[Federal Register Volume 61, Number 180 (Monday, September 16, 1996)]
[Notices]
[Pages 48687-48695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23623]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
Proposed Agency Information Collection Activities; Comment
AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); and Federal
Deposit Insurance Corporation (FDIC).
ACTION: Notice and request for comment.
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SUMMARY: In accordance with the requirements of the Paperwork Reduction
Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the FDIC
(the ``agencies'') may not conduct or sponsor, and the respondent is
not required to respond to, an information collection that has been
extended, revised, or implemented on or after October 1, 1995, unless
it displays a currently valid Office of Management and Budget (OMB)
control number. The Federal Financial Institutions Examination Council
(FFIEC), of which the agencies are members, has recently approved the
agencies' publication for public comment of proposed revisions to the
Consolidated Reports of Condition and Income (Call Report), which are
currently approved collections of information. At the end of the
comment period, the comments and recommendations received will be
analyzed to determine the extent to which the FFIEC should modify the
proposed revisions prior to giving its final approval. The agencies
will then submit the revisions to OMB for review and approval. Comments
are invited on: (a) Whether the proposed revisions to the following
collections of information are necessary for the proper performance of
the agencies' functions, including whether the information has
practical utility; (b) the accuracy of the agencies' estimate of the
burden of the information collections as they are proposed to be
revised, including the validity of the methodology and assumptions
used; (c) ways to enhance the quality, utility, and clarity of the
information to be collected; and (d)
[[Page 48688]]
ways to minimize the burden of information collection on respondents,
including through the use of automated collection techniques or other
forms of information technology.
DATES: Comments must be submitted on or before November 15, 1996.
ADDRESSES: Interested parties are invited to submit written comments to
any or all of the agencies. All comments, which should refer to the OMB
control number(s), will be shared among the agencies.
OCC: Written comments should be submitted to the Communications
Division, Ninth Floor, Office of the Comptroller of the Currency, 250 E
Street, S.W., Washington, D.C. 20219; Attention: Paperwork Docket No.
1557-0081 [FAX number (202) 874-5274; Internet address:
reg.comments@occ.treas.gov]. Comments will be available for inspection
and photocopying at that address.
Board: Written comments should be addressed to Mr. William W.
Wiles, Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, N.W., Washington, D.C. 20551, or delivered to the
Board's mail room between 8:45 a.m. and 5:15 p.m., and to the security
control room outside of those hours. Both the mail room and the
security control room are accessible from the courtyard entrance on
20th Street between Constitution Avenue and C Street, N.W. Comments
received may be inspected in room M-P-500 between 9:00 a.m. and 5:00
p.m., except as provided in section 261.8 of the Board's Rules
Regarding Availability of Information, 12 CFR 261.8(a).
FDIC: Written comments should be addressed to the Office of the
Executive Secretary, Federal Deposit Insurance Corporation, 550 17th
Street, N.W., Washington, D.C. 20429. Comments may be hand-delivered to
Room F-402, 1776 F Street, N.W., Washington, D.C. 20429, on business
days between 8:30 a.m. and 5:00 p.m. Comments may be sent through
facsimile to: (202) 898-3838 or by the Internet to: comments@fdic.gov.
Comments will be available for inspection at the FDIC Public
Information Center, room 100, 801 17th Street, N.W., Washington, D.C.,
between 9:00 a.m. and 4:30 p.m. on business days.
A copy of the comments may also be submitted to the OMB desk
officer for the agencies: Alexander Hunt, Office of Information and
Regulatory Affairs, Office of Management and Budget, New Executive
Office Building, room 3208, Washington, D.C. 20503.
FOR FURTHER INFORMATION CONTACT: A copy of the proposed revisions to
the collections of information may be requested from any of the agency
clearance officers whose names appear below.
OCC: Jessie Gates, OCC Clearance Officer, (202) 874-5090, Office of
the Comptroller of the Currency, 250 E Street, S.W., Washington, D.C.
20219.
Board: Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829,
Division of Research and Statistics, Board of Governors of the Federal
Reserve System, 20th and C Streets, N.W., Washington, D.C. 20551. For
the hearing impaired only, Telecommunications Device for the Deaf
(TDD), Dorothea Thompson, (202) 452-3544, Board of Governors of the
Federal Reserve System, 20th and C Streets, N.W., Washington, D.C.
20551.
FDIC: Steven F. Hanft, FDIC Clearance Officer, (202) 898-3907,
Office of the Executive Secretary, Federal Deposit Insurance
Corporation, 550 17th Street N.W., Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Proposal To Revise the Following Currently Approved Collections of
Information
Title: Consolidated Reports of Condition and Income
Form Number: FFIEC 031, 032, 033, 034.\1\
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\1\ The FFIEC 031 report form is filed by banks with domestic
and foreign offices. The FFIEC 032 report form is filed by banks
with domestic offices only and total assets of $300 million or more.
The FFIEC 033 report form is filed by banks with domestic offices
only and total assets of $100 million or more but less than $300
million. The FFIEC 034 report form is filed by banks with domestic
offices only and total assets of less than $100 million.
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For OCC:
OMB Number: 1557-0081.
Frequency of Response: Quarterly.
Affected Public: National Banks.
Estimated Number of Respondents: 2,800 national banks.
Estimated Time per Response: 39.62 burden hours.
Estimated Total Annual Burden: 443,744 burden hours.
For Board:
OMB Number: 7100-0036.
Frequency of Response: Quarterly.
Affected Public: State Member Banks.
Estimated Number of Respondents: 1,002 state member banks.
Estimated Time per Response: 45.70 burden hours.
Estimated Total Annual Burden: 183,166 burden hours.
For FDIC:
OMB Number: 3064-0052.
Frequency of Response: Quarterly.
Affected Public: Insured State Nonmember Commercial and Savings
Banks.
Estimated Number of Respondents: 6,668 insured state nonmember
commercial and savings banks.
Estimated Time per Response: 28.72 burden hours.
Estimated Total Annual Burden: 765,900 burden hours.
The estimated time per response varies by agency because of
differences in the composition of the banks under each agency's
supervision (e.g., size distribution of banks, types of activities in
which they are engaged, and number of banks with foreign offices).
General Description of Report: This information collection is
mandatory: 12 U.S.C. 161 (for national banks), 12 U.S.C. 324 (for state
member banks), and 12 U.S.C. 1817 (for insured state nonmember
commercial and savings banks). Except for select sensitive items, this
information collection is not given confidential treatment. Small
businesses (i.e., small banks) are affected.
Abstract: Consolidated Reports of Condition and Income are filed
quarterly with the agencies for their use in monitoring the condition
and performance of reporting banks and the industry as a whole. The
reports are also used to calculate banks' deposit insurance assessments
and for monetary policy and other public policy purposes.
Current Actions: A number of existing items would be consolidated
or deleted. The Call Report instructions would be revised by
eliminating instructions that differ from generally accepted accounting
principles (GAAP) and a small number of new items would be added to
meet supervisory data needs resulting from this move to GAAP. Other new
items would be added to the Call Report that are necessary to enhance
the agencies' ability to monitor interest rate risk, to identify bank
usage of credit derivatives, and to support the FDIC's calculation of
deposit insurance assessments.
Type of Review: Revision.
The proposed revisions to the Consolidated Reports of Condition and
Income (Call Report) that are the subject of this notice have been
approved for publication by the FFIEC. Implementation of these
revisions would take place as of the March 31, 1997, report date. The
proposed changes to the Call Report affect several existing schedules.
Unless otherwise indicated, the Call Report changes apply to all four
sets of report forms (FFIEC 031, 032, 033, and 034). Nonetheless, as is
customary for Call Report changes, banks are advised that, for the
March 31,
[[Page 48689]]
1997, report date, reasonable estimates may be provided for any new or
revised item for which the requested information is not readily
available. The specific wording of the captions for the new or revised
Call Report items discussed below should be regarded as preliminary.
The proposed revisions are summarized as follows:
Deletions and Reductions in Detail
Based on their review of the current content of the Call Report,
the agencies are proposing that several deletions and reductions in
detail be made to the Call Report, generally because the existing items
or current levels of detail are no longer considered sufficiently
useful to warrant their continued collection. These and certain related
modifications to the Call Report would affect the following schedules:
(1) Schedule RC--Balance Sheet:
(a) Items 3.a and 3.b, ``Federal funds sold'' and ``Securities
purchased under agreements to resell,'' would be combined into a single
item (item 3). In addition, on the FFIEC 031 report form, this single
Schedule RC item would begin to be reported on a fully consolidated
basis, rather than including only the domestic offices of the bank, the
domestic offices of the bank's Edge and Agreement subsidiaries, and
IBFs, and corresponding changes would be made to Schedule RC-K--
Quarterly Averages, item 5, and Schedule RI--Income Statement, item
1.f.
(b) Items 14.a and 14.b, ``Federal funds purchased'' and
``Securities sold under agreements to repurchase,'' would be combined
into a single item (item 14). In addition, on the FFIEC 031 report
form, this single Schedule RC item would begin to be reported on a
fully consolidated basis, rather than including only the domestic
offices of the bank, the domestic offices of the bank's Edge and
Agreement subsidiaries, and IBFs, and corresponding changes would be
made to Schedule RC-K--Quarterly Averages, item 13, and Schedule RI--
Income Statement, item 2.b.
(c) Item 17, ``Mortgage indebtedness and obligations under
capitalized leases,'' would be combined with existing item 16, ``Other
borrowed money.'' In addition, on the FFIEC 031, 032, and 033 report
forms, a corresponding change in definition would be made to Schedule
RC-K--Quarterly Averages, item 14, ``Other borrowed money.''
(d) Item 22, ``Limited-life preferred stock and related surplus,''
would be combined with existing item 19, ``Subordinated notes and
debentures.''
(2) Schedule RC-B--Securities:
(a) Items 6.a and 6.b, ``Investments in mutual funds'' and ``Other
equity securities with readily determinable fair values,'' would be
combined into a single item (item 6.a). In addition, on the FFIEC 031
report forms, the corresponding items (items 16.a and 16.b) would be
combined into a single item (item 16.a) on Schedule RC-H--Selected
Balance Sheet Items for Domestic Offices.
(b) Memorandum item 4, ``Held-to-maturity debt securities
restructured and in compliance with modified terms,'' would be deleted.
(3) Schedule RC-C, Part I--Loans and Leases: Memorandum item 1,
``Commercial paper included in Schedule RC-C, part I, above,''
(completed only by banks filing the FFIEC 031, 032, and 033 report
forms) would be deleted. In addition, the instructions would be revised
to indicate that commercial paper should no longer be reported as a
loan in Schedule RC-C, but should be reported as a security in Call
Report Schedule RC-B, normally in item 5, ``Other debt securities.''
(4) Schedule RC-E--Deposit Liabilities: Memorandum item 2.d,
``Open-account time deposits of $100,000 or more'' (in domestic
offices), would be combined with existing Memorandum item 2.c, ``Time
certificates of deposit of $100,000 or more'' (in domestic offices).
Memorandum item 2.c would be recaptioned ``Total time deposits of
$100,000 or more.'' As a result of this change, the coverage of the
existing items for interest expense on and the quarterly averages for
``Time certificates of deposit of $100,000 or more'' and ``All other
time deposits'' in Schedules RI 2 and RC-K,3 respectively,
would be revised by moving open-account time deposits of $100,000 or
more from the latter item to the former item in each of these
schedules. The caption for the latter item in each schedule would refer
to ``Time deposits of less than $100,000'' and the caption for the
former item would refer to ``Time deposits of $100,000 or more.''
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\2\ Items 2.a.(1)(b)(3) and 2.a.(1)(b)(4) on the FFIEC 031
report forms; items 2.a.(2)(c) and 2.a.(2)(d) on the FFIEC 032, 033,
and 034 report forms.
\3\ Items 11.c and 11.d on the FFIEC 031, 032, and 033 report
forms; items 9.c and 9.d on the FFIEC 034 report forms.
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(5) Schedule RC-L--Off-Balance Sheet Items:
(a) Item 1.d, ``Securities underwriting,'' would be combined with
existing item 1.e, ``Other unused commitments.''
(b) Items 10.a and 10.b, ``Gross commitments to purchase'' and
``Gross commitments to sell'' when-issued securities, would be
eliminated as separate items and would begin to be reported as off-
balance sheet derivative contracts in items 14 through 17. The notional
amount of these commitments would be included in item 14.b, ``Forward
contracts,'' generally in column A, ``Interest rate contracts,'' and in
items 15 and 16 based on their purpose. On the FFIEC 031, 032, and 033
report forms, the fair values of these commitments would be reported in
item 17. The Glossary entry for ``when-issued securities transactions''
would be revised accordingly.
(6) Schedule RC-M--Memoranda:
(a) Item 8.c, ``Total assets of unconsolidated subsidiaries and
associated companies,'' would be deleted.
(b) Memorandum item 1.b, ``Nonreciprocal holdings of banking
organizations' capital instruments,'' which is collected in the
December report only, would be deleted.
(7) Schedule RC-R--Regulatory Capital:
(a) The separate maturity distributions for ``Subordinated debt and
intermediate term preferred stock'' in items 2.a through 2.f, column A,
and ``Other Limited-Life Capital Instruments'' in items 2.a through
2.f, column B, would be replaced by two single separate items (new
items 2.a and 2.b) for the qualifying portion of each of these two
types of capital components that is includible in Tier 2 capital.
(b) Item 4.a.(1), ``Securities issued by, other claims on, and
claims unconditionally guaranteed by, the U.S. Government and its
agencies and other OECD central governments,'' and item 4.a.(2), ``All
other'' assets assigned to the zero percent risk category,'' would be
combined into a single revised item 4.a for all zero percent risk
weight assets recorded on the balance sheet.
(c) Item 5.a.(1), ``Claims conditionally guaranteed by the U.S.
Government and its agencies and other OECD central governments,'' item
5.a.(2), ``Claims collateralized by securities issued by the U.S.
Government and its agencies and other OECD central governments; by
securities issued by U.S. Government-sponsored agencies; and by cash on
deposit,'' and item 5.a.(3), ``All other'' assets assigned to the 20
percent risk category,'' would be combined into a single revised item
5.a for all 20 percent risk weight assets recorded on the balance
sheet.
(8) Schedule RI--Income Statement:
[[Page 48690]]
(a) Consistent with the proposed revision to Schedule RC noted
above, item 2.d, ``Interest on mortgage indebtedness and obligations
under capitalized leases,'' would be combined with existing item 2.c,
``Interest on demand notes issued to the U.S., trading liabilities, and
other borrowed money.''
(b) On the FFIEC 031, 032, and 033 report forms, item 5.d, ``Other
foreign transaction gains (losses),'' would be combined with existing
item 5.f.(2), ``All other noninterest income.'' If the amount of
``Other foreign transaction gains (losses)'' is among the three largest
amounts exceeding ten percent of the amount reported in item 5.f.(2),
it would be itemized and described in Schedule RI-E, item 1.
(c) Items 11.a and 11.b, ``Extraordinary items and other
adjustments, gross of income taxes,'' and ``Applicable income taxes (on
item 11.a),'' would be deleted. Only the amount of ``Extraordinary
items and other adjustments, net of income taxes'' (item 11.c), would
continue to be reported in Schedule RI. All extraordinary items and
their related tax effects would continue to be separately itemized and
described in Schedule RI-E, item 3.
(9) Schedule RI-C--Applicable Income Taxes by Taxing Authority:
This schedule, which is completed only for the December report, would
be eliminated, except for the item for the ``deferred portion'' of
total applicable income taxes (item 5 on the FFIEC 031, 032, and 033
report forms; item 4 on the FFIEC 034 report form). The ``deferred
portion'' item would be moved to the Memorandum section of the income
statement (Schedule RI) and would continue to be collected with the
December report only.
(10) Savings Bank Supplemental Schedule RC-J--Repricing
Opportunities for Selected Balance Sheet Categories: This supplemental
schedule, which is completed only by FDIC-supervised savings banks,
would be eliminated. Savings banks would begin to complete certain
Memorandum items providing maturity and repricing data in Schedules RC-
B--Securities, RC-C, part I--Loans and Leases, and RC-E--Deposit
Liabilities that have previously been applicable only to insured
commercial banks. (Proposed revisions to the maturity and repricing
data items in these three schedules are discussed below.)
Elimination of Instructions That Differ From GAAP and Related New Items
In November 1995, the FFIEC announced that it had approved the
adoption of GAAP as the reporting basis for the balance sheet, income
statement, and related schedules in the Call Report, effective with the
March 1997 report date. Adopting GAAP as the reporting basis in the
basic schedules of the Call Report will eliminate existing differences
between bank regulatory reporting standards and GAAP, thereby producing
greater consistency in the information collected in regulatory reports
and general purpose financial statements and reducing reporting burden.
Although Call Report instructions that depart from GAAP will be
eliminated, the instructions will continue to contain and the FFIEC and
the agencies will continue when necessary to issue specific reporting
guidance that falls within the range of acceptable practice under GAAP.
Each agency also will retain existing authority to require an
institution to report a transaction in the Call Report in accordance
with that agency's interpretation of GAAP. Furthermore, bank regulatory
capital ratios will continue to be calculated in accordance with the
agencies' capital standards (for national banks, 12 CFR 3; for state
member banks, 12 CFR 208, Appendices A and B; for insured state
nonmember commercial and savings banks, 12 CFR 325).
In connection with this move to GAAP, the section of the Call
Report's General Instructions on ``Applicability of Generally Accepted
Accounting Principles to Regulatory Reporting Requirements'' would be
revised. The revised section would remind banks that the Call Report is
prepared on a separate entity basis. In addition, changes would be made
to the following Call Report instructions to bring them into conformity
with GAAP:
(1) The treatment of assets sold with recourse in the Glossary
entry for ``Sales of Assets'' and the section of the Glossary entry for
``Participations in Pools of Residential Mortgages'' on ``Privately-
issued certificates of participation in pools of residential
mortgages.''
(2) The treatment of excess servicing fees (as that term is used in
the accounting standards that are currently in effect) in the Glossary
entry for ``Sales of Assets'' and in the instruction to Schedule RC-F,
item 3, ``Excess residential mortgage servicing fees receivable.'' (The
accounting for excess servicing fees under GAAP will change on January
1, 1997, when Financial Accounting Standards Board (FASB) Statement No.
125, ``Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,'' takes effect.)
(3) The treatment of futures, forward, and option contracts in the
Glossary entry for ``Futures, Forward, and Standby Contracts.''
(4) The general prohibition on the netting of assets and
liabilities in the Call Report set forth in the Glossary entry for
``Offsetting'' and in the General Instructions.
(5) The initial valuation of foreclosed assets in the Glossary
entries for ``Foreclosed Assets'' and ``Troubled Debt Restructurings''
and in the instructions to Schedule RC-M, item 8.a.(2), ``All other
real estate owned.''
(6) The maximum amortization period for intangible assets set forth
in the section of the Glossary entry for ``Business Combinations'' on
``Purchase acquisition'' and in the instructions to Schedule RC-M, item
6, ``Intangible assets.'' Consistent with the views expressed by the
Securities and Exchange Commission in Staff Accounting Bulletins, the
revised instructions would indicate that amortization periods in excess
of 25 years generally would not be appropriate for Call Report
purposes.
(7) The prohibition on the consolidation of domestic depository
institution subsidiaries of the reporting bank contained in the section
of the General Instructions on ``Scope of the 'Consolidated Bank
Required to be Reported in the Submitted Reports.''
(8) The treatment of third party credit card solicitation costs in
the Glossary entry for ``Loan Fees.''
(9) The maximum interest rate for capitalizing interest on
internally financed projects set forth in the Glossary entry for
``Capitalization of Interest Costs.''
(10) The treatment of repurchase agreements to maturity and long-
term repurchase agreements in the Glossary entry for ``Repurchase/
Resale Agreements.''
(11) The treatment of loan fees charged in connection with
international loans in the Glossary entry for ``Loan Fees.''
(12) The treatment of reciprocal balances in the Glossary entry for
``Reciprocal Balances,'' in the instructions to Schedule RC-A, item 2,
``Balances due from depository institutions in the U.S.,'' for the
FFIEC 031, 032, and 033 report forms, and in the instructions to
Schedule RC, item 1.a, ``Noninterest-bearing balances and currency and
coin,'' for the FFIEC 034 report forms.
(13) The treatment of securities transactions with settlement
periods exceeding regular way settlement time limits that have been
reported as forward contracts according to the
[[Page 48691]]
instructions to Schedule RC-L, item 14, ``Gross amounts (e.g., notional
amounts) of off-balance sheet derivatives.''
Banks that have engaged in any of the preceding types of
transactions or activities prior to January 1, 1997, and have reported
them in the Call Report in accordance with the existing instructions
that differ from GAAP would be permitted to report them in accordance
with GAAP beginning in 1997. The effect of this retroactive application
of GAAP on the amount of a bank's undivided profits as of January 1,
1997, net of applicable income taxes, (i.e., the amount of the ``catch-
up'' adjustment) would be reported as a direct adjustment to equity
capital in Schedule RI-A, item 9, and itemized and described in
Schedule RI-E, item 5.
For some of the preceding types of transactions or activities which
will be affected by the elimination of Call Report instructions that
differ from GAAP, the potential impact of these transactions and
activities on the safety and soundness of banks is of concern to the
agencies. In other cases, the instructional changes may affect the
reported amount of a bank's deposits and, thereby, its assessment base
for deposit insurance purposes. In order to identify the extent of bank
involvement in these areas or the effect on reported deposits, the
FFIEC is proposing to add certain new items to the Call Report and to
modify a number of existing Call Report items, as follows:
(1) In Schedule RC-F--Other Assets, the caption to item 3, ``Excess
residential mortgage servicing fees receivable,'' would be revised in
response to FASB Statement No. 125 to refer to interest-only strips
receivable. This item would be renumbered as item 3.a and continue to
apply only to first lien 1-to-4 family residential mortgages. A new
item 3.b would be added for interest-only strips receivable on other
financial assets. Consistent with Statement No. 125, these strips
receivable would be measured at fair value like available-for-sale
securities.
(2) In Schedule RC-L--Off-Balance Sheet Items, items 9.a through
9.c on residential mortgage loans and agricultural mortgage loans
transferred with recourse in transactions that have been treated as
sales for Call Report purposes would be replaced. Banks would begin to
report the outstanding principal balance and the amount of retained
recourse exposure on (a) first lien 1-to-4 family residential mortgages
and on (b) other financial assets (excluding small business
obligations) that have been transferred with recourse in transactions
reported as sales. Existing item 9.d on small business obligations
transferred with recourse would be retained.
(3) New items would be added to Schedule RC-M--Memoranda (or
another schedule if more appropriate) for:
(a) ``Net unamortized realized deferred gains (losses) on off-
balance sheet derivative contracts included in assets and liabilities
reported in Schedule RC.'' Although available-for-sale securities are
reported on the balance sheet at fair value, this item would include
any deferred gains (losses) that are part of the amortized cost basis
of such securities.
(b) ``Amount of assets netted against nondeposit liabilities (and
deposits in foreign offices other than insured branches) on the balance
sheet (Schedule RC) in accordance with generally accepted accounting
principles.'' This item would include securities purchased under
agreements to resell that have been netted against securities sold
under agreements to repurchase under FASB Interpretation No. 41, back-
to-back loans involving deposits in foreign offices, receivables and
payables arising from unsettled trades, in-substance defeasance
transactions grandfathered under FASB Statement No. 125, and any other
assets netted against nondeposit liabilities (and deposits in foreign
offices other than insured branches) under FASB Interpretation No. 39.
However, the item would exclude netted on-balance sheet amounts
associated with off-balance sheet derivative contracts, deferred tax
assets netted against deferred tax liabilities, and assets netted in
accounting for pensions.
(4) New items would be added to Schedule RC-O--Other Data for
Deposit Insurance Assessments for:
(a) ``Amount of assets netted against deposit liabilities in
domestic offices (and in insured branches in Puerto Rico and U.S.
territories and possessions) on the balance sheet (Schedule RC) in
accordance with generally accepted accounting principles.'' Amounts
would be reported separately for assets netted against demand deposits
and assets netted against time and savings deposits. These items would
exclude data on net reciprocal demand balances and related adjustments
reported in Schedule RC-O, item 11.
(b) A ``yes''/''no'' question asking whether the reporting bank has
any domestic depository institution subsidiaries that have been
consolidated in the Reports of Condition and Income. Any bank answering
``yes'' to this question would be required to report the legal title
and FDIC Certificate Number of each such consolidated subsidiary.
As indicated above, the existing Call Report instructions on
reciprocal balances will be revised to conform with GAAP. At present,
the instructions require banks to report reciprocal demand balances
with commercial banks in the U.S. on a net basis on the balance sheet
(Schedule RC) and in the deposit schedule (Schedule RC-E). All other
reciprocal deposit relationships are to be reported gross. Because this
netting instruction differs from the reciprocal deposit netting
provisions in Section 7(a)(4) of the Federal Deposit Insurance Act, the
insurance assessments schedule contains three netting-related items
used to adjust reported deposits so they conform with the statute
(Schedule RC-O, items 11.a through 11.c). The Call Report instructions
on reciprocal balances, once they are revised in accordance with GAAP,
will still differ from Section 7(a)(4), but in a different manner than
at present. Thus, items 11.a through 11.c of Schedule RC-O must be
modified to ensure that bank assessment bases continue to be properly
measured. As revised, items 11.a through 11.c would be as follows:
(a) ``Amount by which demand deposits would be reduced if the
reporting bank's reciprocal demand balances with the domestic offices
of U.S. banks and savings associations (and insured branches in Puerto
Rico and U.S. territories and possessions) that were reported on a
gross basis in Schedule RC-E had been reported on a net basis.''
(b) ``Amount by which demand deposits would be increased if the
reporting bank's reciprocal demand balances with foreign banks and
foreign offices off U.S. banks (other than insured branches in Puerto
Rico and U.S. territories and possessions) that were reported on a net
basis in Schedule RC-E had been reported on a gross basis.''
(c) ``Amount by which demand deposits would be reduced if cash
items in process of collection were included in the calculation of the
reporting bank's net reciprocal demand balances with the domestic
offices of U.S. banks and savings associations (and insured branches in
Puerto Rico and U.S. territories and possessions) in Schedule RC-E.''
In addition, the coverage of these items would be expanded to
include adjustments to demand deposits in insured branches in Puerto
Rico and U.S. territories and possessions, rather than demand deposits
in domestic offices only.
Although the treatment of assets sold with recourse will be brought
into
[[Page 48692]]
conformity with GAAP for purposes of the Call Report balance sheet and
income statement, the agencies' risk-based capital standards refer to
the existing Call Report instructions as the source for the definition
of asset sales with recourse. The relevant Call Report instructions are
the Glossary entry for ``Sales of Assets'' with its general rule for
determining whether an asset transfer must be reported as a sale or as
a financing transaction. Thus, the Call Report instructions' ``Sales of
Assets'' general rule would remain applicable for purposes of
identifying those asset sales with recourse that are not already
included on the balance sheet whose credit equivalent amounts must be
reported by risk weight category in Call Report Schedule RC-R--
Regulatory Capital.
In particular, as a result of the aforementioned change, banks may
be able to reflect as an asset previously nonrecognized (for Call
Report purposes) excess servicing fees receivable (as the term is used
in the accounting standards that are currently in effect) that act as
credit enhancements for assets (typically credit card receivables) that
have been transferred and securitized. Generally, these fees are used
to fund so-called ``spread accounts.'' 4 Under the existing
``Sales of Assets'' general rule, because the excess servicing fees
were not booked as an asset on the Call Report balance sheet, the asset
transfers were considered to be ``without recourse'' (assuming there
were no other features of the asset transfer that constituted a
retention of risk of loss or obligation for payment) and qualified for
sale treatment.5
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\4\ As noted earlier, the accounting for excess servicing fees
under GAAP will change on January 1, 1997, when FASB Statement No.
125 takes effect. Under this new accounting standard, amounts that
would be deemed excess servicing fees receivable under current
accounting standards would be reported instead as either servicing
assets or interest-only strips receivable, depending upon the
circumstances. The discussion in this paragraph would also be
applicable to these types of assets if they act as credit
enhancements.
\5\ See the FFIEC's November 21, 1986, release on the bank Call
Report treatment of a retained residual interest in an escrow
account established to absorb losses on loans transferred without
recourse.
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In conjunction with the move to GAAP, asset transfers that qualify
for sale treatment under GAAP, but which use excess servicing fees
receivable as credit enhancements, would have to be reported as an off-
balance sheet sale with recourse on Schedule RC-L because the bank has
retained risk of loss. For this same reason, the bank will have to hold
risk-based capital against the full amount of assets transferred with
recourse. However, such transfers may qualify for low-level recourse
capital treatment which would limit the amount of capital required to
the amount of excess servicing fees receivable net of any noncapital
GAAP recourse liability account associated with the asset transfer. The
Call Report instructions would be clarified to address these matters.
The agencies also note that an interagency recourse working group is
reviewing the risk-based capital treatment of all asset transfers,
including transfers that use excess servicing fees as credit
enhancements, to determine whether any changes should be proposed in
the capital treatment for these transactions.
The agencies' adoption of GAAP as the reporting basis for the
balance sheet, income statement, and related schedules in the Call
Report in the first quarter of 1997 coincides with the first reporting
period in which FASB Statement No. 125 will be in effect both for
financial statements prepared in accordance with GAAP and the Call
Report. Comment is requested on whether there are Call Report changes
other than those described above that the FFIEC and the agencies should
consider making in response to FASB Statement No. 125.
Call Report Changes To Improve the Monitoring of Interest Rate Risk
Exposures
On June 26, 1996, the agencies published a Joint Agency Policy
Statement on Interest Rate Risk (61 FR 33166). The agencies stated that
the risk assessment approach that they use to evaluate a bank's capital
adequacy for interest rate risk relies on a combination of quantitative
and qualitative factors. The agencies will use various quantitative
screens and filters as tools to identify banks that may have high
exposures or complex risk profiles, to allocate resources, and to set
examination priorities. These tools rely on Call Report data and
various economic indicators and data.
The agencies have determined that the existing Call Report data
that has been collected for interest rate risk analysis needs is not
adequate for the quantitative screens and filters that they will use.
The agencies are therefore proposing a set of revisions to the Call
Report data collected for interest rate risk monitoring purposes that
will improve their ability to screen for significant levels of interest
rate risk. In summary, the agencies propose to:
combine maturity and repricing data where possible,
break out residential mortgage assets from other types of
assets,
break out mortgage derivative securities from other
securities and have them reported based on their expected life,
add two time bands for maturity/repricing data for loans
and securities,
add one time band for time deposits of less than $100,000
and conform time deposits of $100,000 or more to these time bands,
add one time band for other borrowed money, and
add items for longer term commercial and commercial real
estate loans, off-balance sheet derivatives exposed to rising interest
rates, the fair value of mortgage servicing assets, residential
mortgage loans serviced by others, and loans other than residential
mortgages serviced for others.
Because of the combining of maturity and repricing data, some
revisions also need to be made to certain short-term asset and
liability items collected for liquidity analysis purposes.
The specific proposed changes are as follows:
(1) Schedule RC--Balance Sheet: Item 16.b, ``Other borrowed money
with a remaining maturity of more than one year,'' would be split into
two separate items for borrowings with remaining maturities of more
than one year through three years (new item 16.b) and more than three
years (new item 16.c).
(2) Schedule RC-B--Securities:
(a) Memorandum item 2, ``Maturity and repricing data for debt
securities,'' would be revised and would begin to be completed by FDIC-
supervised savings banks.
(i) Revised Memorandum items 2.a and 2.b would cover maturity and
repricing data for ``Non-mortgage debt securities'' and ``Mortgage
pass-through securities,'' with fixed rate and floating rate
instruments reported on a combined basis. Fixed rate instruments would
continue to be reported based on their remaining contractual maturity.
Floating rate instruments would continue to be reported based on their
repricing frequency. The existing ``Over one year through five years''
time band would be split into two separate bands: ``Over one year
through three years'' and ``Over three years through five years.'' The
existing ``Over five years'' time band would also be split into two
separate bands: ``Over five years through fifteen years'' and ``Over
fifteen years.''
(ii) Memorandum item 2.c would cover mortgage-backed securities
other than pass-through securities, e.g., CMOs, REMICs, and stripped
mortgage-backed securities. A two-way breakdown of these instruments by
expected average life would be reported: those with an expected average
life of
[[Page 48693]]
``Three years or less'' and those with an expected average life of
``Over three years.''
(b) Because fixed rate debt securities would no longer be reported
separately by remaining maturity, Memorandum item 6, ``Floating rate
debt securities with a remaining life of one year or less,'' would be
expanded to cover all debt securities, and would begin to be completed
by FDIC-supervised savings banks.
(3) Schedule RC-C, Part I--Loans and Leases:
(a) The Memorandum item for ``Maturity and repricing data for loans
and leases'' (Memorandum item 3 on the FFIEC 031, 032, and 033 report
forms; Memorandum item 2 on the FFIEC 034 report forms) would be
revised and would begin to be completed by FDIC-supervised savings
banks. Revised subitems a. and b. would cover maturity and repricing
data for ``Loans secured by real estate'' and ``Other loans and
leases,'' with fixed rate and floating rate instruments reported on a
combined basis. Fixed rate instruments would continue to be reported
based on their remaining contractual maturity. Floating rate
instruments would continue to be reported based on their repricing
frequency. The same changes in time bands would be made as were
described above under Schedule RC-B.
(b) Because fixed rate loans and leases would no longer be reported
separately by remaining maturity, the Memorandum item for ``Floating
rate loans with a remaining maturity of one year or less'' (Memorandum
item 3.d on the FFIEC 031, 032, and 033 report forms; Memorandum item
2.d on the FFIEC 034 report forms) would be expanded to cover all loans
and leases, and would begin to be completed by FDIC-supervised savings
banks.
(c) New Memorandum items would be added for ``Commercial and
industrial loans with a remaining maturity or repricing frequency of
over three years'' and ``Loans secured by nonfarm nonresidential real
estate with a remaining maturity or repricing frequency of over five
years'' (Memorandum items 3.e and 3.f on the FFIEC 031, 032, and 033
report forms; Memorandum items 2.e and 2.f on the FFIEC 034 report
forms).
(4) Schedule RC-E--Deposit Liabilities: Memorandum items 5 and 6,
``Maturity and repricing data for time deposits of less than $100,000''
and ``Maturity and repricing data for time deposits of $100,000 or
more,'' would be revised and would begin to be completed by FDIC-
supervised savings banks:
(a) Memorandum item 5.a for fixed rate deposits of less than
$100,000 and Memorandum item 5.b for floating rate deposits of less
than $100,000 would be reported on a combined basis in revised
Memorandum item 5.a. Memorandum items 6.a and 6.b covering time
deposits of $100,000 or more would be combined in the same manner in
revised Memorandum item 6.a. Fixed rate instruments would continue to
be reported based on their remaining contractual maturity. Floating
rate instruments would continue to be reported based on their repricing
frequency.
(b) For time deposits of less than $100,000 (reported in revised
Memorandum item 5.a), the existing ``Over one year'' time band would be
split into two separate time bands: ``Over one year through three
years'' and ``Over three years.'' For time deposits of $100,000 or more
(reported in revised Memorandum item 6.a), the existing ``Over one year
through five years'' and ``Over five years'' time bands would be
changed to ``Over one year through three years'' and ``Over three
years.''
(c) Because fixed rate time deposits would no longer be reported
separately by remaining maturity, Memorandum items 5.c and 6.c,
``Floating rate time deposits of less than $100,000 with a remaining
life of one year or less'' and ``Floating rate time deposits of
$100,000 or more with a remaining life of one year or less,'' would
each be expanded to cover all time deposits of that respective size.
(5) Schedule RC-L--Off-Balance Sheet Items: New items would be
added for the total gross notional amount of certain interest rate
contracts held for purposes other than trading. There would be separate
items for ``Interest rate swaps where the bank has undertaken a
floating rate obligation,'' ``Long positions in interest rate futures
and forward contracts,'' and ``Short positions in interest rate
options.''
(6) Schedule RC-M--Memoranda: New items would be added for the
``Fair value of mortgage servicing rights,'' the carrying value of
which is currently reported in item 6.a of this schedule, the
``Outstanding principal balance of 1-to-4 family residential mortgage
loans held in portfolio that are serviced by others,'' and the
``Outstanding principal balance of loans other than 1-to-4 family
residential mortgage loans that are serviced for others.''
Reporting of Adjusted Attributable Deposit Amounts by Oakar
Institutions
On July 3, 1996, the FDIC proposed to amend certain provisions of
its assessment regulations that pertain to so-called Oakar
institutions, i.e., institutions that belong to one insurance fund
(primary fund), but hold deposits that are treated as insured by the
other insurance fund (secondary fund) (61 FR 34751). The FDIC currently
requires all institutions that assume secondary-fund deposits in an
Oakar transaction to complete and submit an FDIC-supplied Oakar
transaction worksheet for the transaction. Such institutions report the
total deposits acquired and the value of the Adjusted Attributable
Deposit Amount (AADA) thereby generated. In addition, Oakar
institutions must complete a growth adjustment worksheet to recalculate
their AADA as of December 31 of each year and must report the value of
their AADA on a quarterly basis in their Call Reports.
As part of the FDIC's proposal, the FDIC would relieve Oakar
institutions of the burden of calculating their AADA by assuming this
calculation responsibility itself. This would eliminate the annual
growth adjustment worksheet entirely and Oakar institutions would no
longer have to report their AADAs in their Call Reports. The FDIC would
calculate AADAs during the current quarterly insurance premium payment
process. To do so, however, Oakar institutions would have to report
three items on a quarterly basis in their Call Reports. Oakar
institutions already report two of these items as part of their annual
growth adjustment worksheets: total deposits acquired during the
quarter, and secondary-fund deposits acquired during the quarter. Oakar
institutions would therefore have to supply one new item: total
deposits sold during the quarter. These items will be zero in most
quarters for most Oakar institutions. Even in quarters in which some
transactions have occurred, the information requested in these items
should be readily available and easy to report. Thus, Oakar
institutions should see a net reduction in reporting burden from the
proposed reporting changes related to AADAs.
The agencies are therefore proposing to revise Call Report Schedule
RC-O--Other Data for Deposit Insurance Assessments, by deleting
existing item 8, ``Total `Adjusted Attributable Deposits' of all
institutions acquired under Section 5(d)(3) of the Federal Deposit
Insurance Act,'' which must be completed only by banks with Oakar
deposits, and replacing it with three new items for these same banks
only. These items would be ``Total deposits purchased or acquired from
other FDIC-insured institutions during the quarter'' (item 8.a.(1)),
``Amount of purchased or acquired deposits reported in item 8.a.(1)
above attributable to a secondary
[[Page 48694]]
fund'' (item 8.a.(2)), and ``Total deposits sold or transferred during
the quarter'' (item 8.b). These items would exclude transactions
involving deposits in foreign offices.
Comment is requested on whether the elimination of the current Call
Report item in which Oakar banks disclose the amount of their AADAs
would present any difficulties to Call Report users, such as
institutions who are considering potential acquisitions of Oakar
institutions.
Credit Derivatives
Credit derivatives are off-balance sheet arrangements that allow
one party, the beneficiary, to transfer the credit risk of a
``reference asset'' to another party, the guarantor. The market for
this new type of instrument is expected to grow significantly over the
next few years. In order to identify the extent of bank involvement
with these instruments, both on an individual institution basis and for
the industry, the agencies are proposing to add two new items to
Schedule RC-L--Off-Balance Sheet Items. The first item would be for the
notional amount of all credit derivatives on which the reporting bank
is the guarantor. The second would be for the notional amount of all
credit derivatives on which the reporting bank is the beneficiary.
Banks would include the notional amounts of credit default swaps, total
rate of return swaps, and other credit derivative instruments.
In addition, the Call Report instructions would explain that banks
that are guarantors should report the credit equivalent amounts of
these credit derivative contracts in Call Report Schedule RC-R, items 4
through 7, column B, according to the risk category of the reference
asset obligor or any guarantor, whichever is lower. The notional amount
of these contracts would not be reported as interest rate, foreign
exchange, commodity, or equity derivative transactions in Schedule RC-
R, Memorandum item 2. For banks that are beneficiaries, an asset for
which credit protection has been obtained through a credit derivative
should be reported in the Call Report without regard to the existence
of the credit derivative, including its reporting as past due or
nonaccrual in Schedule RC-N, except in Schedule RC-R where an asset
that has been effectively guaranteed may be assigned to the risk
category of the obligor or guarantor, whichever is lower.
Other Instructional Changes
In addition to those previously mentioned, the following changes,
which may affect how some banks report certain information in the Call
Report, would be made to the instructions.
(1) Reporting of assets that are deducted when measuring regulatory
capital--At present, those banks that are required to complete Schedule
RC-R--Regulatory Capital, in its entirety must report as 100 percent
risk-weight assets in item 7, column A, those on-balance sheet assets
that are deducted from their assets and capital as part of their
regulatory capital calculations. These assets include goodwill, core
deposit intangibles, disallowed mortgage servicing rights, disallowed
deferred tax assets, and reciprocal holdings of bank capital
instruments and banks have to identify these amounts in order to report
their risk-weighted assets, Tier 1 capital, and total risk-based
capital which are reported in Schedule RC-R, items 3.e, 3.a, and 3.c.
The agencies believe it is misleading to report these assets as if they
were subject to a 100 percent risk weight and that it would be more
appropriate for these assets to be reported in item 8 of the regulatory
capital schedule along with the asset amounts that are excluded from
the risk-based capital calculation. Furthermore, the agencies' optional
regulatory capital worksheet treats these deducted assets in this
manner. Therefore, the instructions for items 7 and 8 of Schedule RC-R
and the caption for item 8 would be revised accordingly.
(2) Residential mortgage loan commitments--Six categories of unused
commitments are currently reported in the subitems of Schedule RC-L,
item 1. Banks currently report their revolving, open-end lines of
credit secured by 1-to-4 family residential properties (e.g., home
equity lines) in item 1.a. Because there is no separate subitem
specifically designed for the reporting of other commitments secured by
1-to-4 family residential mortgages, these commitments are reportable
in a catch-all category, ``Other unused commitments,'' item 1.e. Due to
questions as to where such other residential mortgage loan commitments
should be reported in Schedule RC-L, the instructions to item 1.e will
be clarified by stating that the item also includes commitments to
extend credit (other than revolving, open-end lines) secured by 1-to-4
family residential properties for which the bank has charged a
commitment fee or other consideration, or otherwise has a legally
binding commitment to extend credit.
(3) Firm commitments to sell residential mortgage loans--The
instructions to Schedule RC-L, item 14.b, column A, ``Interest rate
forwards,'' direct banks to report forward contracts committing the
bank to purchase or sell financial instruments and whose predominant
risk characteristic is interest rate risk. Questions have been raised
about whether firm commitments to sell loans secured by 1-to-4 family
residential properties should be reported as interest rate forwards.
The agencies believe that commitments that have a specific interest
rate, delivery date, and dollar amount should be considered forward
contracts and plan to revise this item instruction accordingly.
(4) Reporting the number of full-time equivalent employees and
their compensation expense--Banks report the number of their full-time
equivalent employees in an income statement memorandum item (Schedule
RI, Memorandum item 4 on the FFIEC 031, 032, and 033; Memorandum item 5
on the FFIEC 034). At some banking organizations, some or all of the
operations of each bank in the organization are conducted by persons
who are ostensibly employees of the parent holding company or a holding
company subsidiary rather than the bank. Because the agencies consider
these persons in substance to be employees of the bank, they must be
included in the determination of the number of full-time equivalent
employees to be reported in the memorandum item. In addition, the
salaries and employee benefits of these persons should be reported as
such in Schedule RI, item 7.a. If the reporting bank does not have to
pay the amount of these persons' compensation to the affiliated entity
which, in form, is their employer, this in substance represents a
capital contribution to the bank which must be reported in Schedule RI-
A--Changes in Equity Capital, item 12 (item 13 on the FFIEC 031),
``Other transactions with parent holding company.'' Due to ongoing
questions from banks, the agencies plan to clarify these instructions
to reflect their longstanding view about the reporting treatment for
these employment arrangements, including removing the phrase ``on the
payroll of the bank'' from the instructions for the memorandum item on
full-time equivalent employees to eliminate ambiguity.
(5) Loans and leases held for sale--Memorandum item 5, ``Loans and
leases held for sale,'' was added to Call Report Schedule RC-C, part
I--Loans and Leases, in 1991. In prior years, banks were given the
option to include loans and leases held for sale either in their loan
and lease portfolio or in their trading assets depending upon how they
[[Page 48695]]
were reported for other financial reporting purposes. When the FFIEC
announced the addition of the specific memorandum item to the loan
schedule for ``Loans and leases held for sale'' in February 1991, the
announcement also indicated that this option was being eliminated. The
instructions for trading assets were revised at that time to indicate
that loans and leases held for sale were to be reported as part of the
loan and lease portfolio. However, the General Instructions to Schedule
RC-C, part I, were not also revised and continue to include a reference
to this now nonexistent option. These General Instructions would now be
corrected.
(6) Assets indirectly representing premises and fixed assets--The
instructions to Schedule RC--Balance Sheet, item 6, ``Premises and
fixed assets,'' direct banks to include loans and advances to
individuals, partnerships, and nonmajority-owned corporations for the
purpose of purchasing or holding land, buildings, or fixtures occupied
or used by the bank in that asset category rather than in loans. The
requirement to reclassify these loans on the balance sheet would be
eliminated.
Request for Comment
Comments submitted in response to this Notice will be shared among
the agencies and will be summarized or included in the agencies'
requests for OMB approval. All comments will become a matter of public
record. Written comments should address the accuracy of the burden
estimates and ways to minimize burden including the use of automated
collection techniques or the use of other forms of information
technology as well as other relevant aspects of the information
collection request.
Dated: September 6, 1996.
Karen Solomon,
Director, Legislative and Regulatory Activities Division, Office of the
Comptroller of the Currency.
Board of Governors of the Federal Reserve System, September 4,
1996.
William W. Wiles,
Secretary of the Board.
Dated at Washington, D.C., this 10th day of September, 1996.
Federal Deposit Insurance Corporation
Jerry L. Langley,
Executive Secretary.
[FR Doc. 96-23623 Filed 9-13-96; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P
