits.  The purpose of the Rule is to add the balance of a state bank's allowance for loan and lease losses, otherwise excluded from Tier 1 Capital and Tier 2 Capital, as additional shareholder equity included in "unimpaired capital and unimpaired surplus."  This addition is consistent with the objective of P.A. 88-546 to permit state banks to use the same elements that national banks use in calculating lending and investment limits, and it will provide needed clarity and consistency  regarding the calculation and application of lending and investment limits by state banks.

 

Section 335.20  Definitions

 

            "Allowance for loan and lease losses"  are reserves that have been established through a charge against earnings to absorb future losses on loans or lease financing receivables.  Allowance for loan and lease losses exclude allocated transfer risk reserves, and reserves created against identified losses.

 

            "Allocated transfer risk reserves" are reserves that have been established in accordance with Section 905(a) of the International Lending Supervision Act of 1983, 12 U.S.C. 3904 (1993), against certain assets whose value has been found by the United States supervisory authorities to have been significantly impaired by protracted transfer risk problems.

 

            "Appropriate federal banking agency" shall have the meaning as defined in  Section 2 of the Illinois Banking Act [205 ILCS 5/2] (see P.A. 88-546, effective June 29, 1994).

 

            "Tier 1 Capital" and "Tier 2 Capital" shall have the meanings as defined in  Section  2 of the Illinois Banking Act [205 ILCS 5/2] (see P.A. 88-546, effective June 29, 1994).

 

Section 335.30  General Rule

 

For the purposes of Section 2 of the Illinois Banking Act, "unimpaired capital and unimpaired surplus" shall include the balance of the state bank's allowance for loan and lease losses not included in the state bank's Tier 1 Capital and Tier 2 Capital.