Federal Register / Vol. 62, No. 63 / Wednesday, April 2, 1997 / Rules and Regulations 15601

final rule on March 19, 1997 (62 FR

13276) in which the Board added

§§ 208.25 and 208.129 to Regulation H

(12 CFR part 208). The Board’s

amendatory instruction number 3.

‘‘§ 208.129 is added to subpart B’’ will

be corrected to read ‘‘§ 208.129 is added

to subpart E’’. In § 208.129, paragraph

(b), in the first sentence, the cite

‘‘§ 208.25(b)’’ will be corrected to read

‘‘§ 208.25(d).’’

In final rule FR Doc. 97–6803,

published on March 19, 1997 (62 FR

13276), make the following corrections:

1. On page 13285, in the third

column, instruction 3., remove ‘‘subpart

B’’ and add in its place ‘‘subpart E.’’

2. On page 13285, in the third

column, under § 208.129, paragraph (b),

in the first sentence, remove

‘‘§ 208.25(b)’’ and add in its place

‘‘§ 208.25(d).’’

By order of the Board of Governors of the

Federal Reserve System, March 28, 1997.

Jennifer J. Johnson,

Deputy Secretary of the Board.

[FR Doc. 97–8358 Filed 4–1–97; 8:45 am]

BILLING CODE 6210–01–P

SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

Business Loan Programs

AGENCY: Small Business Administration.

ACTION: Interim final rule.

SUMMARY: The U.S. Small Business

Administration (SBA) is modifying its

rules regarding the financing and

securitization of the unguaranteed

portion of loans it guarantees under

Section 7(a) of the Small Business Act.

Present SBA regulations allow only nondepository lenders to engage in these

practices (13 CFR 120.420, revised as of

March 1, 1996). This interim rule will

permit both depository and nondepository lenders to pledge or sell the

unguaranteed portions of SBA

guaranteed loans.

During the pendency of this interim

final rule, subject to compliance with all

other aspects of the interim final rule,

SBA expects to give favorable review to

any transaction which complies with

the retainage requirements described in

the notice of proposed rulemaking

relevant to financing and securitization

which appeared in the Federal Register

on February 26, 1997. If SBA is

presented with a transaction which is

not structured in a manner consistent

with such retainage requirements, SBA

will need to assure itself as to safety and

soundness considerations and

compliance with the interim rule before

giving its approval.

DATES: Effective: April 2, 1997.

Comments must be submitted on or

before May 2, 1997.

ADDRESSES: Please mail all comments to

Jane Palsgrove Butler, Acting Associate

Administrator for Financial Assistance,

U.S. Small Business Administration,

409 Third Street, SW, Room 8200,

Washington, D.C. 20416.

FOR FURTHER INFORMATION CONTACT:

James W. Hammersley, Acting Deputy

Associate Administrator for Financial

Assistance, (202) 205–7505.

SUPPLEMENTARY INFORMATION: Over the

past several years, the average SBA

guarantee under its guaranteed business

loan program (program) has decreased

from nearly 90% to approximately 75%.

This 150% increase in lender exposure

requires lenders participating in the

program to commit substantially more

of their own capital in order to support

their dollar volume of SBA guaranteed

loans. In 1992, SBA promulgated

regulations that permitted nondepository lenders participating in the

program to pledge or sell the

unguaranteed portions of SBA

guaranteed loans, thereby permitting

them to fund unguaranteed portions of

SBA guaranteed loans with the proceeds

of loans or securities offerings

(securitizations). (See 13 CFR § 120.420,

revised as of March 1, 1996.)

Since that time, bank (depository)

participants have asked SBA to modify

its regulations to provide them the same

ability to offset the increase in

commitment of capital needed for them

to continue participation in the

program. These lenders have told SBA

that, in many cases, it is more efficient

to raise funds through a pledge or

securitization than to attract additional

deposits.

Congress has now recognized the

need to permit all participants in the

program to have a level playing field in

raising capital needed to fund the

increased requirement for unguaranteed

portions. Therefore, recent legislation

prohibits the sale of unguaranteed

portions under SBA’s present

regulations after March 31, 1997, unless

SBA develops regulations permitting all

participating lenders to sell the

unguaranteed portions of their SBA

guaranteed loans. See § 103(e) of Public

Law 104–408, Oct. 1, 1996, which

directs SBA to promulgate a final

regulation ‘‘that applies uniformly to

both depository institutions and other

lenders * * * setting forth the terms

and conditions under which such sales

can be permitted, including

maintenance of appropriate reserve

requirements and other safeguards to

protect the safety and soundness of the

program.’’

On November 29, 1996, SBA

published an advance notice of

proposed rulemaking which requested

the views of interested parties on how

this statutory requirement might be

satisfied. 61 FR 60649, Nov. 29, 1996.

SBA received nine responses,

including one response which had four

signatories. The comments addressed

several questions posed in the advance

notice of proposed rulemaking regarding

how the statutory mandate should be

satisfied.

On February 26, 1997, at 62 FR 8640,

SBA published a notice of proposed

rulemaking on this subject. The

proposed rulemaking took the

comments on the advance notice of

proposed rulemaking fully into

consideration. The public was given 30

days to comment on the proposal. As of

March 21, 1997, SBA had not received

any comments from the public in

response to the proposed rulemaking.

SBA recognizes the complexity of the

issues surrounding the various means

for implementing the statutory mandate.

It is clear that additional time will be

necessary to develop a full spectrum of

comment on the notice of proposed

rulemaking. It is SBA’s desire to have

the broadest possible public

involvement in this rulemaking. At the

same time, SBA does not wish to

penalize any lender seeking to conduct

a pledging or sale transaction after

March 31, 1997.

Under these circumstances, SBA has

decided to extend, for an additional 30

days, the comment period on its

proposed rule. Pending its review of all

comments received and its issuance of

a final rule on the subject, SBA also will

promulgate an interim final rule which

will allow all lenders in the program to

proceed with securitizations, subject to

prior SBA approval on a case by case

basis. In this regard, SBA will extend to

all of its lenders, on an interim basis, an

existing regulation which previously

has been applicable only to nondepository lenders. This will afford SBA

the opportunity to obtain further public

comment, to consider how best to

implement the statutory directive that a

new rule be finalized, and to permit

interim transactions to go forward on a

basis consistent with safety and

soundness in the program.

SBA is convinced that it can review

any transactions which take place

during the interim period in a manner

sufficient to protect such safety and

soundness. It should be noted that all

pledging or sale transactions which

have taken place since 1992 have been
15602 Federal Register / Vol. 62, No. 63 / Wednesday, April 2, 1997 / Rules and Regulations

carefully reviewed by SBA personnel.

SBA has ensured that language adequate

to protect its interest has been built into

the documentation for all of these

transactions and that the transactions

themselves do not add undue risk to the

program. It will employ similar

procedures in reviewing any

transactions taking place during the

pendency of the interim rule.

While interested in receiving

extensive comments on its proposed

rule, SBA still believes that it sets out

a reasonable approach to approving

sales of the unguaranteed portions of

SBA loans. Accordingly, subject to

compliance with all other aspects of the

interim rule, SBA expects to give

favorable review to any interim period

transaction which complies with the

retainage requirements described in the

notice of proposed rulemaking. If it is

presented with a transaction which is

not structured in a manner consistent

with such retainage requirements, SBA

will need to assure itself as to safety and

soundness considerations and

compliance with the interim rule before

giving its approval.

As expressed in both the advance

notice and the notice of proposed

rulemaking, SBA is concerned that there

are multiple issues which need to be

fully explored before this extremely

complex matter is finally resolved. It is

SBA’s expectation that the public will

comment on the substance of both the

advance notice and the proposed rule

during the pendency of this interim

final rule, and that such comment will

serve as the basis for a new final rule to

be published shortly after the extended

comment period closes.

Compliance With Executive Orders

12612, 12778, and 12866, the Regulatory

Flexibility Act (5 U.S.C. 601, et seq.),

and the Paperwork Reduction Act (44

U.S.C. Ch. 35).

SBA certifies that this interim final

rule does not constitute a significant

rule within the meaning of Executive

Order 12866 and will not have a

significant economic impact on a

substantial number of small entities

within the meaning of the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq. It

believes this rule is not likely to have an

annual economic effect of $100 million

or more, but requests comment from the

public on its perception of the costs and

benefits associated with this rule to

enable it to decide whether to prepare

a cost benefit analysis in conjunction

with the final rule. SBA believes that

the rule will not result in a major

increase in costs or prices, or have a

significant adverse effect on competition

or the United States economy.

The rule is consistent with the

mandate of section 103(e) of Public Law

104–208 that it set forth terms and

conditions under which sales for the

purpose of securitization can be

permitted, including the maintenance of

appropriate reserve requirements and

other safeguards to protect the safety

and soundness of the program. SBA

believes that the reserve requirements

and other safeguards built into the rule

satisfy this concern. For the reasons set

forth above, SBA believes that the rule

will help SBA lenders support an

increased volume of SBA lending.

Finally, the rule has no negative impact

on State, local, or tribal governments.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this final rule contains no

new reporting or record keeping

requirements.

For purposes of Executive Order

12612, SBA certifies that this rule has

no federalism implications warranting

the preparation of a Federalism

Assessment.

For purposes of Executive Order

12778, SBA certifies that this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in Section 2 of that Order.

List of Subjects in 13 CFR Part 120

Business loans.

For the reasons set forth above, SBA

amends Part 120 of Title 13, Code of

Federal Regulations, as follows:

PART 120—BUSINESS LOANS

1. The authority citation for part 120

continues to read as follows:

Authority: 15 U.S.C. 634(b)(6) and 636 (a)

and (h).

2. Section 120.420 is revised to read

as follows:

§ 120.420 Financings by participating

lenders.

(a) A Lender may pledge the notes

evidencing SBA guaranteed loans or sell

the unguaranteed portions of such loans

if SBA, notwithstanding the provisions

of Sec. 120.453(c), in its sole discretion,

gives its prior written consent. The

Lender must be secure financially and

have a history of compliance with SBA’s

regulations and any other applicable

state or Federal statutory and regulatory

requirements.

(b) The Lender, SBA, and any third

party involved in the transaction, as

determined by SBA in its sole

discretion, must enter into a written

agreement satisfactory to SBA

acknowledging SBA’s interest as

guarantor of the subject loans and

accepting that all relevant third parties

agree to recognize and uphold those

interests under the Act, this part, and

the contractual provisions of SBA’s

Loan Guarantee Agreement. In any such

agreement, the parties must agree to the

following conditions:

(1) The Lender, SBA, or third party

custodian agreeable to SBA, will hold all

pertinent Loan Instruments, and the Lender

will continue to service the loans after the

pledge or transfer is made; and

(2) The Lender must retain an economic

risk in and bear the ultimate risk of loss on

the unguaranteed portions. This must be

demonstrated to SBA’s satisfaction by

establishing a sufficient reserve fund at the

time of sale of the unguaranteed portions

and, in the case of pledging notes, by

retaining all of the economic interest in the

unguaranteed portion of any loan which a

note evidences.

(c) The Lender may not use SBA

guaranteed loans or the collateral

supporting such loans as collateral for

any borrowing not related to financing

of the guaranteed or unguaranteed

portion of SBA loans.

Dated: March 26, 1997.

Ginger Ehn Lew,

Acting Administrator.

[FR Doc. 97–8416 Filed 4–1–97; 8:45 am]

BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Airspace Docket No. 96–ANM–027]

Amendment of Class E Airspace;

Montrose, Colorado

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule.

SUMMARY: This action amends the

Montrose, Colorado, Class E airspace to

accommodate a new Global Positioning

System (GPS) Standard Instrument

Approach Procedure (SIAP) to the

Montrose Regional Airport.

EFFECTIVE DATE: 0901 UTC, July 17,

1997.

FOR FURTHER INFORMATION CONTACT:

Ted Melland, Operations Branch, ANM–

532.1, Federal Aviation Administration,

Docket No. 96–ANM–027, 1601 Lind

Avenue SW., Renton, Washington

98055–4056; telephone number: (206)

227–2535.

SUPPLEMENTARY INFORMATION:

History

On January 29, 1997, the FAA

proposed to amend part 71 of the