[Federal Register Volume 72, Number 30 (Wednesday, February 14, 2007)]
[Notices]
[Pages 7121-7128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-677]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
Agency Information Collection Activities: Submission for OMB
Review; Joint Comment Request
AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision
(OTS), Treasury.
ACTION: Notice of information collections to be submitted to OMB for
review and approval under the Paperwork Reduction Act.
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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, the FDIC, and
the OTS (the ``agencies'') 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. On October 31, 2006, the agencies, under the
auspices of the Federal Financial Institutions Examination Council
(FFIEC), requested public comment for 60 days on a proposal to extend,
with revision, the Consolidated Reports of Condition and Income (Call
Report) for banks and the Thrift Financial Report (TFR) for savings
associations, which are currently approved collections of information.
After considering the comments, the FFIEC and the agencies have
modified some of the proposed changes, which will be implemented March
31, 2007, as proposed. Additionally, OTS will incorporate in its OMB
submission the proposed TFR changes published in the Federal Register
on December 1, 2006 (71 FR 69619). These changes will also be
implemented March 31, 2007, as proposed.
DATES: Comments must be submitted on or before March 16, 2007.
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: Communications Division, Office of the Comptroller of the
Currency, Public Information Room, Mailstop 1-5, Attention: 1557-0081,
250 E Street, SW., Washington, DC 20219. In addition, comments may be
sent by fax to (202) 874-4448, or by electronic mail to
[email protected]. You can inspect and photocopy the comments
at the OCC's Public Information Room, 250 E Street, SW., Washington, DC
20219. You can make an appointment to inspect the comments by calling
(202) 874-5043.
Board: You may submit comments, which should refer to
``Consolidated Reports of Condition and Income, 7100-0036,'' by any of
the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected]. Include docket
number in the subject line of the message.
FAX: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW) between 9 a.m. and 5 p.m. on weekdays.
FDIC: You may submit comments, which should refer to ``Consolidated
Reports of Condition and Income, 3064-0052,'' by any of the following
methods:
http://www.FDIC.gov/regulations/laws/federal/notices.html.
E-mail: [email protected]. Include ``Consolidated Reports
of Condition and Income, 3064-0052'' in the subject line of the
message.
Mail: Steven F. Hanft (202-898-3907), Clearance Officer,
Attn: Comments, Room MB-2088, 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 Building (located on F
Street) on business days between 7 a.m. and 5 p.m.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal/notices.html
including any personal information provided. Comments may be inspected
at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive,
Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
OTS: You may submit comments, identified by ``1550-0023 (TFR: March
2007 Revisions),'' by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail address: [email protected].
Please include ``1550-0023 (TFR: March 2007 Revisions)'' in the subject
line of the message and include your name and telephone number in the
message.
Fax: (202) 906-6518.
Mail: Information Collection Comments, Chief Counsel's
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552, Attention: ``1550-0023 (TFR: March 2007 Revisions).''
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Information
[[Page 7122]]
Collection Comments, Chief Counsel's Office, Attention: ``1550-0023
(TFR: March 2007 Revisions).''
Instructions: All submissions received must include the agency name
and OMB Control Number for this information collection. All comments
received will be posted without change to the OTS Internet site at
http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any
personal information provided.
Docket: For access to the docket to read background documents or
comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1. In addition, you may inspect comments
at the Public Reading Room, 1700 G Street, NW., by appointment. To make
an appointment for access, call (202) 906-5922, send an e-mail to
public.info@ots.treas.gov">public.info@ots.treas.gov, or send a facsimile transmission to (202)
906-7755. (Prior notice identifying the materials you will be
requesting will assist us in serving you.) We schedule appointments on
business days between 10 a.m. and 4 p.m. In most cases, appointments
will be available the next business day following the date we receive a
request.
Additionally, commenters may send a copy of their comments to the
OMB desk officer for the agencies by mail to the Office of Information
and Regulatory Affairs, U.S. Office of Management and Budget, New
Executive Office Building, Room 10235, 725 17th Street, NW.,
Washington, DC 20503, or by fax to (202) 395-6974.
FOR FURTHER INFORMATION CONTACT: For further information about the
revisions discussed in this notice, please contact any of the agency
clearance officers whose names appear below. In addition, copies of the
Call Report forms can be obtained at the FFIEC's Web site (http://www.ffiec.gov/ffiec_report_forms.htm). Copies of the TFR can be
obtained from the OTS's Web site (http://www.ots.treas.gov/main.cfm?catNumber=2&catParent=0).
OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dickerson,
(202) 874-5090, Legislative and Regulatory Activities Division, Office
of the Comptroller of the Currency, 250 E Street, SW., Washington, DC
20219.
Board: Michelle E. Shore, Federal Reserve Board Clearance Officer,
(202) 452-3829, Division of Research and Statistics, Board of Governors
of the Federal Reserve System, 20th and C Streets, NW., Washington, DC
20551. Telecommunications Device for the Deaf (TDD) users may call
(202) 263-4869.
FDIC: Steven F. Hanft, Paperwork Clearance Officer, (202) 898-3907,
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street,
NW., Washington, DC 20429.
OTS: Marilyn K. Burton, OTS Clearance Officer, at
[email protected], (202) 906-6467, or facsimile number (202)
906-6518, Litigation Division, Chief Counsel's Office, Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION: The agencies are requesting OMB approval to
revise and extend for three years the Call Report and the TFR, which
are currently approved collections of information.
1. Report Title: Consolidated Reports of Condition and Income (Call
Report).
Form Number: Call Report: FFIEC 031 (for banks with domestic and
foreign offices) and FFIEC 041 (for banks with domestic offices only).
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OCC
OMB Number: 1557-0081.
Estimated Number of Respondents: 1,900 national banks.
Estimated Time per Response: 44.33 burden hours.
Estimated Total Annual Burden: 336,925 burden hours.
Board
OMB Number: 7100-0036.
Estimated Number of Respondents: 905 state member banks.
Estimated Time per Response: 51.02 burden hours.
Estimated Total Annual Burden: 184,692 burden hours.
FDIC
OMB Number: 3064-0052.
Estimated Number of Respondents: 5,234 insured state nonmember
banks.
Estimated Time per Response: 35.27 burden hours.
Estimated Total Annual Burden: 738,413 burden hours.
The estimated time per response for the Call Report is an average
that varies by agency because of differences in the composition of the
institutions under each agency's supervision (e.g., size distribution
of institutions, types of activities in which they are engaged, and
existence of foreign offices). The average reporting burden for the
Call Report is estimated to range from 16 to 630 hours per quarter,
depending on an individual institution's circumstances.
2. Report Title: Thrift Financial Report (TFR).
Form Number: OTS 1313 (for savings associations).
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OTS
OMB Number: 1550-0023.
Estimated Number of Respondents: 845 savings associations.
Estimated Time per Response: 57.1 burden hours.
Estimated Total Annual Burden: 193,139 burden hours.
General Description of Reports
These information collections are mandatory: 12 U.S.C. 161 (for
national banks), 12 U.S.C. 324 (for state member banks), 12 U.S.C. 1817
(for insured state nonmember commercial and savings banks), and 12
U.S.C. 1464 (for savings associations). Except for selected data items,
these information collections are not given confidential treatment.
Abstract
Institutions submit Call Report and TFR data to the agencies each
quarter for the agencies' use in monitoring the condition, performance,
and risk profile of individual institutions and the industry as a
whole. Call Report and TFR data provide the most current statistical
data available for evaluating institutions' corporate applications, for
identifying areas of focus for both on-site and off-site examinations,
and for monetary and other public policy purposes. The agencies use
Call Report and TFR data in evaluating interstate merger and
acquisition applications to determine, as required by law, whether the
resulting institution would control more than ten percent of the total
amount of deposits of insured depository institutions in the United
States. Call Report and TFR data are also used to calculate all
institutions' deposit insurance and Financing Corporation assessments,
national banks' semiannual assessment fees, and the OTS's assessments
on savings associations.
Current Actions
I. Overview
On October 31, 2006, the agencies requested comment on proposed
revisions to the Call Report and the TFR (71 FR 63848). All four
agencies proposed to replace certain information currently collected in
the Call Report and TFR for deposit insurance assessment purposes with
the information described in proposed amendments to Part 327 of the
FDIC's regulations (71 FR 28790, May 18,
[[Page 7123]]
2006).\1\ The four agencies also proposed to revise the information
collected in the Call Report and TFR on time deposits, particularly
with respect to certain retirement accounts affected by the FDIC's
amended deposit insurance regulations.
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\1\ On November 30, 2006, the FDIC published a final rule
amending Part 327 of its regulations to improve and modernize its
operational systems for deposit insurance assessments (71 FR 69270).
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In addition, the OCC, the Board, and the FDIC (the banking
agencies) proposed to implement a number of other changes to the Call
Report requirements, most of which are expected to apply to a small
percentage of banks. First, the banking agencies proposed to revise the
Call Report to collect certain data on fair value measurements from
those institutions that choose, under generally accepted accounting
principles, to apply a fair value option to one or more financial
instruments and one or more classes of servicing assets and liabilities
and from certain institutions that report trading assets and
liabilities. The banking agencies also proposed to collect an item for
regulatory capital calculation purposes to capture the change in the
fair value of liabilities accounted for under a fair value option that
is attributable to a change in a bank's own creditworthiness. Second,
in order to meet supervisory data needs, the banking agencies proposed
to collect certain data in the Call Report on 1-4 family residential
mortgages with terms that allow for negative amortization. Finally, the
banking agencies proposed to clarify the Call Report instructions for
assets serviced for others by explicitly stating that such servicing
includes the servicing of loan participations.
The OTS's other changes to the TFR were addressed separately in its
notices published on July 31, 2006 (71 FR 43286), and December 1, 2006
(71 FR 69619). These changes will be incorporated in this OMB
submission, and will take effect on March 31, 2007.
The revisions to the Call Report and the TFR set forth herein,
which were approved for publication by the FFIEC, were proposed to take
effect as of March 31, 2007, and, for certain deposit insurance
assessment revisions, March 31, 2008. After considering the comments
and other actions since the publication of the proposal, the agencies
approved certain modifications to the initial set of proposed
revisions. The agencies will move forward with these modified reporting
changes on March 31, 2007, and March 31, 2008. For the March 31, 2007,
report date only, institutions may provide reasonable estimates for any
new or revised Call Report or TFR item for which the requested
information is not readily available.
The agencies collectively received comments from five respondents:
one banking organization, one national banking trade association, a
trade association of community organizations, a financial institution
data processing servicer, and a government agency. All of these
respondents except the government agency addressed the proposed
reporting of information on 1-4 family residential mortgages with
negative amortization features. The trade association of community
organizations supported the collection of the total amount of these
mortgages in the Call Report while the banking organization and the
banking trade association addressed the proposal to collect certain
additional data on these mortgages from banks with a significant volume
of negatively amortizing residential mortgages. The data processing
servicer commented on the proposed March 31, 2007, effective date for
reporting this information.
With respect to the other proposed revisions to the Call Report and
the TFR, the banking organization stated that it ``generally supports
the Agencies' ``proposed changes'' and the banking trade association
expressed support for ``the majority of changes proposed by the
agencies.'' This latter commenter observed that the proposed changes to
the data reported for deposit insurance assessment purposes should be
conformed to the FDIC's final rule on the operational procedures
governing deposit insurance assessments that was published after the
proposed changes to the Call Report and TFR were published for comment
on October 31, 2006. This commenter also urged the agencies to proceed
cautiously with the proposed reporting schedule that would capture data
on banks' use of the fair value option under a yet-to-be issued final
accounting standard.
A summary of the agencies' responses to the comments and the final
revisions are presented below.
II. Discussion of Revisions
A. Deposit Insurance Assessment Revisions to the Call Report and TFR
On May 18, 2006, the FDIC issued proposed amendments to Part 327 of
its regulations, ``Assessments,'' to improve and modernize its
operational systems for deposit insurance assessments. Under these
proposed amendments, the FDIC's computation of deposit insurance
assessments for certain institutions would be determined using daily
averages for deposits rather than quarter-end balances. On November 30,
2006, the FDIC published a final rule amending Part 327 of its
regulations largely as proposed on May 18.
In conjunction with these amendments to Part 327 of the FDIC's
regulations, the agencies proposed to revise and reduce the overall
reporting requirements related to deposit insurance assessments in both
the Call Report and the TFR in order to simplify regulatory reporting.
The proposed revised reporting requirements contained the following key
elements:
Institutions would separately report (a) gross deposits as
defined in Section 3(l) of the Federal Deposit Insurance Act (FDI Act)
(12 U.S.C. 1813(l)) before any allowable exclusions and (b) allowable
exclusions;
The same data items would be reported for both quarter-end
and daily average deposits;
All institutions would report using quarter-end deposits
and allowable exclusions; and
All institutions with $300 million or more in assets, and
other institutions that meet specified criteria, would also report
daily averages for deposits and allowable exclusions in addition to
quarter-end amounts.
The proposal also provided an interim period covering the March 31,
2007, through December 31, 2007, report dates, during which
institutions would have the option to submit Call Reports and TFRs
using either the current or revised formats for reporting data for
measuring their assessment base. An institution that chose to begin
reporting under the revised format in any quarter during the interim
period would be required to continue to report under the revised format
through the rest of the interim period and would not be permitted to
revert back to the current reporting format. The revised reporting
format would take effect for all institutions on March 31, 2008, at
which time the current reporting format would be eliminated. Although
no institution that chose to report under the revised format during the
2007 interim period would be required to report daily averages during
this period, any institution could elect to report daily averages as of
any quarter-end report date in 2007. However, once an institution began
to report daily averages (even during the interim period), it would be
required to continue to report daily averages each quarter thereafter
in its Call Report or TFR.
In its May 18, 2006, proposed amendments to Part 327 of its
regulations, the FDIC proposed to revise
[[Page 7124]]
the definition of the assessment base to be consistent with Section
3(l) of the FDI Act. This was intended to eliminate the need for
periodic updates to the FDIC's assessment regulations in response to
outside factors and allow a simplification of the associated reporting
requirements. In addition, the FDIC proposed to use daily average
deposits and exclusions over the quarter instead of quarter-end totals
for deposits and exclusions to compute the assessment base for
institutions with $300 million or more in assets and other institutions
who meet specified criteria. All other institutions could opt
permanently to determine their assessment base using daily averages. In
its final rule amending Part 327, the FDIC raised the size threshold
for using daily average deposits and exclusions to compute an
institution's assessment base from $300 million to $1 billion.
At present, 23 items are required in the Call Report to determine a
bank's assessment base and eight items are required in the TFR to
determine a savings association's assessment base. The agencies
proposed to change the way the assessment base is reported in the Call
Report and the TFR. As proposed, these changes would effectively reduce
the number of reported items to as few as two for certain small
institutions (without foreign offices) and no more than six for other
institutions. Specifically, the banking agencies proposed to replace
items 1 through 12 (including their subitems) on Schedule RC-O, ``Other
Data for Deposit Insurance and FICO Assessments,'' and OTS proposed to
replace the eight items in the section of Schedule DI, ``Consolidated
Deposit Information,'' for ``Deposit and Escrow Data for Deposit
Insurance Premium Assessments'' with the following six items:
Total Deposit Liabilities Before Exclusions (Gross) as
Defined in Section 3(l) of the FDI Act and FDIC Regulations;
Total Allowable Exclusions (including Foreign Deposits);
Total Foreign Deposits (included in Total Allowable
Exclusions);
Total Daily Average of Deposit Liabilities Before
Exclusions (Gross) as Defined in Section 3(l) of the FDI Act and FDIC
Regulations;
Total Daily Average Allowable Exclusions (including
Foreign Deposits); and
Total Daily Average Foreign Deposits (included in Total
Daily Average Allowable Exclusions).
The total amount of allowable exclusions from the assessment base
would be reported separately for any institution that maintains such
records as will readily permit verification of the correctness of its
assessment base. The allowable exclusions, which are set forth in
Section 3(l)(5) and other sections of the FDI Act and in the FDIC's
regulations, include foreign deposits (including International Banking
Facility deposits), reciprocal balances, drafts drawn on other
depository institutions, pass-through reserve balances, depository
institution investment contracts, and deposits accumulated for the
payment of personal loans that are assigned or pledged to assure
payment at maturity. The net amount of unposted debits and credits
would no longer be considered within the definition of the assessment
base.
In addition to quarter-end balance reporting, institutions that
meet certain criteria would be required to report average daily deposit
liabilities and average daily allowable exclusions to determine their
assessment base effective March 31, 2008. The amounts to be reported
would be averages of the balances as of the close of business for each
day for the calendar quarter. For days that an office of the reporting
institution (or any of its subsidiaries or branches) is closed (e.g.,
Saturdays, Sundays, or holidays), the amounts outstanding from the
previous business day would be used. An office is considered closed if
there are no transactions posted to the general ledger as of that date.
According to the agencies' October 31 reporting proposal, the
requirement for an institution to report daily averages beginning March
31, 2008, would have applied to any institution that had $300 million
or more in total assets either in its Call Report or TFR for March 31,
2007, regardless of its asset size in subsequent quarters. In addition,
if an institution reported $300 million or more in total assets in two
consecutive Call Reports or TFRs beginning with its June 30, 2007,
report, daily average reporting would have begun on the later of March
31, 2008, or the report date six months after the second consecutive
quarter. Daily average reporting beginning March 31, 2008, would also
have applied to any institution that became newly insured after March
31, 2007. An institution reporting less than $300 million in total
assets in its Call Report or TFR for March 31, 2007, would be permitted
to continue to determine its assessment base using quarter-end balances
until it met the two-consecutive-quarter asset size test for reporting
daily averages unless it opted to determine its assessment base using
daily averages. After an institution began to report daily averages for
its total deposits and allowable exclusions, either voluntarily or
because it was required to do so, the institution would not be
permitted to switch back to reporting only quarter-end balances.
In its comment letter, the banking trade association ``point[ed]
out that the threshold for average daily balance reporting requirements
in the final FDIC ruling is $1 billion, which differs from the $300
million threshold proposed by the FDIC on May 18, 2006,'' and upon
which the agencies' October 31 reporting proposal was based. The trade
association added that the reporting threshold in the Call Report and
the TFR ``must be revised to $1 billion to correspond with the final
FDIC rule.'' The agencies concur and are revising the threshold for
average daily balance reporting to $1 billion. In addition,
institutions that become newly insured on or after April 1, 2008, would
be required to report daily average balances beginning in the first
quarterly Call Report or TFR that they file. An institution that
becomes insured after March 31, 2007, but on or before March 31, 2008,
would not be required to report daily average balances in its Call
Report or TFR unless and until it exceeded the $1 billion asset size
threshold.
B. Revision of Certain Time Deposit Information on the Call Report and
TFR
The Federal Reserve uses data from Call Report Schedule RC-E,
Deposit Liabilities, and from TFR Schedule DI, Consolidated Deposit
Information, to ensure accurate construction of the monetary aggregates
for monetary policy purposes.\2\ In order to more accurately calculate
the monetary aggregates, the banking agencies proposed to revise two
Schedule RC-E items, Memorandum items 2.b, ``Total time deposits of
less than $100,000,'' and 2.c, ``Total time deposits of $100,000 or
more,'' and add a new Memorandum item 2.c.(1) to this schedule.
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\2\ In order to calculate the money stock measure M2, the
Federal Reserve takes M1 (which consists of currency held by the
public, traveler's checks, demand deposits, and other checkable
deposits) and adds (1) savings deposits, (2) small-denomination time
deposits (time deposits in amounts of less than $100,000) less
Individual Retirement Account (IRA) and Keogh balances at depository
institutions, and (3) balances in retail money market mutual funds,
less IRA and Keogh balances at money market mutual funds.
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In Schedule RC-E, Memorandum item 2.b would be revised to include
brokered time deposits issued in denominations of $100,000 or more that
are participated out by the broker in shares of less than $100,000 as
well as brokered certificates of deposit issued in
[[Page 7125]]
$1,000 amounts under a master certificate of deposit (when information
on the number of $1,000 amounts held by each of the broker's customers
is not readily available to the bank). Memorandum item 2.c would be
revised to exclude such brokered time deposits. In addition, because
the deposit insurance limit for certain retirement plan deposit
accounts increased from $100,000 to $250,000 in 2006, a new Memorandum
item 2.c.(1) would be added to Schedule RC-E to separately identify the
portion of the total time deposits of $100,000 or more reported in
Memorandum item 2.c that represents IRA and Keogh Plan accounts.
For the same reasons, OTS proposed to add two new items to Schedule
DI of the TFR. These data items would be (1) Time Deposits of $100,000
or More (excluding brokered time deposits participated out by the
broker in shares of less than $100,000 and brokered certificates of
deposit issued in $1,000 amounts under a master certificate of deposit)
and (2) IRA/Keogh Accounts included in Time Deposits of $100,000 or
More.
The agencies received no comments on the proposed time deposit
reporting changes, which they will implement as proposed.
C. Reporting of Certain Fair Value Measurements and the Use of the Fair
Value Option in the Call Report
On September 15, 2006, the Financial Accounting Standards Board
(FASB) issued Statement No. 157, Fair Value Measurements (FAS 157),
which is effective for banks and other entities for fiscal years
beginning after November 15, 2007. Earlier adoption of FAS 157 is
permitted as of the beginning of an earlier fiscal year, provided the
bank has not yet issued a financial statement or filed a Call Report
for any period of that fiscal year. Thus, a bank with a calendar year
fiscal year may voluntarily adopt FAS 157 as of January 1, 2007. The
fair value measurements standard provides guidance on how to measure
fair value and would require banks and other entities to disclose the
inputs used to measure fair value based on a three-level hierarchy for
all assets and liabilities that are remeasured at fair value on a
recurring basis.\3\
The FASB plans to issue a final standard, The Fair Value Option for
Financial Assets and Financial Liabilities, in the first quarter of
2007. This standard would allow banks and other entities to report
certain financial assets and liabilities at fair value with the changes
in fair value included in earnings. The banking agencies anticipate
that relatively few banks will elect to use the fair value option for a
significant portion of their financial assets and liabilities.
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\3\ The FASB's three-level fair value hierarchy gives the
highest priority to quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). Level 1 inputs are quoted prices in
active markets for identical assets or liabilities that the
reporting bank has the ability to access at the measurement date
(e.g., the Call Report date). Level 2 inputs are inputs other than
quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 3 inputs
are unobservable inputs for the asset or liability.
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According to the FASB's Web site (http://www.fasb.org), the FASB
Board has tentatively decided to require that the effective date of the
final fair value option standard be the same as the effective date of
FAS 157. Thus, the final fair value option standard should be effective
for financial statements issued for fiscal years beginning after
November 15, 2007. The FASB Board has also tentatively decided to
permit an entity to early adopt the final fair value option standard
provided that the entity also adopts all of the requirements
(measurement and disclosure) of FAS 157 concurrent with or prior to the
early adoption of the final fair value option standard. Furthermore,
the FASB Board would permit early adoption of the final fair value
option standard within 120 days of the beginning of the entity's fiscal
year, thereby making the fair value option election retroactive to the
beginning of that fiscal year (or the date of initial recognition, if
later) provided that the entity has not yet issued any interim
financial statements for that fiscal year. Thus, a bank with a calendar
year fiscal year that voluntarily adopts FAS 157 as of January 1, 2007,
would also be able to adopt the final fair value option standard as of
that same date.
The banking agencies proposed to clarify the Call Report
instructions to explain where financial assets and liabilities measured
under the fair value option should be reported in the existing line
items of the Call Report. The banking agencies also proposed to add a
new Schedule RC-Q to the Call Report to collect data, by major asset
and liability category, on the amount of assets and liabilities to
which the fair value option has been applied along with separate
disclosure of the amount of such assets and liabilities whose fair
values were estimated under level two and under level three of the
FASB's fair value hierarchy. The categories are:
Securities held for purposes other than trading with
changes in fair value reported in current earnings;
Loans and leases;
All other financial assets and servicing assets;
Deposit liabilities;
All other financial liabilities and servicing liabilities;
and
Loan commitments (not accounted for as derivatives).
In addition, the banking agencies proposed to collect data on
trading assets and trading liabilities in the new schedule from those
banks that complete Schedule RC-D, Trading Assets and Liabilities,
i.e., banks that reported average trading assets of $2 million or more
for any quarter of the preceding calendar year. In the proposed new
schedule, such banks would report the carrying amount of trading assets
and trading liabilities whose fair values were estimated under level
two and under level three of the FASB's fair value hierarchy.
The FASB's fair value measurements standard requires banks and
other entities to consider the effect of a change in their own
creditworthiness when determining the fair value of a financial
liability. The banking agencies proposed to add one new item to
Schedule RC-R, Regulatory Capital, for the cumulative change in the
fair value of all financial liabilities accounted for under the fair
value option that is attributable to changes in the bank's own
creditworthiness. This amount would be excluded from the bank's
retained earnings for purposes of determining Tier 1 capital under the
banking agencies' regulatory capital standards.
Finally, the banking agencies proposed to clarify the instructions
to Schedule RI for the treatment of interest income on financial assets
and interest expense on financial liabilities measured under a fair
value option. The instructions would be modified to instruct banks to
separate the contractual year-to-date amount of interest earned on
financial assets and interest incurred on financial liabilities that
are reported under a fair value option from the overall year-to-date
fair value adjustment and report these contractual amounts in the
appropriate interest income or interest expense items on Schedule RI.
Only one commenter, the banking trade association, offered comments
on fair value option reporting, urging ``the agencies to proceed
cautiously with any major revisions to the Call Report or TFR prior to
the official release of the Fair Value Option statement.'' The trade
association also requested that the agencies delay the March 31, 2007,
effective date of the proposed reporting revisions related to the fair
value option if the release of the FASB's final fair
[[Page 7126]]
value option standard is delayed beyond its expected issuance in the
first quarter of 2007. The trade association did not address the
proposed reporting revisions for the fair value option and fair value
measurements themselves.
The banking agencies agree on the need for caution in implementing
their proposed reporting revisions related to the fair value option and
fair value measurements. Accordingly, once the FASB issues its final
fair value option standard, only if banks are permitted to adopt this
standard in the first quarter of 2007 for other financial reporting
purposes would the fair value option reporting requirements in the Call
Report take effect as of March 31, 2007. Otherwise, these reporting
requirements would be delayed until banks can elect the fair value
option for other financial reporting purposes. Additionally, the
banking agencies will proceed with the new Schedule RC-R item for fair
value changes included in retained earnings that are attributable to
changes in a bank's own creditworthiness. This item will initially
reflect the banking agencies' determination that banks should exclude
from Tier 1 capital the cumulative change in the fair value of
financial liabilities accounted for under a fair value option that is
included in retained earnings and is attributable to changes in the
bank's own creditworthiness. If the scope of the banking agencies'
determination concerning changes in the fair value of liabilities
attributable to changes in own creditworthiness is later modified, the
new Schedule RC-R item would be modified accordingly.
D. Reporting of Certain Data in the Call Report on 1-4 Family
Residential Mortgage Loans With Terms That Allow for Negative
Amortization
The banking agencies proposed to collect certain Call Report items
to monitor the extent of bank holdings of closed-end 1-4 family
residential mortgage loan products whose terms allow for negative
amortization. As proposed, all banks would report the total amount of
their holdings of such closed-end mortgage loans in a new memorandum
item in Schedule RC-C, Part I, Loans and Leases. The banking agencies
also proposed to collect two additional memorandum items on Schedule
RC-C and another new memorandum item on Schedule RI, Income Statement,
from banks with a significant volume of negatively amortizing 1-4
family residential mortgage loans. The two additional Schedule RC-C
memorandum items would be (1) the total maximum remaining amount of
negative amortization contractually permitted on closed-end loans
secured by 1-4 family residential properties and (2) the total amount
of negative amortization on closed-end loans secured by 1-4 family
residential properties that is included in the carrying amount of these
loans. The Schedule RI memorandum item would be the year-to-date
noncash income on closed-end loans with a negative amortization feature
secured by 1-4 family residential properties.
The banking agencies' proposal stated that the threshold for
identifying banks with a significant volume of negatively amortizing
residential mortgage loans would be based on the aggregate amount of
these loans being in excess of either a certain dollar amount, e.g.,
$100 million or $250 million, or a certain percentage of the total
loans and leases (in domestic offices) reported on Schedule RC-C, e.g.,
five percent or ten percent. For reporting during 2007, a bank with
negatively amortizing loans would determine whether it met the size
threshold for reporting the three additional memorandum items using
data reflected in its December 31, 2006, Call Report. For reporting in
2008 and subsequent years, the determination would be based on data
from the previous year-end Call Report. Thus, banks with negatively
amortizing 1-4 family residential mortgage loans in excess of the
reporting threshold as of the end of any particular calendar year would
report these three items for the entire next calendar year.
The banking agencies requested comment on the specific dollar
amount and percentage of loans that should be used in setting the size
threshold for additional reporting on negatively amortizing loans. As
mentioned above, the comments from the banking organization and the
banking trade association addressed this threshold. In this regard, the
banking organization recommended that the agencies base their reporting
threshold only on a percentage of an institution's total loans and
leases and not also include a fixed dollar amount of negatively
amortizing loans in the threshold test. The organization stated that
using a percentage test ``is more in line with the Agencies' goals of
ensuring the safety and soundness of institutions while minimizing the
burden of information collection'' because ``safety and soundness
concerns become more prominent only as an institution's concentration
in these loans increases relative to the rest of its portfolio.''
In its comments, the banking trade association referred to the
agencies' Interagency Guidance on Nontraditional Mortgage Product
Risks, which they published at the beginning of October 2006,\4\ noting
that this guidance ``specifically states that the agencies did not
intend to establish concentration caps for institutions that
underwrite'' nontraditional mortgages, including the residential
mortgages with negative amortization features on which data would be
reported in the Call Report. The trade association expressed concern
that the establishment of a reporting threshold for reporting certain
data on these loans would be ``a de facto concentration limit above
which heightened regulatory scrutiny could be implied for such loans.''
This ``would be inconsistent with the Interagency Guidance.'' As a
consequence, the trade association suggested eliminating the entire
proposed reporting requirement for negatively amortizing residential
mortgage loans. Alternatively, if the proposed reporting requirement
were to be retained, the trade association recommended eliminating the
reporting threshold for the three additional items and requiring all
banks to report these items.
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\4\ See 71 FR 58609, October 4, 2006.
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The banking agencies have considered these comments that focus on
the reporting threshold. The intent of the proposal to establish a
reporting threshold for certain additional data on negatively
amortizing residential mortgage loans was not to establish
concentration limits for these mortgage products. Rather, as the
agencies noted in their proposal, they currently ``have no readily
available means of identifying the industry's exposure'' to these
products, which led them to propose to collect certain data to assist
them in ``monitor[ing] the extent of use of negatively amortizing
residential mortgage loans in the industry.'' Thus, the reporting of
data on these mortgages is intended to support agency analysis at both
the institution level and the industry level. The threshold for
reporting additional data on negatively amortizing residential mortgage
loans that are present at an institution in a significant volume was
designed to limit the reporting burden on institutions, particularly
small banks, with a nominal volume of these loans. A threshold based
solely on a percentage of total loans and leases would not enable the
banking agencies to gain an industry perspective on the amount of
remaining contractually permitted negative amortization, capitalized
negative amortization, and noncash income from negative amortization
and how they relate to the amount of negatively amortizing residential
mortgages. Therefore, the banking agencies will
[[Page 7127]]
proceed with a reporting threshold for the three additional data items
that incorporates both a dollar amount test and a percentage test. More
specifically, banks would report the three additional data items
pertaining to their negatively amortizing residential mortgages if the
amount of these mortgages exceeds the lesser of $100 million or 5
percent of their total loans and leases (in domestic offices), both
held for sale and held for investment.
The data processing servicer commented on the proposed March 31,
2007, effective date for reporting this information. The servicer
observed that the end of the proposal's comment period is less than 90
days before this effective date, while it typically needs a minimum of
180 days to implement programming changes after requirements are
finalized. As a consequence, the servicer stated that it would not be
able to commit to completing the programming, testing, and
implementation of changes to its mortgage software by March 31, 2007,
to enable its client banks to report the proposed information on
negatively amortizing residential mortgages.
The Interagency Guidance on Nontraditional Mortgage Product Risks
indicates that management information and reporting systems ``should
allow management to detect changes in the risk profile of its
nontraditional mortgage loan portfolio. The structure and content
should allow the isolation of key loan products, risk-layering loan
features, and borrower characteristics.'' The guidance further provides
that ``[a]t a minimum, information should be available by loan type,''
such as for the closed-end residential mortgage loans with negative
amortization features that are the subject of this Call Report
proposal, and ``by borrower performance (e.g., payment patterns,
delinquencies, interest accruals, and negative amortization).'' These
risk management expectations for information systems were set forth
approximately 180 days before the March 31, 2007, effective date of the
proposed Call Report items for negatively amortizing residential
mortgages. In addition, as previously mentioned, for the March 31,
2007, report date, banks may provide reasonable estimates for these new
Call Report items if the requested information is not readily
available.
E. Call Report Instructional Clarification for Servicing of Loan
Participations
Banks report the outstanding principal balance of loans and other
assets serviced for others in Memorandum items 2.a, 2.b, and 2.c of
Schedule RC-S, ``Servicing, Securitization, and Asset Sale
Activities.'' The instructions for these Memorandum items do not
explicitly state whether a bank that has sold a participation in a loan
or other financial asset, which it continues to service, should include
the servicing in Memorandum item 2.a, 2.b, or 2.c, as appropriate.
Because the absence of clear instructional guidance has resulted in
questions from bankers and has produced diversity in practice among
banks, the banking agencies propose to clarify the instructions to
these Schedule RC-S Memorandum items to explicitly state that the
amount of loan participations serviced for others should be included in
these items. The banking agencies received no comments specifically
addressing this instructional clarification, which will be implemented
as proposed.
III. Other Matters
Section 601 of the Financial Services Regulatory Relief Act of 2006
(Relief Act) removed several statutory reporting requirements relating
to insider lending by banks and savings associations. One of these
amendments, which became effective on October 13, 2006, eliminated the
requirement that an institution include a separate report with its Call
Report or TFR each quarter on any extensions of credit the institution
has made to its executive officers since the date of its last Call
Report or TFR.\5\ Accordingly, institutions were no longer required to
report on such extensions of credit beginning December 31, 2006, and
the ``Special Report'' on loans to executive officers, which has been
included with the Call Report and TFR in previous quarters, is being
discontinued. Because the reporting burden of this ``Special Report''
has been included in the burden for the Call Report and TFR information
collections, the agencies have adjusted the burden of these collections
in response to this statutory change and the elimination of the
reporting requirement.
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\5\ In keeping with the Relief Act, the Board amended Regulation
O (12 CFR part 215) to eliminate the insider loan reporting
requirements addressed in Section 601, effective December 11, 2006
(71 FR 71472, December 11, 2006). The FDIC repealed Part 349 of its
regulations (12 CFR part 349), which covered certain insider loan
reporting requirements addressed in Section 601, effective December
22, 2006 (71 FR 78337, December 29, 2006). The OCC's regulations (12
CFR part 31) and the OTS's regulations (12 CFR part 563) incorporate
Regulation O by reference and, therefore, do not require amendment.
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To improve the timeliness with which Call Report data become
available to the public, the banking agencies will start posting
individual bank data on the Internet earlier than in the past. This
change will occur in conjunction with the implementation of the FFIEC's
Central Data Repository Public Data Distribution (CDR PDD) site as the
Web site for obtaining individual bank Call Report data. At present,
individual bank Call Reports for which the analyses have been completed
are released to the public beginning the third Friday after the report
date (e.g., January 19, 2007, for the December 31, 2006, report) and
additional bank reports are posted each Friday thereafter. Beginning
with the March 31, 2007, report, the banking agencies plan to begin
posting individual bank Call Report data on the CDR PDD Web site 15
calendar days after the report date (e.g., April 15, 2007). However, no
individual bank data will be posted until 72 hours after that data has
been accepted by the banking agencies and is incorporated within the
Central Data Repository.
IV. Request for Comment
Public comment is requested on all aspects of this joint notice.
Comments are invited on:
(a) Whether the proposed revisions to the Call Report and TFR
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' estimates 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;
(d) Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments submitted in response to this joint 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.
[[Page 7128]]
Dated: February 8, 2007.
Stuart E. Feldstein,
Assistant Director, Legislative and Regulatory Activities Division,
Office of the Comptroller of the Currency.
Board of Governors of the Federal Reserve System, February 5,
2007.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 2nd day of February, 2007.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
Dated: January 31, 2007.
Deborah Dakin,
Senior Deputy Chief Counsel, Regulations and Legislation Division,
Office of Thrift Supervision.
[FR Doc. 07-677 Filed 2-13-07; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P