[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 923 Enrolled Bill (ENR)]
H.R.923
One Hundred Eighth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the twentieth day of January, two thousand and four
An Act
To amend the Small Business Investment Act of 1958 to allow certain
premier certified lenders to elect to maintain an alternative loss
reserve.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Premier Certified Lenders Program
Improvement Act of 2004''.
SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS TEMPORARILY
DETERMINED ON THE BASIS OF OUTSTANDING BALANCE OF
DEBENTURES.
Paragraph (6) of section 508(c) of the Small Business Investment
Act of 1958 (15 U.S.C. 697e(c)) is amended--
(1) by striking ``The Administration'' and inserting the
following:
``(A) In general.--The Administration''; and
(2) by adding at the end the following new subparagraph:
``(B) Temporary reduction based on outstanding balance.--
Notwithstanding subparagraph (A), during the 2-year period
beginning on the date that is 90 days after the date of the
enactment of this subparagraph, the Administration shall allow
the certified development company to withdraw from the loss
reserve such amounts as are in excess of 1 percent of the
aggregate outstanding balances of debentures to which such loss
reserve relates. The preceding sentence shall not apply with
respect to any debenture before 100 percent of the contribution
described in paragraph (4) with respect to such debenture has
been made.''.
SEC. 3. ALTERNATIVE LOSS RESERVE PILOT PROGRAM FOR CERTAIN PREMIER
CERTIFIED LENDERS.
(a) In General.--Subsection (c) of section 508 of the Small
Business Investment Act of 1958 (15 U.S.C. 697e) is amended by adding
at the end the following new paragraphs:
``(7) Alternative loss reserve.--
``(A) Election.--With respect to any eligible calendar
quarter, any qualified high loss reserve PCL may elect to have
the requirements of this paragraph apply in lieu of the
requirements of paragraphs (2) and (4) for such quarter.
``(B) Contributions.--
``(i) Ordinary rules inapplicable.--Except as provided
under clause (ii) and paragraph (5), a qualified high loss
reserve PCL that makes the election described in
subparagraph (A) with respect to a calendar quarter shall
not be required to make contributions to its loss reserve
during such quarter.
``(ii) Based on loss.--A qualified high loss reserve
PCL that makes the election described in subparagraph (A)
with respect to any calendar quarter shall, before the last
day of such quarter, make such contributions to its loss
reserve as are necessary to ensure that the amount of the
loss reserve of the PCL is--
``(I) not less than $100,000; and
``(II) sufficient, as determined by a qualified
independent auditor, for the PCL to meet its
obligations to protect the Federal Government from risk
of loss.
``(iii) Certification.--Before the end of any calendar
quarter for which an election is in effect under
subparagraph (A), the head of the PCL shall submit to the
Administrator a certification that the loss reserve of the
PCL is sufficient to meet such PCL's obligation to protect
the Federal Government from risk of loss. Such
certification shall be in such form and submitted in such
manner as the Administrator may require and shall be signed
by the head of such PCL and the auditor making the
determination under clause (ii)(II).
``(C) Disbursements.--
``(i) Ordinary rule inapplicable.--Paragraph (6) shall
not apply with respect to any qualified high loss reserve
PCL for any calendar quarter for which an election is in
effect under subparagraph (A).
``(ii) Excess funds.--At the end of each calendar
quarter for which an election is in effect under
subparagraph (A), the Administration shall allow the
qualified high loss reserve PCL to withdraw from its loss
reserve the excess of--
``(I) the amount of the loss reserve, over
``(II) the greater of $100,000 or the amount which
is determined under subparagraph (B)(ii) to be
sufficient to meet the PCL's obligation to protect the
Federal Government from risk of loss.
``(D) Recontribution.--If the requirements of this
paragraph apply to a qualified high loss reserve PCL for any
calendar quarter and cease to apply to such PCL for any
subsequent calendar quarter, such PCL shall make a contribution
to its loss reserve in such amount as the Administrator may
determine provided that such amount does not exceed the amount
which would result in the total amount in the loss reserve
being equal to the amount which would have been in such loss
reserve had this paragraph never applied to such PCL. The
Administrator may require that such payment be made as a single
payment or as a series of payments.
``(E) Risk management.--If a qualified high loss reserve
PCL fails to meet the requirement of subparagraph (F)(iii)
during any period for which an election is in effect under
subparagraph (A) and such failure continues for 180 days, the
requirements of paragraphs (2), (4), and (6) shall apply to
such PCL as of the end of such 180-day period and such PCL
shall make the contribution to its loss reserve described in
subparagraph (D). The Administrator may waive the requirements
of this subparagraph.
``(F) Qualified high loss reserve pcl.--The term `qualified
high loss reserve PCL' means, with respect to any calendar
year, any premier certified lender designated by the
Administrator as a qualified high loss reserve PCL for such
year. The Administrator shall not designate a company under the
preceding sentence unless the Administrator determines that--
``(i) the amount of the loss reserve of the company is
not less than $100,000;
``(ii) the company has established and is utilizing an
appropriate and effective process for analyzing the risk of
loss associated with its portfolio of PCLP loans and for
grading each PCLP loan made by the company on the basis of
the risk of loss associated with such loan; and
``(iii) the company meets or exceeds 4 or more of the
specified risk management benchmarks as of the most recent
assessment by the Administration or the Administration has
issued a waiver with respect to the requirement of this
clause.
``(G) Specified risk management benchmarks.--For purposes
of this paragraph, the term `specified risk management
benchmarks' means the following rates, as determined by the
Administrator:
``(i) Currency rate.
``(ii) Delinquency rate.
``(iii) Default rate.
``(iv) Liquidation rate.
``(v) Loss rate.
``(H) Qualified independent auditor.--For purposes of this
paragraph, the term `qualified independent auditor' means any
auditor who--
``(i) is compensated by the qualified high loss reserve
PCL;
``(ii) is independent of such PCL; and
``(iii) has been approved by the Administrator during
the preceding year.
``(I) PCLP loan.--For purposes of this paragraph, the term
`PCLP loan' means any loan guaranteed under this section.
``(J) Eligible calendar quarter.--For purposes of this
paragraph, the term `eligible calendar quarter' means--
``(i) the first calendar quarter that begins after the
end of the 90-day period beginning with the date of the
enactment of this paragraph; and
``(ii) the 7 succeeding calendar quarters.
``(K) Calendar quarter.--For purposes of this paragraph,
the term `calendar quarter' means--
``(i) the period which begins on January 1 and ends on
March 31 of each year;
``(ii) the period which begins on April 1 and ends on
June 30 of each year;
``(iii) the period which begins on July 1 and ends on
September 30 of each year; and
``(iv) the period which begins on October 1 and ends on
December 31 of each year.
``(L) Regulations.--Not later than 45 days after the date
of the enactment of this paragraph, the Administrator shall
publish in the Federal Register and transmit to the Congress
regulations to carry out this paragraph. Such regulations shall
include provisions relating to--
``(i) the approval of auditors under subparagraph (H);
and
``(ii) the designation of qualified high loss reserve
PCLs under subparagraph (F), including the determination of
whether a process for analyzing risk of loss is appropriate
and effective for purposes of subparagraph (F)(ii).
``(8) Bureau of pclp oversight.--
``(A) Establishment.--There is hereby established in the
Small Business Administration a bureau to be known as the
Bureau of PCLP Oversight.
``(B) Purpose.--The Bureau of PCLP Oversight shall carry
out such functions of the Administration under this subsection
as the Administrator may designate.
``(C) Deadline.--Not later than 90 days after the date of
the enactment of this Act--
``(i) the Administrator shall ensure that the Bureau of
PCLP Oversight is prepared to carry out any functions
designated under subparagraph (B), and
``(ii) the Office of the Inspector General of the
Administration shall report to the Congress on the
preparedness of the Bureau of PCLP Oversight to carry out
such functions.''.
(b) Increased Reimbursement for Losses Related to Debentures Issued
During Election Period.--Subparagraph (C) of section 508(b)(2) of the
Small Business Investment Act of 1958 (15 U.S.C. 697e(b)(2)) is amended
by inserting ``(15 percent in the case of any such loss attributable to
a debenture issued by the company during any period for which an
election is in effect under subsection (c)(7) for such company)''
before ``; and''.
(c) Conforming Amendments.--
(1) Subparagraph (D) of section 508(b)(2) of the Small Business
Investment Act of 1958 (15 U.S.C. 697e(b)(2)) is amended by
striking ``subsection (c)(2)'' and inserting ``subsection (c)''.
(2) Paragraph (5) of section 508(c) of the Small Business
Investment Act of 1958 (15 U.S.C. 697e(c)) is amended by striking
``10 percent''.
(d) Study and Report.--
(1) In general.--The Administrator shall enter into a contract
with a Federal agency experienced in community development lending
and financial regulation or with a member of the Federal Financial
Institutions Examinations Council to study and prepare a report
regarding--
(A) the extent to which statutory requirements have caused
overcapitalization in the loss reserves maintained by certified
development companies participating in the Premier Certified
Lenders Program established under section 508 of the Small
Business Investment Act of 1958 (15 U.S.C. 697e); and
(B) alternatives for establishing and maintaining loss
reserves that are sufficient to protect the Federal Government
from the risk of loss associated with loans guaranteed under
such Program.
(2) Transmission of report.--The report described in paragraph
(1) shall be transmitted to the Committee on Small Business of the
House of Representatives and the Committee on Small Business and
Entrepreneurship of the Senate not later than 90 days after the
date of the enactment of this Act.
(3) Limitation.--The amount of the contract described in
paragraph (1) shall not exceed $75,000.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.