[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR211.45]

[Page 387-388]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)--Table of Contents
 
              Subpart D--International Lending Supervision
 
Sec. 211.45  Accounting for fees on international loans.

    (a) Restrictions on fees for restructured international loans. No 
banking institution shall charge any fee in connection with a 
restructured international loan unless all fees exceeding the banking 
institution's administrative costs, as described in paragraph (c)(2) of 
this section, are deferred and recognized over the term of the loan as 
an interest yield adjustment.
    (b) Amortizing fees. Except as otherwise provided by this section, 
fees received on international loans shall be deferred and amortized 
over the term of the loan. The interest method should be used during the 
loan period to recognize the deferred fee revenue in relation to the 
outstanding loan balance. If it is not practicable to apply the interest 
method during the loan period, the straight-line method shall be used.
    (c) Accounting treatment of international loan or syndication 
administrative costs and corresponding fees. (1) Administrative costs of 
originating, restructuring or syndicating an international loan shall be 
expensed as incurred. A portion of the fee income equal to the banking 
institution's administrative costs may be recognized as income in the 
same period such costs are expensed.
    (2) The administrative costs of originating, restructuring, or 
syndicating an international loan include those costs which are 
specifically identified with negotiating, processing and consummating 
the loan. These costs include, but are not necessarily limited to: legal 
fees; costs of preparing and processing loan documents; and an allocable 
portion of salaries and related benefits of employees engaged in the 
international lending function and, where applicable, the syndication 
function. No portion of supervisory and administrative expenses or other 
indirect expenses such as occupancy and other similar overhead costs 
shall be included.
    (d) Fees received by managing banking institutions in an 
international syndicated loan. Fees received on international syndicated 
loans representing an adjustment of the yield on the loan shall be 
recognized over the loan period using the interest method. If the 
interest yield portion of a fee received on an international syndicated 
loan by a managing banking institution is unstated or differs materially 
from the

[[Page 388]]

pro rata portion of fees paid other participants in the syndication, an 
amount necessary for an interest yield adjustment shall be recognized. 
This amount shall at least be equivalent (on a pro rata basis) to the 
largest fee received by a loan participant in the syndication that is 
not a managing banking institution. The remaining portion of the 
syndication fee may be recognized as income at the loan closing date to 
the extent that it is identified and documented as compensation for 
services in arranging the loan. Such documentation shall include the 
loan agreement. Otherwise, the fee shall be deemed an adjustment of 
yield.
    (e) Loan commitment fees. (1) Fees which are based upon the unfunded 
portion of a credit for the period until it is drawn and represent 
compensation for a binding commitment to provide funds or for rendering 
a service in issuing the commitment shall be recognized as income over 
the term of the commitment period using the straight-line method of 
amortization. Such fees for revolving credit arrangements, where the 
fees are received periodically in arrears and are based on the amount of 
the unused loan commitment, may be recognized as income when received 
provided the income result would not be materially different.
    (2) If it is not practicable to separate the commitment portion from 
other components of the fee, the entire fee shall be amortized over the 
term of the combined commitment and expected loan period. The straight-
line method of amortization should be used during the commitment period 
to recognize the fee revenue. The interest method should be used during 
the loan period to recognize the remaining fee revenue in relation to 
the outstanding loan balance. If the loan is funded before the end of 
the commitment period, any unamortized commitment fees shall be 
recognized as revenue at that time.
    (f) Agency fees. Fees paid to an agent banking institution for 
administrative services in an international syndicated loan shall be 
recognized at the time of the loan closing or as the service is 
performed, if later.

[49 FR 12197, Mar. 29, 1984]

                             Interpretations