[Federal Register Volume 83, Number 207 (Thursday, October 25, 2018)]
[Proposed Rules]
[Pages 53829-53832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23042]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 83, No. 207 / Thursday, October 25, 2018 /
Proposed Rules
[[Page 53829]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 350
RIN 3064-AE65
Disclosure of Financial and Other Information by FDIC-Insured
State Nonmember Banks
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) proposes to
rescind and remove its regulations relating to the disclosure of
financial and other information by FDIC-insured state nonmember banks.
Upon the removal of the regulations, all insured state nonmember banks
and insured state-licensed branches of foreign banks (collectively,
``banks'') would no longer be subject to the annual disclosure
statement requirement found in those regulations. The financial and
other information that has been subject to disclosure by individual
banks pursuant to these regulations is publicly available through the
FDIC's website.
DATES: Comments must be received on or before November 26, 2018.
ADDRESSES: You may submit comments, identified by RIN 3064-AE65, by any
of the following methods:
Agency Website: https://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency
website.
Email: [email protected]. Include the RIN 3064-AE65 on the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
Hand Delivery: Comments may be hand-delivered to the guard
station at the rear of the 550 17th Street NW, building (located on F
Street) on business days between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments received will be posted without
change to https://www.fdic.gov/regulations/laws/federal, including any
personal information provided. Paper copies of public comments may be
ordered from the FDIC Public Information Center, 3501 North Fairfax
Drive, Room E-1002, Arlington, VA 22226 by telephone at (877) 275-3342
or (703) 562-2200.
FOR FURTHER INFORMATION CONTACT: Robert Storch, Chief Accountant,
Division of Risk Management Supervision, (202) 898-8906 or
[email protected]; Andrew Overton, Examination Specialist (Bank
Accounting), Division of Risk Management Supervision, (202) 898-8922 or
[email protected]; Michael Condon, Counsel, Legal Division, (202) 898-
6536 or [email protected].
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objective of the proposed rule is to simplify the FDIC's
regulations by removing unnecessary or redundant regulations. The
proposed rulemaking rescinds and removes part 350 from the Code of
Federal Regulations. Technological advancements over the past 30 years
provide the public with ready access to more extensive and timely
information on the condition and performance of individual banks,
obviating the need for the annual disclosure statement requirements in
part 350.
II. Background
Part 350 was adopted by the FDIC Board of Directors on December 17,
1987, and took effect February 1, 1988.\1\ In general, part 350
requires FDIC-insured state nonmember banks and FDIC-insured state-
licensed branches of foreign banks (collectively, ``banks'') to
prepare, and make available on request, annual disclosure statements
consisting of: (1) Required financial data comparable to specified
schedules in the Consolidated Reports of Condition and Income (Call
Report) filed for the previous two year-ends; (2) information that the
FDIC may require of particular banks, which could include disclosure of
enforcement actions; and (3) other information at a bank's option. Part
350 also permits the use of certain alternatives to the Call Report as
a disclosure statement. Part 350 does not apply to the insured state
savings associations that are supervised by the FDIC.
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\1\ See 52 FR 49379 (December 31, 1987).
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The annual disclosure statement for a particular year must be
prepared, and made available to the public, by March 31 of the
following year, or the fifth day after an organization's annual report
covering the year is sent to shareholders, whichever occurs first.
Banks are required to announce the availability of the disclosure
statements in lobby notices in each of their offices and in notices of
annual meetings sent to shareholders.
In adopting part 350, the FDIC's intent was to improve public
awareness and understanding of the financial condition of individual
banks. In the preamble to the December 1987 final rule, the FDIC stated
that ``improved financial disclosure should reduce the likelihood of
the market or bank customers overreacting to incomplete information.''
The FDIC also said it believed the disclosure requirement ``will
complement its supervisory efforts and enhance public confidence in the
banking system.'' With limited resources available for the public to
gather, analyze, and understand information about the financial
condition of individual banks before and during the 1980s, the FDIC's
adoption of part 350 provided the public with an opportunity to obtain
certain basic bank financial information.
After the FDIC adopted part 350, the Office of the Comptroller of
the Currency (OCC) and the Federal Reserve Board (FRB) adopted similar
disclosure regulations. When initially adopted, the disclosure
regulations adopted by the FDIC (12 CFR part 350), the FRB (12 CFR
208.17), and the OCC (12 CFR part 18) were substantially uniform. These
regulations required institutions to make almost identical information
available to the public upon request. The former Office of Thrift
Supervision (OTS) had a similar, but not identical, disclosure
regulation (12 CFR 562.3). As a result of its review of regulations
pursuant to Section 303(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994, the OTS repealed 12 CFR 562.3 as
unnecessary in 1995.\2\ In 1998, the FRB eliminated 12 CFR 208.17,
Disclosure of Financial Information by State Member Banks, from its
regulations on the basis
[[Page 53830]]
that Call Report information for banks had become available through the
internet.\3\ In 2017, the OCC removed 12 CFR part 18 from its
regulations, noting that the information it required national banks to
disclose is contained in other publicly available documents, which
meant that 12 CFR part 18 is duplicative and unnecessary.\4\
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\2\ See 60 FR 66866 (December 27, 1995).
\3\ See 63 FR 37630 (July 13, 1998).
\4\ See 82 FR 8082 (January 23, 2017).
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With advancements in information technology since part 350 was
adopted, including widespread public access to the internet (including
through public libraries for individuals without their own direct
personal access to the internet), information about the financial
condition of individual insured depository institutions is now reliably
and directly offered to the public through the FDIC's and the Federal
Financial Institutions Examination Council's (FFIEC) websites. For
example, information about the financial condition and performance of
all insured depository institutions is publicly available each quarter
through the Call Report and the Uniform Bank Performance Report (UBPR).
In addition, enforcement actions taken by the FDIC are readily
available to the public from the FDIC's website.
The Call Report contains an institution's balance sheet, income
statement, and supplemental schedules that disclose additional details
about the major categories of assets and liabilities, regulatory
capital, and other financial information. Since the successful
deployment of the FFIEC's Central Data Repository (CDR) Public Data
Distribution (PDD) website,\5\ the public has had ready access to
financial information for each insured depository institution. The
public is able to obtain more current Call Report data for individual
institutions in various formats from the FFIEC's CDR PDD website than
the financial information available in the annual disclosure statement
required by part 350. The quarterly Call Report data currently provided
on this website goes back to the March 31, 2001, report date.
Individual institution Call Report data generally are posted on this
website within 24 hours after the data have been submitted to and
accepted by the CDR.
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\5\ https://cdr.ffiec.gov/public/ManageFacsimiles.aspx.
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The UBPR is an analytical tool created for bank supervisory,
examination, and management purposes that shows the impact of
management decisions and economic conditions on a bank's performance
and balance-sheet composition. The content of the UBPR is calculated
each quarter primarily from Call Report data. UBPRs for individual
institutions are available to the public via the CDR PDD website. The
website provides UBPRs from March 31, 2005, to date. An institution's
UBPR is usually published online within a day after its Call Report has
been filed with and accepted by the CDR. Online access to an
institution's UBPR each quarter complements the public's use of the
institution's Call Report and further expands upon the amount of
publicly available financial data for an institution beyond the limited
financial information provided in the annual disclosure statement
required by part 350. The public is able to easily locate the Call
Report and the UBPR for a bank through the FDIC BankFind tool, which is
available on the FDIC's website.\6\
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\6\ https://research.fdic.gov/bankfind/.
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In addition, on a monthly basis, the FDIC publishes a press release
listing the administrative enforcement actions it has taken against
banks and individuals during the preceding month. Enforcement actions
taken by the FDIC since 1990 are available to the public on the FDIC's
website.\7\ Interested parties may also obtain administrative orders
through the FDIC's Public Information Center.
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\7\ https://www5.fdic.gov/EDO/index.html.
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III. The Proposal
Under section 2222 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPRA),\8\ the FDIC is required to conduct a
review at least once every 10 years to identify any outdated or
otherwise unnecessary regulations. As part of the EGRPRA review
completed in 2017, part 350 was included in the third EGRPRA Federal
Register notice.\9\ The FDIC did not receive any comments on this
regulation in response to that notice. Nevertheless, upon review, the
FDIC has determined that part 350 is outdated and no longer necessary
and therefore should be eliminated. Part 350 places a burden on insured
state nonmember banks and insured state-licensed branches of foreign
banks by requiring them to prepare an annual disclosure statement and
make available to the public a potentially unlimited number of copies
of these statements. This burden was justified in the past because
disclosure statements were an effective means for the public to obtain
information concerning a bank's financial condition. However, with
widespread public access to the internet where more extensive and
timely financial information about individual banks, as well as
administrative enforcement actions, can be readily obtained, the
incremental burden on banks of providing an annual disclosure statement
in accordance with a regulation that has become outdated is no longer
justified. Furthermore, because part 350 does not apply to insured
state savings associations, for which the FDIC became the primary
federal regulatory agency in 2011, the proposal would eliminate a
difference in the regulatory requirements and resulting regulatory
burden imposed on insured state nonmember banks and insured state-
licensed branches of foreign banks compared to insured state savings
associations. Finally, because regulations similar to part 350 have
been rescinded by the FRB and the OCC (as well as the former OTS), the
preparation and availability of annual disclosure statements are no
longer required by the other federal banking agencies for the
institutions under their supervision. Consistent with the objectives of
section 2222 of EGRPRA, the FDIC is requesting public comment on the
proposed removal of part 350 from the Code of Federal Regulations.
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\8\ Public Law 104-208 (1996), codified at 12 U.S.C. 3311.
\9\ See 80 FR 32046 (June 5, 2015).
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IV. Expected Effects
The proposed removal of the requirement that each FDIC-insured
state nonmember bank and insured state-licensed branch of a foreign
bank prepare, and make available on request, annual disclosure
statements will lessen the burden the FDIC imposes on these
institutions. As of June 30, 2018, there were 3,534 FDIC-insured state
nonmember banks and insured state-licensed branches of foreign banks
that would be affected by this proposal.
The proposed rule is expected to reduce recordkeeping, reporting,
and disclosure requirements for FDIC-insured state nonmember banks and
insured state-licensed branches of foreign banks. As discussed in
Section III: The Proposal, part 350 requires institutions to prepare an
annual disclosure statement and make it available to the public. By
removing part 350, the proposed rule will remove this disclosure
burden. The FDIC assumes that 15 percent of the institutions covered by
part 350 provide a management discussion and analysis in their annual
disclosure statement, and estimates that preparing this material takes
each institution 1.5 hours. Assuming the time spent preparing the
material is divided equally between a financial analyst and
[[Page 53831]]
a manager, each earning the 75th percentile wage for their occupation,
the estimated annual cost per institution to prepare the material is
$156.45.\10\ Based on the FDIC's estimation that 15 percent of
institutions prepare this material, the total annual cost is estimated
to be $82,919, or approximately 0.0001 percent of noninterest expenses
for covered institutions.\11\
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\10\ The annual cost per institution is estimated using the 75th
percentile hourly wage for financial analysts and management
occupations in the depository credit intermediation industry as of
May 2017. This hourly wage is adjusted for inflation, and grossed-up
to include benefits, through March 2018. The 75th percentile
inflation and benefit-adjusted hourly wage of management occupations
as of March 2018 is $124.13, and for financial analysts is $84.47.
Assuming the 1.5 hours are equally divided between a manager and an
analyst, this yields a total cost of (0.75 * $124.13) + (0.75 *
$84.47) = $156.45.
Hourly wages are from the Bureau of Labor Statistics (BLS) May
2017 National Industry-Specific Occupational Employment and Wage
Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are
adjusted for inflation through March 2018 using the Seasonally
Adjusted All-items Consumer Price Index for All Urban Consumers,
https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to
include benefits based on Employer Cost for Employee Compensation
data as of March 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. March 2018 is the latest available period of Employer Cost
for Employee Compensation data. The data on hourly wages, inflation,
and employer cost for employee compensation was extracted on June
15, 2018.
\11\ This equals 530 * $156.45, i.e., (3,534 * 0.15) * $156.45,
rounded to the nearest dollar. Noninterest expenses are calculated
from data reported in the June 30, 2018, Call Report, and
annualized.
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In addition to the directly measurable cost savings, another
potential benefit of the proposed rule is that it frees up institution
staff time that would otherwise have been spent complying with part
350. Theoretically, time previously spent complying with part 350 may
now be spent on another task of higher value to the institution. This
potential effect is difficult to accurately estimate with available
information, but it is likely to be small given that the disclosure
burden imposed by part 350 is a relatively small percentage of
noninterest expenses.
The proposed rule does remove a disclosure requirement for affected
institutions; however, the FDIC believes that the reduction will not
have material effects for customers, investors, or counterparties. As
discussed in Section III: The Proposal, extensive and timely financial
information about individual banks, as well as administrative
enforcement actions, can be readily obtained by the public on the
internet. Therefore, the FDIC believes that removal of this disclosure
requirement will not have substantive effects on financial market
participants.
V. Alternatives
The FDIC considered alternatives to the proposed rule, but believes
that the proposed rescission and removal of part 350 represents the
most appropriate option. In particular, the FDIC considered whether to
(1) retain the existing disclosure statement requirement, but to extend
it to the insured state savings associations now supervised by the
FDIC, (2) require that disclosure statements be updated quarterly
instead of annually, and/or (3) require the inclusion in disclosure
statements of either the entire Call Report (excluding a limited number
of items accorded confidential treatment) or financial data comparable
to a greater number of specified Call Report schedules. However, with
the timely public availability of each institution's quarterly Call
Report and UBPR via the FDIC's and the FFIEC's websites, and with the
public disclosure of information about enforcement actions taken by the
FDIC routinely made available on the FDIC's website, the FDIC believes
any extension of part 350 to other institutions, increase in the
frequency of disclosure, increase in the scope of disclosure, or
combination of these alternatives, imposes additional cost without any
corresponding public benefit in terms of access to financial and other
information on institutions. Moreover, the FDIC is not aware of any
difficulties encountered by the public in obtaining current financial
and enforcement action information on institutions supervised by the
FRB and the OCC (and those institutions previously supervised by the
OTS) via public websites since these agencies eliminated their
respective disclosure statement requirements.
VI. Request for Comments
The FDIC invites comments on all aspects of this proposed
rulemaking. In particular, the FDIC requests comments on the following
questions:
1. Should part 350 be retained in whole or in part? Please
substantiate your response.
2. What negative impacts, if any, can you foresee in the FDIC's
proposal to rescind part 350 and remove it from the Code of Federal
Regulations?
VII. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3501-3521), the FDIC may not conduct or
sponsor, and the respondent is not required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (OMB) control number. Part 350 is currently an
approved information collection with OMB Control No. 3064-0090.
Removing part 350 will obviate the need for this collection of
information pursuant to the PRA, and FDIC would seek to discontinue its
use.
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a rulemaking, an agency prepare and make available for
public comment an initial regulatory flexibility analysis describing
the impact of the proposed rule on small entities.\12\ A regulatory
flexibility analysis is not required; however, if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. The U.S. Small Business
Administration (SBA) has defined ``small entities'' to include banking
organizations with total assets less than or equal to $550 million.\13\
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\12\ 5 U.S.C. 601 et seq.
\13\ 13 CFR 121.201 (as amended, effective December 2, 2014).
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As of June 30, 2018, there are 3,534 FDIC-insured state nonmember
banks and FDIC-insured state-licensed branches of foreign banks.\14\ Of
these, 2,725 are considered small entities for the purposes of RFA.\15\
Thus, the FDIC concludes the proposed rule will affect a substantial
number of small entities.
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\14\ Data from the June 2018 Call Report and FFIEC 002 report.
\15\ The SBA defines a small banking organization as having $550
million or less in assets, where an organization's ``assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201
(as amended, effective December 2, 2014). In its determination, the
``SBA counts the receipts, employees, or other measure of size of
the concern whose size is at issue and all of its domestic and
foreign affiliates.'' See 13 CFR 121.103. Following these
regulations, the FDIC uses a covered entity's affiliated and
acquired assets, averaged over the preceding four quarters, to
determine whether the covered entity is ``small'' for the purposes
of RFA.
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The proposed rule is expected to reduce recordkeeping, reporting,
and disclosure requirements for small FDIC-supervised banks. As
discussed in Section III: The Proposal, part 350 requires institutions
to prepare an annual disclosure statement and make it available to the
public. By removing part 350, the proposed rule will remove this
disclosure burden. As discussed in Section IV: Expected Effects, the
FDIC estimates the annual cost per institution to prepare the material
is $156.45.\16\
[[Page 53832]]
Based on the FDIC's estimation that 15 percent of institutions prepare
this material, the total annual cost for small FDIC-supervised
institutions is estimated to be $63,988, or less than 0.0005 percent of
noninterest expenses for such institutions.\17\
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\16\ The annual cost per institution is estimated using the 75th
percentile hourly wage for financial analysts and management
occupations in the depository credit intermediation industry as of
May 2017. This hourly wage is adjusted for inflation, and grossed-up
to include benefits, through March 2018. The 75th percentile
inflation and benefit-adjusted hourly wage of management occupations
as of March 2018 is $124.13, and for financial analysts is $84.47.
Assuming the 1.5 hours are equally divided between a manager and an
analyst, this yields a total cost of (0.75 * $124.13) + (0.75 *
$84.47) = $156.45.
Hourly wages are from the Bureau of Labor Statistics (BLS) May
2017 National Industry-Specific Occupational Employment and Wage
Estimates, https://www.bls.gov/oes/current/oessrci.htm. Wages are
adjusted for inflation through March 2018 using the Seasonally
Adjusted All-items Consumer Price Index for All Urban Consumers,
https://data.bls.gov/PDQWeb/cu. The hourly wages are grossed-up to
include benefits based on Employer Cost for Employee Compensation
data as of March 2018, https://www.bls.gov/news.release/pdf/ecec.pdf. March 2018 is the latest available period of Employer Cost
for Employee Compensation data. The data on hourly wages, inflation,
and employer cost for employee compensation was extracted on June
15, 2018.
\17\ This equals 409 * $156.45, i.e., (2,725 * 0.15) * $156.45,
rounded to the nearest dollar. Noninterest expenses are calculated
from data reported in the June 30, 2018, Call Report, and
annualized.
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Also as described in Section IV above, in addition to the directly
measurable cost savings, another potential benefit of the proposed rule
is that it frees up institution staff time that would otherwise have
been spent complying with part 350. While this potential effect is
difficult to accurately estimate with available information, it is
likely to be small given that the disclosure burden imposed by part 350
is a relatively small percentage of noninterest expenses for small
FDIC-supervised institutions.
The proposed rule does remove a disclosure requirement for affected
institutions; however, the FDIC believes that the reduction will not
have material effects for customers, investors, or counterparties. As
discussed in Section III: The Proposal, extensive and timely financial
information about individual banks, as well as administrative
enforcement actions, can be readily obtained by the public on the
internet. Therefore, the FDIC believes that removal of this disclosure
requirement with have not substantive effects on financial market
participants.
Based on the information above, the FDIC certifies that the
proposed rule will not have a significant economic impact on a
substantial number of small entities.
The FDIC invites comments on all aspects of the supporting
information provided in this RFA section. In particular, would this
proposal have any significant effects on small entities that the FDIC
has not identified?
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809, requires each Federal banking agency
to use plain language in all of its proposed and final rules published
after January 1, 2000. As a Federal banking agency subject to the
provisions of this section, the FDIC has sought to present the proposed
rule to rescind part 350 in a simple and straightforward manner. The
FDIC invites comments on whether the proposal is clearly stated and
effectively organized, and how the FDIC might make the proposal easier
to understand.
D. The Economic Growth and Regulatory Paperwork Reduction Act
Under section 2222 of EGRPRA, the FDIC is required to conduct a
review at least once every 10 years to identify any outdated or
otherwise unnecessary regulations. The FDIC completed its most recent
comprehensive review of its regulations under EGRPRA in 2017 and did
not receive any comments from the public concerning part 350. The
burden reduction evidenced in this notice of proposed rulemaking is
consistent with the objectives of the EGRPRA review process.
List of Subjects in 12 CFR Part 350
Accounting, Banks, banking, Reporting and recordkeeping
requirements.
For the reasons stated in the preamble, and under the authority of
12 U.S.C. 1817(a)(1), 1819 ``Seventh'' and ``Tenth,'' the Board of
Directors of the Federal Deposit Insurance Corporation proposes to
remove 12 CFR part 350.
PART 350--DISCLOSURE OF FINANCIAL AND OTHER INFORMATION BY FDIC-
INSURED STATE NONMEMBER BANKS
0
1. Part 350--[Removed and Reserved]
Remove and reserve part 350 consisting of Sec. Sec. 350.1 through
350.12.
Dated at Washington, DC, on October 17, 2018.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2018-23042 Filed 10-24-18; 8:45 am]
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