Under current reserve requirement regulations (Regulation D, amended May 1986), bank loan sales with recourse are regarded as a liability and hence are subject to reserve requirements. The reservability of loan sales extends to a bank issuing a credit guarantee and a recourse provision. Loans sold without recourse (or credit guarantees by the selling bank) are free of reserve requirements. With the elimination of reserve requirements on nontransaction accounts and the lowering of reserve requirements on transaction accounts in 1991, the reserve tax effect is likely to become a less important feature driving bank loan sales (as well as the recourse/nonrecourse mix) in the future.

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