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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 923 Referred in Senate (RFS)]

  1st Session
                                H. R. 923

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 25, 2003

 Received; read twice and referred to the Committee on Small Business 
                          and Entrepreneurship

_______________________________________________________________________

                                 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 2003''.

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 purpose 
                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.

            Passed the House of Representatives June 24, 2003.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.
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