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 
DEBEN-
TURES.
Paragraph (6) of section 508(c) of the Small Busi-
ness Investment Act of 1958 (15 U.S.C. 697e(c)) is
amended—
(1) by striking ‘‘The Administration’’ and in-
serting the following:
‘‘(A) IN GENERAL.—The Administration’’;
and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) TEMPORARY REDUCTION BASED ON
OUTSTANDING
BALANCE.—Notwithstanding
subparagraph (A), during the 2-year period be-
ginning on the date that is 90 days after the
date of the enactment of this subparagraph, the
Administration shall allow the certified develop-
ment company to withdraw from the loss re-
serve such amounts as are in excess of 1 per-
cent of the aggregate outstanding balances of
debentures to which such loss reserve relates.
The preceding sentence shall not apply with re-
spect 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 eli-
gible calendar quarter, any qualified high loss
reserve PCL may elect to have the requirements
of this paragraph apply in lieu of the require-
ments of paragraphs (2) and (4) for such quar-
ter.
‘‘(B) CONTRIBUTIONS.—
‘‘(i) 
ORDINARY
RULES
INAPPLI-
CABLE.—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 elec-
tion described in subparagraph (A) with
respect to any calendar quarter shall, be-
fore 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 Ad-
ministrator 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
INAPPLI-
CABLE.—Paragraph (6) shall not apply
with respect to any qualified high loss re-
serve PCL for any calendar quarter for
which an election is in effect under sub-
paragraph (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 re-
serve, 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 pro-
tect the Federal Government from
risk of loss.
‘‘(D) RECONTRIBUTION.—If the require-
ments of this paragraph apply to a qualified
high loss reserve PCL for any calendar quarter
and cease to apply to such PCL for any subse-
quent 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 Ad-
ministrator may require that such payment be
made as a single payment or as a series of pay-
ments.
‘‘(E) RISK MANAGEMENT.—If a qualified
high loss reserve PCL fails to meet the require-
ment of subparagraph (F)(iii) during any pe-
riod for which an election is in effect under sub-
paragraph (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 de-
scribed in subparagraph (D). The Adminis-
trator may waive the requirements of this sub-
paragraph.
‘‘(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 sen-
tence 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 asso-
ciated with its portfolio of PCLP loans and
for grading each PCLP loan made by the
company on the basis of the risk of loss as-
sociated with such loan; and
‘‘(iii) the company meets or exceeds 4
or more of the specified risk management
benchmarks as of the most recent assess-
ment by the Administration or the Admin-
istration has issued a waiver with respect
to the requirement of this clause.
‘‘(G) 
SPECIFIED
RISK
MANAGEMENT
BENCHMARKS.—For purposes of this para-
graph, the term ‘specified risk management
benchmarks’ means the following rates, as de-
termined by the Administrator:
‘‘(i) Currency rate.
‘‘(ii) Delinquency rate.
‘‘(iii) Default rate.
‘‘(iv) Liquidation rate.
‘‘(v) Loss rate.
‘‘(H) QUALIFIED
INDEPENDENT
AUDI-
TOR.—For purpose of this paragraph, the term
‘qualified independent auditor’ means any audi-
tor who—
‘‘(i) is compensated by the qualified
high loss reserve PCL;
‘‘(ii) is independent of such PCL; and
‘‘(iii) has been approved by the Ad-
ministrator 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 be-
gins after the end of the 90-day period be-
ginning with the date of the enactment of
this paragraph; and
‘‘(ii) the 7 succeeding calendar quar-
ters.
‘‘(K) CALENDAR QUARTER.—For purposes
of this paragraph, the term ‘calendar quarter’
means—
‘‘(i) the period which begins on Janu-
ary 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 Octo-
ber 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 Con-
gress regulations to carry out this paragraph.
Such regulations shall include provisions relat-
ing 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 wheth-
er 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 Administra-
tion 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 Ad-
ministrator 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 pre-
pared to carry out any functions des-
ignated under subparagraph (B), and
‘‘(ii) the Office of the Inspector Gen-
eral 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 RE-
LATED TO DEBENTURES ISSUED DURING ELECTION PE-
RIOD.—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 ‘‘sub-
section (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 experi-
enced in community development lending and finan-
cial regulation or with a member of the Federal Fi-
nancial Institutions Examinations Council to study
and prepare a report regarding—
(A) the extent to which statutory require-
ments have caused overcapitalization in the loss
reserves maintained by certified development
companies participating in the Premier Cer-
tified Lenders Program established under sec-
tion 508 of the Small Business Investment Act
of 1958 (15 U.S.C. 697e); and
(B) alternatives for establishing and main-
taining loss reserves that are sufficient to pro-
tect 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 Busi-
ness 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:
Clerk.