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FDIC Federal Register Citations

[Federal Register: August 23, 2005 (Volume 70, Number 162)]
[Notices]              
[Page 49363-49372]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23au05-149]                        

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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 Request

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: Joint notice and request for comment.

--------------------------------------------------------------------------------------------------------------------

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 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 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 and the agencies
should modify the proposed revisions prior to giving final approval.
The agencies will then submit the revisions to OMB for review and
approval.

DATES: Comments must be submitted on or before October 24, 2005.

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: You may submit comments, identified by [Attention: 1557-0081],
by any of the following methods:
     E-mail: regs.comments@occ.treas.gov. Include [Attention:
1557-0081] in the subject line of the message.
     Fax: (202) 874-4448.
     Mail: Public Information Room, Office of the Comptroller
of the Currency, 250 E Street, SW., Mailstop 1-5, Washington, DC 20219;
Attention: 1557-0081.
    Public Inspection: You may inspect and photocopy comments at the
Public Information Room. 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: regs.comments@federalreserve.gov. 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/propose.html.     E-mail: comments@fdic.gov. Include ``Consolidated Reports

of Condition and Income, 3064-0052'' in the subject line of the
message.
     Mail: Steven F. Hanft (202-898-3907), Paperwork Clearance
Officer, Room MB-3064, 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/propose.html

including any personal information provided. Comments may be inspected
at the FDIC Public Information Center, Room 100, 801 17th Street, NW.,
between 9 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: Mark Menchik, Office of Information and
Regulatory Affairs, Office of Management and Budget, New Executive
Office Building, Room 10235, Washington, DC 20503, or electronic mail
to mmenchik@omb.eop.gov.

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
Call Report forms can be obtained at the FFIEC's Web site
(http://www.ffiec.gov/ffiec_report_forms.htm).

    OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dixon, (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. Long, Federal Reserve 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.

[[Page 49364]]


SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and
extend for three years the Call Report, which is currently an approved
collection of information for each of the agencies.
    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: 1,950 national banks.
    Estimated Time per Response: 43.80 burden hours (represents a
decrease of 4.47 hours associated with testing and enrollment in the
Central Data Repository (CDR) and a net increase of 1.81 hours for
proposed new items and deletions).
    Estimated Total Annual Burden: 341,621 burden hours.
    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 919 State member banks.
    Estimated Time per Response: 50.38 burden hours (represents a
decrease of 4.01 hours associated with testing and enrollment in the
CDR and a net increase of 2.01 hours for proposed new items and
deletions).
    Estimated Total Annual Burden: 185,197 burden hours.
    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 5,243 insured state nonmember
banks.
    Estimated Time per Response: 34.73 burden hours (represents a
decrease of 4.16 hours associated with testing and enrollment in the
CDR and a net increase of 1.79 hours for proposed new items and
deletions).
    Estimated Total Annual Burden: 728,274 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 625 hours per quarter,
depending on an individual institution's circumstances.
    Furthermore, the effect on reporting burden of the proposed
revisions to the Call Report requirements will vary from institution to
institution depending, in some cases, on the institution's asset size
and, in other cases, on its involvement with the types of activities or
transactions to which the proposed changes apply. This proposal would
add several new data items to the Call Report, revise certain existing
items, eliminate a limited number of items, and remove the burden hours
associated with testing and enrollment in the new CDR system, which had
been added to the Call Report burden estimate in 2004, because these
CDR activities will be completed prior to the implementation of the
proposed revisions. Since the reduction in burden related to the CDR
exceeds the net increase in burden from the proposed revisions to the
content of the Call Report, the proposal as a whole would produce a net
decrease in reporting burden for banks of all sizes. Nevertheless, the
proposed new items and revisions of existing items, taken together,
would have an effect on all banks. Therefore, as discussed more fully
below in Section I. Overview, the agencies encourage banks and other
interested parties to comment on such matters as data availability,
data alternatives, and reporting thresholds for each proposal for new
or revised data. Such comments will assist the agencies in determining
the content of the final set of revisions to the Call Report. For
purposes of this proposal, the following burden estimates include the
effect of all of the proposed revisions without anticipating any
possible modifications resulting from the public comment process that
may lessen the impact of the revisions on some or all banks.

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), and 12 U.S.C.
1817 (for insured State nonmember commercial and savings banks). Except
for selected items, these information collections are not given
confidential treatment.

Abstract

    Institutions file Call Reports with 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. In
addition, Call Reports provide the most current statistical data
available for evaluating institutions' corporate applications such as
mergers, for identifying areas of focus for both on-site and off-site
examinations, and for monetary and other public policy purposes. Call
Reports are also used to calculate all institutions' deposit insurance
and Financing Corporation assessments and national banks' semiannual
assessment fees.

Current Actions

I. Overview

    The agencies last revised the form and content of the Call Report
in a manner that significantly affected a substantial percentage of
banks in March 2002. The revisions that have taken effect since March
2002 (i.e., in March 2003 and June 2005) were narrowly focused on
certain specific activities in order to improve the information
available to the agencies for those banks engaging in these activities.
These focused revisions meant that the new or revised Call Report items
pertaining to each of these activities were directly applicable to
small percentages of banks rather than to most or all banks.
    During this recent period of limited revisions to the Call Report,
the FFIEC and the agencies having been working toward the October 1,
2005, implementation of the CDR, the Internet-based system they are
developing to modernize and streamline how Call Report data are
collected, validated, managed, and distributed. At the same time, the
agencies have also been carefully evaluating their information needs.
In this regard, the agencies recognize that the Call Report imposes
reporting burden, which is a component of the overall regulatory burden
that banks face. Another contributor to this overall burden is the
examination process, particularly on-site examinations during which
bank management and staff spend time and effort responding to inquiries
and requests for information that are designed to assist examiners in
evaluating the condition and risk profile of the institution. The
amount of attention that examiners initially direct to the various risk
areas of the bank under examination is, in large part, determined from
Call Report data. These data, and analytical reports generated from
Call Report data such as the Uniform Bank Performance Report, assist
examiners in making their preliminary assessments of risks and in
scoping efforts during the planning phase of the examination process.
    The more risk-focused the information available to examiners from a
bank's Call Report, the better the job examiners can do before the
start of their on-site work in making their preliminary assessments as
to whether each of the risk areas of the bank presents greater than
normal, normal, or less than normal risk. The degree of perceived risk
determines the extent of the examination procedures, and the

[[Page 49365]]

resultant regulatory burden, that are initially planned for each risk
area. If the outcome of these procedures begins to reveal a greater
than expected level of risk in a particular risk area, the examination
scope and procedures are adjusted accordingly, adding to the regulatory
burden imposed on the bank.
    Call Report data are also a vital source of information for the
agencies' off-site examination and surveillance activities. Among their
benefits, these activities aid in determining whether the frequency of
a bank's examination cycle should remain at maximum allowed time
intervals, thereby lessening overall regulatory burden. More risk-
focused Call Report data enhance the agencies' ability to assess
whether an institution is experiencing changes in its risk profile that
warrant immediate follow-up, which may include accelerating the timing
of an on-site examination.
    In developing this proposal, the agencies have considered a range
of potential information needs, particularly in the areas of credit
risk, liquidity, and liabilities, and have identified those additions
to the Call Report that are believed to be most critical and relevant
to the agencies as they seek to fulfill their supervisory
responsibilities. At the same time, the agencies have identified
certain existing Call Report data that are no longer sufficiently
critical or useful to warrant their continued collection from either
all banks or banks that meet certain criteria (e.g., an asset size
threshold). On balance, the agencies recognize that the reporting
burden that would result from the addition to the Call Report of all of
the new items discussed in this proposal would not be fully offset by
the proposed elimination of, or establishment of reporting thresholds
for, a limited number of other Call Report items, thereby resulting in
a net increase in reporting burden. Nevertheless, when viewing these
proposed revisions to the Call Report within a larger context, they are
intended to enhance the agencies' on- and off-site supervision
activities, which should help to control the overall regulatory burden
on banks.
    Thus, the agencies are requesting comment on the following proposed
revisions to the Call Report, which would take effect as of March 31,
2006. For each of the proposed revisions of existing items or proposed
new items, the agencies are particularly interested in comments from
banks on whether the information that is proposed to be collected is
readily available from existing bank records. The agencies also invite
comment on whether there are particular proposed revisions for which
the new data would be of limited relevance for purposes of assessing
risks in a specific segment of the banking industry. In such cases,
comments are requested on what criteria, e.g., an asset size threshold
or some other measure, should be established for identifying the
specific segment of the banking industry that should be required to
report the proposed new information. Finally, the agencies seek comment
on whether, for a particular proposed revision, there is an alternative
set of information that could satisfy the agencies' data needs in that
area and be less burdensome for banks to report than the new or revised
items that the agencies have proposed. The agencies will consider all
of the comments they receive as they formulate a final set of revisions
to the Call Report for implementation in March 2006.
    (1) Burden-reducing revisions:
     Eliminating Schedule RC-O, Memorandum item 2, ``Estimated
amount of uninsured deposits,'' for banks with less than $1 billion in
assets;
     Collecting only the total amount of a bank's holdings of
asset-backed securities in Schedule RC-B from banks that only have
domestic offices and are less than $1 billion in assets (but continuing
to collect the breakdown by type of asset-backed security from all
other banks);
     Eliminating items for reporting the impact on income of
derivatives held for purposes other than trading (Schedule RI,
Memorandum items 9.a through 9.c); and
     Eliminating items pertaining to bankers acceptances
(Schedule RC, items 9 and 18; Schedule RC-H, items 1 and 2; and
Schedule RC-L, item 5).
    (2) Revisions of existing items and new items:
     Splitting ``Construction, land development, and other land
loans'' (CLD&OL loans) into separate categories for 1-4 family
residential CLD&OL loans and all other CLD&OL loans (Schedule RC-C,
part I, item 1.a; Schedule RC-N, item 1.a; Schedule RI-B, part I, item
1.a; and Schedule RC-L, item 1.c.1);
     Splitting loans ``Secured by nonfarm nonresidential
properties'' (commercial real estate loans) into separate categories
for owner-occupied and other commercial real estate (Schedule RC-C,
part I, item 1.e; Schedule RC-N, item 1.e; Schedule RI-B, part I, item
1.e);
     Replacing the breakdown of ``Lease financing receivables''
between leases from U.S. and non-U.S. addressees with a breakdown of
leases between retail (consumer) leases and commercial leases for banks
with foreign offices or with domestic offices only and $300 million or
more in total assets (Schedule RC-C, part I, items 10.a and 10.b;
Schedule RC-N, items 8.a and 8.b on the FFIEC 031 and Memorandum item
3.d on the FFIEC 041; and Schedule RI-B, part I, items 8.a and 8.b on
the FFIEC 031 and Memorandum item 2.d on the FFIEC 041);
     Collecting further information on Federal Home Loan Bank
advances, which are currently reported in Schedule RC-M, item 5.a, by
adding breakdowns of advances by type and by next repricing date and by
splitting the existing item for advances with a remaining maturity of
more than three years into two items;
     Adding two items to the past due and nonaccrual assets
schedule (Schedule RC-N) for ``Additions to nonaccrual assets during
the quarter'' and ``Nonaccrual assets sold during the quarter;''
     Collecting additional information on credit derivatives by
adding a breakdown by type of contract to the notional amounts
currently reported in Schedule RC-L, item 7, along with new items for
the maximum amounts payable and receivable on credit derivatives;
adding credit derivatives to the existing maturity distribution of
derivatives in Schedule RC-R, Memorandum item 2; adding credit
derivatives to the breakdown of trading revenue by type of exposure
currently collected in Schedule RI, Memorandum item 8; and adding a new
income statement Memorandum item for the effect on earnings of credit
derivatives held for purposes other than trading;
     Adding a new Schedule RC-P to collect data pertaining to
closed-end 1-4 family residential mortgage banking activities for banks
with $1 billion or more in total assets,\1\ including quarter-end loans
held for sale and quarterly originations, purchases, and sales,
segregated between first and junior liens, and noninterest income from
these activities;
---------------------------------------------------------------------------

    \1\ In addition, a smaller bank with significant involvement in
these activities, as determined by its primary federal regulator,
could be directed by its regulator to report this information.
---------------------------------------------------------------------------

     Changing the category of noninterest income in which banks
report income from certain sales of annuities from ``Income from other
insurance activities'' (Schedule RI, item 5.h.(2)) to ``Investment
banking, advisory, brokerage, and underwriting fees and commissions''
(Schedule RI, item 5.d);
     Splitting the income statement item for ``Investment
banking, advisory, brokerage, and underwriting fees and commissions''
(Schedule RI, item 5.d)

[[Page 49366]]

into separate items for fees and commissions from securities brokerage,
fees and commissions from sales of annuities, and other fees and
commissions;
     Adding new items for the amounts included in ``Federal
funds purchased (in domestic offices)'' (Schedule RC, item 14.b) and
``Other borrowings'' (Schedule RC-M, item 5.b) that are secured;
     Adding an item to Schedule RC-F, ``Other Assets,'' for the
carrying value of the bank's life insurance assets, which would replace
the item in this schedule for reporting such assets if they exceed 25
percent of ``All other assets'';
     Revising Schedule RI-D, ``Income from International
Operations,'' on the FFIEC 031 to focus on activity conducted in
foreign offices; and
     Revising the scope of Schedule RC-S, column G, ``All Other
Loans and All Leases,'' to cover securitizations and credit-enhanced
asset sales involving assets other than loans and leases.
    (3) Other matters:
     Clarifying the instructions to Schedule RC-S, Memorandum
item 2, to indicate that the servicing of home equity lines should be
included in the servicing of ``Other financial assets'' rather than 1-4
family residential mortgages; and
     Revising the officer declaration and director attestation
requirements and signatures that apply to the Call Report.
    These proposed revisions to the Call Report, which have been
approved for publication by the FFIEC for the purpose of soliciting
comments from banks and other interested parties, are discussed in more
detail below.
    Type of Review: Revision and extension of currently approved
collections.
    As mentioned above, the agencies plan to implement the proposed
changes as of the March 31, 2006, report date. Nonetheless, as is
customary for Call Report changes, institutions are advised that they
may report reasonable estimates for any new or revised item in their
reports for March 31, 2006, if the information to be reported is not
readily available. In addition, the specific wording of the captions
for the new and revised Call Report items discussed in this proposal
and the numbering of these items in the report should be regarded as
preliminary.

II. Discussion of Proposed Revisions

A. Burden-Reducing Revisions

1. Uninsured Deposits
    All banks have been required to report the ``Estimated amount of
uninsured deposits'' in Schedule RC-O, Memorandum item 2, since March
2002. To limit reporting burden, the FFIEC and the agencies advised
banks that they were not expected to modify their information systems
or acquire new systems solely for purposes of making this estimate.
Rather, banks were instructed to base their estimates of the uninsured
portion of their deposits on data that are readily available from the
information systems and other records the bank has in place.
Nonetheless, smaller banks continue to indicate that they find this
Memorandum item burdensome and, as a consequence, many resort to
reporting a simple estimate based on the number and amount of their
deposit accounts of more than $100,000, the current limit of deposit
insurance.
    Because banks already report the number and amount of such deposit
accounts in Schedule RC-O, Memorandum item 1, the agencies are able to
calculate the same simple estimate of uninsured deposits as these banks
have done. A comparison of the amounts banks have reported for their
estimated uninsured deposits in Memorandum item 2 with a simple
estimate calculated by the agencies from the information reported in
Memorandum item 1 revealed insignificant differences between the two
figures for banks with less than $1 billion in assets, which currently
hold only about 20 percent of banks' total domestic deposits. Only at
larger institutions were the differences between banks' reported
estimates and the calculated simple estimate significant enough to have
a potential effect on the estimate of insured deposits used by the FDIC
in the determination of deposit insurance assessment premiums.
Accordingly, the agencies are proposing that banks with less than $1
billion in total assets would no longer be required to complete
Schedule RC-O, Memorandum item 2. Banks with $1 billion or more in
total assets would continue to report the ``Estimated amount of
uninsured deposits'' in this Memorandum item.
2. Holdings of Asset-Backed Securities
    In Schedule RC-B, ``Securities,'' the agencies collect a six-way
breakdown of banks' holdings of asset-backed securities (not held for
trading purposes) in items 5.a through 5.f.\2\ Because banks with
domestic offices only and less than $1 billion in total assets hold
only a nominal percentage of the industry's investments in asset-backed
securities, the agencies have determined that continuing to request a
breakdown by category of these institutions' limited holdings is no
longer warranted. Instead, these banks would report only their total
holdings of asset-backed securities in Schedule RC-B. However, all
banks with foreign offices and other banks with $1 billion or more in
total assets would continue to report the existing breakdown of their
asset-backed securities in this schedule.
---------------------------------------------------------------------------

    \2\ In Schedule RC-B, the asset-backed securities reported in
items 5.a through 5.f exclude mortgage-backed securities, which are
reported separately in items 4.a(1) through 4.b(3) of the schedule.
---------------------------------------------------------------------------

3. Impact of Derivatives on Income
    Banks with foreign offices or with $100 million or more in total
assets report the effect that their use of derivatives outside the
trading account has had on their year-to-date interest income, interest
expense, and net noninterest income in income statement (Schedule RI)
Memorandum items 9.a through 9.c. The amounts reported in these
Memorandum items are aggregates of all nontrading derivative positions
and combine derivatives that may have substantially different
underlying risk exposures, e.g., interest rate risk, foreign exchange
risk, and credit risk. In recognition of the new data on credit
derivatives that the agencies are proposing to collect (see Section
II.B.6. below), the agencies have identified the three income statement
Memorandum items as being of lesser utility and propose to delete them.
4. Bankers Acceptances
    The Call Report balance sheet (Schedule RC) has long required banks
to separately disclose the amount of their ``Customers'' liability to
this bank on acceptances outstanding'' (item 9) and their ``Bank's
liability on acceptances executed and outstanding'' (item 18). For
banks with foreign offices, corresponding amounts are disclosed for
acceptance assets and liabilities in domestic offices (Schedule RC-H,
items 1 and 2). In addition, banks with foreign offices or $100 million
or more in total assets also report the amount of ``Participations in
acceptances conveyed to others by the reporting bank'' (Schedule RC-L,
item 5). Over time, the volume of acceptance assets and liabilities as
a percentage of industry assets and liabilities has declined
substantially to a nominal amount, with only a small number of banks
reporting these items. The agencies are proposing to delete these five
items and banks would be instructed to include any acceptance assets
and liabilities in ``Other assets'' and ``Other liabilities,''
respectively, on the Call Report balance sheet.

[[Page 49367]]

B. Revisions of Existing Items and New Items

1. Construction Land Development, and Other Land Loans
    Construction, land development, and other land lending are highly
specialized activities with inherent risks that must be managed and
controlled to ensure that these activities remain profitable.
Management's ability to identify, measure, monitor, and control the
risks from these types of loans through effective underwriting
policies, systems, and internal controls is crucial to a sound lending
program. In areas of the country that experience high levels of
construction activity and an extremely competitive lending environment,
these factors often lead to thinner profit margins on CLD&OL loans and
looser underwriting standards. Moreover, the risk profiles, including
loss rates, of CLD&OL loans vary across loan types because of
differences in such factors as underwriting and repayment source. The
agencies' real estate lending standards recognize these differences in
risk, for example, by setting higher supervisory loan-to-value limits
for 1-4 family residential construction loans than for other
construction loans.
    The agencies have seen substantial growth in the volume of CLD&OL
loans in recent years. At commercial banks and state-chartered savings
banks, these loans grew more rapidly than loan portfolios as a whole
during 2003 and 2004. The faster growth in CLD&OL lending than overall
lending occurred each year not only for institutions as a whole, but
also for banks with less than $100 million in assets, banks with $100
million to $1 billion in assets, and for banks with more than $1
billion in assets. At year-end 2004, banks' CLD&OL loans totaled more
than $300 billion, up nearly 40 percent from their level of $217
billion two years earlier. In addition, at banks with less than $100
million in assets, CLD&OL loans were a higher percentage of total loans
and leases at year-end 2004 (7 percent) than at banks with more than $1
billion in assets (less than 5 percent). Nearly 88 percent of all banks
reported holding CLD&OL loans at year-end 2004, including almost 79
percent of banks with less than $100 million in assets and more than 91
percent of banks with more than $1 billion in assets.
    In the Thrift Financial Report (TFR) (Form 1313, OMB No. 1550-0023)
that the Office of Thrift Supervision (OTS) collects from the savings
associations under its supervision, these institutions are required to
report the amount of construction loans for 1-4 family residential
properties separately from other construction loans. Charge-offs and
recoveries on 1-4 family residential property construction loans are
also reported separately from other construction loan charge-offs and
recoveries in the TFR. The National Association of Home Builders
(NAHB), in letters submitted to the agencies in January 2003 and May
2005 in response to the agencies' requests for comment on past proposed
revisions to the Call Report, has requested that the agencies
``consider itemizing the construction and land development lending data
that are currently aggregated'' to distinguish between different types
of construction loans. The NAHB noted that their analysis of TFR data
on construction loans revealed that residential construction loans
``perform much better than most other real estate loans'' and expressed
concern that the ``current lack of credible activity and performance
data'' on construction lending in the Call Report ``impedes the
Agencies'' ability to accurately evaluate the level of risk associated
with such activities.''
    The agencies agree with the NAHB that it would be beneficial to
improve their ability to monitor the construction lending activities of
individual banks and the industry as a whole by obtaining separate data
on 1-4 family residential CLD&OL loans and all other CLD&OL loans,
particularly in light of the substantial growth in this type of lending
by banks. Such information would also enable the agencies to identify
institutions that significantly shift from 1-4 family residential
construction lending to other construction lending, and vice versa, and
to identify when institutions that had been solely 1-4 family
residential construction lenders move into other types of construction
lending.
    Therefore, the agencies are proposing to split the existing item
for ``Construction, land development, and other land loans'' in the
loan schedule (Schedule RC-C, part I, item 1.a), the past due and
nonaccrual schedule (Schedule RC-N, item 1.a), and the charge-offs and
recoveries schedule (Schedule RI-B, part I, item 1.a) into separate
items for ``1-4 family residential construction, land development, and
other land loans'' and ``Other construction, land development, and
other land loans.'' In addition, the agencies would similarly split the
item for ``Commitments to fund commercial real estate, construction,
and land development loans secured by real estate'' in the off-balance
sheet items schedule (Schedule RC-L, item 1.c.(1)) into two items.
2. Loans Secured by Nonfarm Nonresidential Properties
    Loans secured by nonfarm nonresidential properties (commercial real
estate loans) include loans made to the occupants of such properties
and loans to non-occupant investors. These two types of commercial real
estate loans present different risk profiles. Loans secured by owner-
occupied properties perform more like commercial and industrial loans
because the success of the occupant's business is the primary source of
repayment. To ensure repayment of loans to non-occupant investors, the
property must generate sufficient cash flow from the parties who are
the occupants.
    The volume of commercial real estate loans at banks has also
increased significantly in recent years. As with CLD&OL loans,
commercial real estate loans grew more rapidly than loan portfolios as
a whole at commercial banks and state-chartered savings banks during
2003 and 2004, both for the industry as a whole and for small, medium,
and large banks. At year-end 2004, banks' commercial real estate loans
stood at nearly $700 billion, a jump of 20 percent from the $584
billion in such loans at year-end 2002. The $700 billion in commercial
real estate loans represented almost 14 percent of loans at all
commercial banks and state-chartered savings banks at year-end 2004,
but such loans were 19 percent of loans at banks with less than $100
million in assets versus 11 percent of loans at banks with more than $1
billion in assets. Almost all banks hold commercial real estate loans,
including 96 percent of banks with less than $100 million in assets and
93 percent of banks with more than $1 billion in assets.
    Because of the significant and growing level of bank involvement in
commercial real estate lending and the different risk characteristics
of owner-occupied and other commercial properties, separate reporting
of these two categories of commercial real estate would enhance the
agencies' monitoring and risk-scoping capabilities. The agencies
propose to split the existing item for loans ``Secured by nonfarm
nonresidential properties'' in the loan schedule (Schedule RC-C, part
I, item 1.e), the past due and nonaccrual schedule (Schedule RC-N, item
1.e), and the charge-offs and recoveries schedule (Schedule RI-B, part
I, item 1.e) into separate items for loans secured by owner-occupied
nonfarm nonresidential properties and loans

[[Page 49368]]

secured by other nonfarm nonresidential properties.
    When a commercial property that is partially occupied by the owner
and partially occupied (or available to be occupied) by other parties,
the property would be considered owner-occupied when the owner occupies
more than half of the property's usable space. Properties such as
hotels and motels would not be considered owner-occupied. The agencies
request comment on the reporting of partially owner-occupied properties
and on any other definitional issues that may arise when determining
whether to report a loan as secured by owner-occupied property.
3. Retail and Commercial Leases
    Banks with foreign offices or with $300 million or more in total
assets currently report a breakdown of their lease financing
receivables between those from U.S. and non-U.S. addressees in Schedule
RC-C, part I, items 10.a and 10.b, and certain related schedules.\3\
Because banks lease various types of property to various types of
customers, the current addressee breakdown, in which only a limited
number of banks report having leases to non-U.S. addressees, does not
provide satisfactory risk-related information about this type of
financing activity. When reporting information on their loans that are
not secured by real estate in the Call Report loan schedule and related
schedules, banks distinguish, for example, between consumer (retail)
loans and commercial loans. As with retail and commercial loans, there
are differences between the underwriting of and repayment sources for
retail and commercial leases.
---------------------------------------------------------------------------

    \3\ Banks with domestic offices only and less than $300 million
in total assets are not required to provide this breakdown.
---------------------------------------------------------------------------

    The agencies believe that the different risk characteristics of
these two types of leases warrant replacing the existing addressee
breakdown of leases with a retail versus commercial lease breakdown in
the Call Report schedules for loans and leases, past due and nonaccrual
assets, and charge-offs and recoveries. Retail (consumer) leases would
be defined in a manner similar to consumer loans, i.e., as leases to
individuals for household, family, and other personal expenditures.
Commercial leases would encompass all other lease financing
receivables. This proposed reporting change would affect only the
approximately 500 banks with foreign offices or with $300 million or
more in total assets that have lease financing receivables as assets.
4. Federal Home Loan Bank Advances
    The Federal Home Loan Bank (FHLB) System is an increasingly
important funding source for banks, particularly community banks, with
over 57 percent of all banks reporting borrowings from FHLBs as of
December 31, 2004. From year-end 2001 to year-end 2004, the volume of
FHLB advances to commercial banks grew more than 25 percent to $250
billion. At the same time, the array of advances offered by the 12
FHLBs has expanded in recent years, with many of the newer advance
products containing features that can significantly alter an
institution's interest rate risk profile.
    The agencies currently collect aggregate information on FHLB
advances that is stratified by remaining maturity (Schedule RC-M, items
5.a (1) through 5.a.(3)). This information does not differentiate among
types of advance products, which means that the agencies cannot
distinguish products with lower repricing risk (putable advances where
the bank has the right, but not the obligation, to prepay the FHLB)
from products with higher repricing risk (callable advances where the
FHLB has the right, but not the obligation, to require the bank to
prepay the advance or establish a new advance). Furthermore, the
current reporting by remaining maturity is based on the contractual
terms of the advances, but this approach does not capture the potential
volatility associated with more complex products that have various
embedded options.
    To address these informational deficiencies, the agencies are
proposing to add two additional breakdowns of FHLB advances. The first
would collect data on four categories of advances: Fixed rate, variable
rate (where the interest rate is tied to an index), callable structured
advances (where the FHLB has the option to call the advance), and other
structured advances (putable, convertible, or with caps, floors, or
other embedded derivatives). In the second breakdown, banks would
report their advances based on the amount of time until the next
repricing date (one year or less, over one year through three years,
over three years through five years, and over five years). The existing
data reported on the remaining maturity of FHLB advances would be
modified by adding a new remaining maturity period of over five years,
with a corresponding modification to the remaining maturity periods
used for ``Other borrowings'' in Schedule RC-M, item 5.b. This
additional information would help the agencies' assessments of interest
rate risk, liquidity, and funds management and, in particular, would
assist examiners with their risk-scoping of examinations, which can be
performed off-site and thereby reduce on-site examination hours.
    Banks currently report standby letters of credit issued by a
Federal Home Loan Bank on their behalf in Schedule RC-L, item 9, ``All
other off-balance sheet liabilities,'' when these letters of credit
exceed 10 percent of the bank's total equity capital. When these
letters of credit exceed 25 percent of total equity capital, the amount
must also be separately identified and disclosed in Schedule RC-L.
Because of the growth in this activity, the agencies would add a
preprinted caption to Schedule RC-L, item 9.c, to facilitate the
reporting and identification of standby letters of credit issued by a
Federal Home Loan Bank when the amount exceeds 25 percent of total
equity capital.
5. Nonaccrual Assets
    Information on nonaccrual assets is a key indicator of the credit
quality of a bank's assets. Effective December 31, 2003, bank holding
companies that file the Consolidated Financial Statements for Bank
Holding Companies (FR Y-9C) (OMB No. 7100-0128) with the Board began to
complete two new items in the report's Schedule HC-N, ``Past Due and
Nonaccrual Loans, Leases, and Other Assets': Memorandum item 7,
``Additions to nonaccrual assets during the quarter,'' and Memorandum
item 8, ``Nonaccrual assets sold during the quarter.'' The agencies
propose to add these same items to the comparable Call Report schedule
(Schedule RC-N).
    Although the overall quarter-to-quarter change in a bank's
nonaccrual assets can be calculated based on the quarter-end totals
reported for such assets in Schedule RC-N, the reasons for the change
cannot be determined from the information currently reported in
Schedule RC-N. Information relating to inflows and outflows of
nonaccrual assets would enhance the agencies' ability to track shifts
in the credit quality of a bank's assets. Information on additions to
nonaccrual assets during the quarter would indicate the extent of
erosion or improvement in the quality of a bank's assets. Data on the
outflow of nonaccrual assets, such as sale activity, would also provide
insight into the approaches taken by a bank's management to the
resolution of problem assets. Thus, the proposed new items would assist
the agencies in assessing a bank's ability to manage credit risk and
deal with credit problems.
    For the industry as a whole, information on inflows and outflows

[[Page 49369]]

would aid in the evaluation of credit cycle trends. For example, a
slowdown in inflows of nonaccrual assets may indicate an approaching
peak level of nonperforming assets after the end of a recession. The
information on nonaccrual asset sales would increase the agencies'
understanding of the evolution of the secondary market for sales of
distressed assets, which has only come into existence in recent years.
    Because bank holding companies that file the FR Y-9C report (i.e.,
bank holding companies with total consolidated assets of $150 million
or more and certain multibank holding companies) have reported the
volume of additions to nonaccrual assets and sales of such assets for
the past two years, banks that are subsidiaries of these holding
companies should have systems in place for compiling these data. Other
banks, however, may not currently track these data, although the
agencies believe that sales of nonaccrual assets by small banks are
infrequent at present. Thus, the agencies are particularly interested
in receiving comments from banks that do not fall within the scope of
an FR Y-9C report about their ability to report the amounts of
quarterly additions to, and sales of, nonaccrual assets beginning March
31, 2006.
6. Information on Credit Derivatives
    The volume of credit derivatives, as measured by their notional
amount, has increased significantly at banks over the past several
years, rising from an aggregate notional amount of $395 billion at
year-end 2001 to $3.1 trillion at March 31, 2005. From the end of the
fourth quarter of 2004 to the end of the first quarter of 2005 alone,
the notional amount of credit derivatives reported by banks increased
by $778 billion or 33 percent. However, despite this volume, the number
of banks currently participating in the credit derivatives market,
almost all of which have in excess of $1 billion in assets, is
extremely small: 19 banks act as a guarantor by selling credit
protection to other parties (i.e., they are assuming credit risk),
while 26 banks are buying credit protection from other parties (i.e.,
they are hedging credit risk). A number of these banks enter into some
credit derivatives as guarantor and other credit derivatives as
beneficiaries.
    To gain a better understanding of the nature and trends of the
credit derivative activities that are concentrated in a small number of
large banks, the agencies are proposing to expand the information they
collect in several Call Report schedules. First, in Schedule RC-L, item
7, where banks currently report the notional amounts of the credit
derivatives on which they are the guarantor and on which they are the
beneficiary, these banks would be required to provide a breakdown of
these notional amounts by type of credit derivative: credit default
swaps, total return swaps, credit options, and other credit
derivatives. Banks would also report the maximum amounts they would pay
and receive on credit derivatives on which they are the guarantor and
on which they are the beneficiary, respectively.
    Second, in Schedule RC-R, Memorandum item 2, where banks currently
present a maturity distribution of their derivative contracts that are
subject to the risk-based capital requirements, credit derivatives
would be added as a new category of derivatives with their remaining
maturities reported separately for those that are investment grade and
those that are subinvestment grade.
    Third, in Schedule RI, Memorandum item 8, banks that reported
average trading assets of $2 million or more for any quarter of the
preceding calendar year currently provide a four-way breakdown of
trading revenue by type of risk exposure. When banks that must complete
Memorandum item 8 hold credit derivatives for trading purposes, they
have to report the revenue from these derivatives in one of the four
existing risk exposure categories, none of which is particularly
suitable for reporting such revenue. Accordingly, the agencies propose
to add a new risk exposure category for credit derivatives. This
information would address the current weakness in the reporting of
trading revenue, but, more importantly, it would enable the agencies to
begin to identify the extent to which credit derivatives held for
trading purposes contribute to a bank's trading revenue each period and
over time.
    Finally, the agencies propose to add a new Memorandum item to
Schedule RI, ``Income Statement,'' for the changes in fair value
recognized in earnings on credit derivatives that are held for purposes
other than trading, e.g., to economically hedge credit exposures
arising from nontrading assets (such as available-for-sale securities
or loans held for investment \4\) or unused lines of credit. In this
regard, the agencies reiterate that credit derivatives held for
purposes other than trading should not be reported as trading assets or
liabilities in the Call Report and the changes in fair value of such
credit derivatives should not be reported as trading revenue.
Consistent with the existing guidance in the Glossary entry for
``Derivative contracts'' in the Call Report instructions, credit
derivatives held for purposes other than trading with positive and
negative fair values should be reported in ``Other assets'' and ``Other
liabilities,'' respectively, on the Call Report balance sheet. Changes
in fair value of derivatives held for purposes other than trading that
are not designated as hedging instruments should be reported
consistently as either ``Other noninterest income'' or ``Other
noninterest expense'' in the Call Report income statement.
---------------------------------------------------------------------------

    \4\ Loans held for investment are loans that the bank has the
intent and ability to hold for the foreseeable future or until
maturity or payoff.
---------------------------------------------------------------------------

7. 1-4 Family Residential Mortgage Banking Activities
    Mortgage banking activities, particularly those involving closed-
end 1-4 family residential mortgages, have become an increasingly
important line of business for many banks. Mortgage banking revenues
are a significant component of earnings for these institutions and have
been critical to the recent record earnings achieved by the banking
industry as a whole. The growth of the industry's mortgage banking
activities also reflects the central role that securitization
mechanisms now play in the mortgage market.
    However, these activities and the revenues they generate can be
quite volatile over the business and interest rate cycle. Furthermore,
a bank's mortgage banking operations can raise significant management
and supervisory concerns related to credit, liquidity, interest rate,
and operational risk. Understanding the importance of mortgage banking
activities to an institution's financial condition and risk profile
requires information about the transactional flows associated with
residential mortgages. In this regard, the OTS has collected a large
set of cash flow data on mortgage loan disbursements, purchases, and
sales in the TFR for more than a decade.
    After considering the OTS's reporting requirements as well as the
types of information commonly disclosed by banking organizations with
large mortgage banking operations, the agencies are proposing to add a
new Schedule RC-P that would contain a series of items that are focused
on closed-end 1-4 family residential mortgage loans, with data reported
separately for first liens and junior liens. The new items would cover
loans originated, purchased, and sold during the quarter, loans held
for sale at quarter-end, and the year-to-date noninterest income earned
from closed-

[[Page 49370]]

end 1-4 family residential mortgage banking activities. This income
would consist of the portion of a bank's ``Net servicing fees,'' ``Net
securitization income,'' and ``Net gains (losses) on sales of loans and
leases'' (Schedule RI, items 5.f, 5.g, and 5.i) attributable to closed-
end 1-4 family residential mortgage loans.
    The proposed new items would be reported by all banks with $1
billion or more in total assets. In addition, banks with less than $1
billion in assets that are significantly involved in mortgage banking
activities, as determined by their primary Federal regulator, could be
directed by their regulator to report this mortgage banking
information.
    For loans originated, purchased, and sold during the quarter, banks
would report the principal amount of these loans. Originations would
include those loans for which the origination and underwriting process
was handled by the bank or a consolidated subsidiary of the bank, but
would exclude those loans for which the origination and underwriting
process was handled by another party, including a correspondent or
mortgage broker, even if the loan was closed in the name of the bank or
a consolidated subsidiary of the bank. Such loans would be treated as
purchases, as would acquisitions of loans closed in the name of another
party. Sales of loans would include those transfers of loans that have
been accounted for as sales in accordance with generally accepted
accounting principles, i.e., where the loans are no longer included in
the bank's consolidated total assets. Loans held for sale at quarter-
end would be reported at the lower of cost or fair value, consisent
with their presentation in the Call Report balance sheet. The agencies
request comment on the reporting approach discussed in this paragraph.
8. Income Statement Reclassification of Income From Annuity Sales
    In the Call Report income statement (Schedule RI), banks currently
report commissions and fees from sales of annuities (fixed, variable,
and deferred) and related referral and management fees as a component
of item 5.h.(2), ``Income from other insurance activities.'' \5\
Because annuities are deemed to be financial investment products rather
than insurance, the agencies propose to revise the instructions for
item 5.h.(2) and item 5.d, ``Investment banking, advisory, brokerage,
and underwriting fees and commissions,'' by moving the references to
annuities in the former item to the latter item. This change in the
income statement classification for commissions and fees from annuity
sales and related income should affect no more than 25 percent of all
banks based on the number of banks that currently report ``Income from
the sale and servicing of mutual funds and annuities'' in Schedule RI,
Memorandum item 2.
---------------------------------------------------------------------------

    \5\ However, commissions and fees from sales of annuities by a
bank's trust department (or a consolidated trust company subsidiary)
that are executed in a fiduciary capacity are to be reported in
``Income from fiduciary activities'' in Schedule RI, item 5.a, and
income from sales of annuities to bank customers by a bank's
securities brokerage subsidiary are reported in ``Investment
banking, advisory, brokerage, and underwriting fees and
commissions'' in Schedule RI, item 5.d.
---------------------------------------------------------------------------

9. Investment Banking, Advisory, Brokerage, and Underwriting Income
    As the caption for Schedule RI, item 5.d, ``Investment banking,
advisory, brokerage, and underwriting fees and commissions,''
indicates, this income statement item commingles noninterest income
from a variety of activities. At present, approximately 25 percent of
all banks report that they earn income from these activities. However,
the percentage of institutions reporting such income varies
significantly as a function of bank size, ranging from less than 12
percent of banks with less than $100 million in assets to more than 60
percent of banks with $1 billion or more in assets. The smaller banks
that report income in Schedule RI, item 5.d, generally are not involved
in investment banking and securities underwriting activities, but
generate fees and commissions from sales of one or more types of
investment products to customers. (In addition, as discussed in the
preceding section, some banks generate commissions and fees from sales
of annuities and the agencies are proposing to include such income in
Schedule RI, item 5.d.)
    In order to better understand the sources of banks' noninterest
income, the agencies are proposing to distinguish between banks'
investment banking (dealer) activities and their sales (brokerage)
activities by splitting item 5.d (after moving commissions and fees
from annuity sales and related income into this income statement
category from item 5.h.(2) as discussed in the preceding section) into
three separate items. As revised, item 5.d would be subdivided into
items for ``Fees and commissions from securities brokerage,'' ``Fees
and commissions from annuity sales,'' and ``Investment banking,
advisory, and underwriting fees and commissions.'' Securities brokerage
income would include fees and commissions from sales of mutual funds
and from purchases and sales of other securities and money market
instruments for customers (including other banks) where the bank is
acting as agent.
10. Certain Secured Borrowings
    When banks raise funds from sources other than deposit liabilities,
they may do so on a secured or unsecured basis. ``Securities sold under
agreements to repurchase'' (Schedule RC, item 14.b) and ``Federal Home
Loan Bank advances'' (Schedule RC-M, item 5.a) always represent secured
borrowings, whereas ``Subordinated notes and debentures'' (Schedule RC,
item 19) must be unsecured. However, amounts included in ``Federal
funds purchased (in domestic offices)'' (Schedule RC, item 14.a) and
``Other borrowings'' (Schedule RC-M, item 5.b) can be secured or
unsecured, but this cannot be determined at present from the Call
Report. This uncertainty adversely affects the agencies' assessment of
banks' liquidity positions. Moreover, as a bank's condition
deteriorates, it usually encounters increasing difficulty in rolling
over existing unsecured debt or borrowing additional funds on an
unsecured basis. When an institution fails, the relative volume of
secured and unsecured borrowings directly influences the loss to the
FDIC-administered deposit insurance fund.
    Thus, to better understand the structure of banks' nondeposit
liabilities and the effect of these liabilities on liquidity, the
agencies are proposing to add two items to Schedule RC-M in which banks
would report the secured portion of their ``Federal funds purchased''
and their ``Other borrowings.'' At present, only about one fifth of all
banks have purchased federal funds and the same percentage of
institutions have other borrowings. The use of these funding sources
increases in relation to bank size, with 15 percent of banks with less
than $100 million in assets reporting federal funds purchased and about
11 percent of such banks reporting other borrowings. The respective
percentages for these two types of liabilities increase to nearly 53
and 64 percent for banks with $1 billion or more in assets.
11. Life Insurance Assets
    Banks include their holdings of life insurance assets (i.e., the
cash surrender value reported to the bank by the insurance carrier,
less any applicable surrender charges not reflected by the carrier in
this reported value) in Schedule RC-F, item 5, ``All other assets.'' If
the carrying amount of a bank's life insurance assets included in item
5 is greater than $25,000 and exceeds 25 percent of its ``All other

[[Page 49371]]

assets,'' the bank must disclose this carrying amount in item 5.b.
    In December 2004, the agencies issued an Interagency Statement on
the Purchase and Risk Management of Life Insurance to provide guidance
to institutions to help ensure that their risk management processes for
bank-owned life insurance (BOLI) are consistent with safe and sound
banking practices. Given the risks associated with BOLI, the
Interagency Statement advises institutions that it is generally not
prudent for an institution to hold BOLI with an aggregate cash
surrender value that exceeds 25 percent of the institution's capital as
measured in accordance with its primary Federal regulator's
concentration guidelines. Although more than 40 percent of all banks
report the amount of their life insurance assets in item 5.b under the
current 25 percent of ``All other assets'' disclosure threshold, this
reporting mechanism does not ensure that the agencies are able to
monitor whether all banks holding life insurance assets are approaching
or have exceeded the 25 percent of capital concentration threshold. As
a consequence, the agencies are proposing to revise Call Report
Schedule RC-F by adding a new item 5 in which all banks would report
their holdings of life insurance assets and by renumbering existing
item 5, ``All other assets,'' as item 6. The agencies note that all
savings associations are currently required to report the amount of
their life insurance assets in the TFR (Schedule SC, lines SC615 and
SC625).
12. Income From International Operations
    In the FFIEC 031 version of the Call Report, banks with foreign
offices whose international operations account for more than 10 percent
of total revenues, total assets, or net income must complete Schedule
RI-D, ``Income from International Operations.'' Banks that must
complete this schedule, of which there are less than 40, are directed
to report estimates of the amounts of their income and expense
attributable to international operations after eliminating intrabank
accounts. These estimates should reflect all appropriate internal
allocations of income and expense, whether or not recorded in that
manner in the bank's formal accounting records. The agencies have found
that the term ``international operations'' is subject to varying
interpretations and has led to differences between what some banks
report as international income in their internal management reports
compared to the income reported in Schedule RI-D.
    In order to obtain better income data about banks' foreign
operations in a less burdensome manner, the agencies are proposing to
revise the approach taken in Schedule RI-D. Instead of collecting
income from ``international operations,'' the agencies would begin to
capture income from foreign offices as that term is currently defined
for Call Report purposes. This revised approach should improve the
usefulness of the Schedule RI-D data in assessing the significance of
foreign office net income to banks' overall net income. The threshold
for completing revised Schedule RI-D would continue to be based on a 10
percent test, but the total revenues, total assets, and net income used
for this test would be based on foreign office revenues, assets, and
net income, which should present a clearer standard than at present.
    The data items in proposed revised Schedule RI-D, ``Income from
Foreign Offices,'' would for the most part mirror categories of income
and expense reported in Schedule RI. The categories that would be used
for foreign offices would include total interest income; total interest
expense; provision for loan and lease losses; trading revenue;
investment banking, advisory, brokerage, and underwriting fees and
commissions; net securitization income; all other noninterest income;
realized gains (losses) on held-to-maturity and available-for-sale
securities; total noninterest expense; applicable income taxes; and
extraordinary items and other adjustments, net of income taxes. The
amounts reported in the preceding income and expense categories would
be reported gross, i.e., before eliminating the effects of transactions
with domestic offices, which would be a change from the current
Schedule RI-D approach under which amounts are reported net of
intrabank transactions. Banks would also report the amount of any
adjustments to pretax income for internal allocations to foreign
offices for the effects of equity capital on overall bank funding costs
before arriving at net income attributable to foreign offices before
internal allocations of income and expense. To complete the remainder
of revised Schedule RI-D, banks would next report the amount of
internal allocations of income and expense applicable to foreign
offices, followed by the amount of eliminations arising from the
consolidation of foreign offices with domestic offices. Finally, banks
would then report their consolidated net income attributable to foreign
offices.
13. Scope of Securitizations To Be Included in Schedule RC-S
    In column G of Schedule RC-S, ``Servicing, Securitization, and
Asset Sale Activities,'' banks report information on securitizations
and on asset sales with recourse or other seller-provided credit
enhancements involving loans and leases other than those covered in
columns A through F. Although the scope of Schedule RC-S was intended
to cover all of a bank's securitizations and credit-enhanced asset
sales, as currently structured column G does not capture transactions
involving assets other than loans and leases. As a result,
securitization transactions involving such assets as securities, for
example, have not been reported in Schedule RC-S. Therefore, the
agencies propose to revise the scope of column G to encompass ``All
Other Loans, All Leases, and All Other Assets'' to ensure that they can
identify and monitor the full range of banks' involvement in and credit
exposure to securitizations and asset sales. With fewer than 30 banks
reporting data on securitizations in column G of Schedule RC-S at
present, the proposed change in the scope of column G is expected to
affect only a nominal number of banks.

C. Other Matters

1. Instructional Clarification for Servicing of Home Equity Lines
    Banks report the outstanding principal balance of assets serviced
for others in Schedule RC-S, Memorandum item 2. In Memorandum items 2.a
and 2.b, the amounts of 1-4 family residential mortgages serviced with
recourse and without recourse, respectively, are reported. Memorandum
item 2.c covers all other financial assets serviced for others, but
banks are required to report the amount of such servicing only if the
servicing volume is more than $10 million. The instructions for
Memorandum items 2.a and 2.b do not explicitly define ``1-4 family
residential mortgages.'' However, the caption for column A of the body
of Schedule RC-S is ``1-4 family residential loans,'' which the
instructions for column A describe as closed-end loans secured by first
or junior liens on 1-4 family residential properties as defined for
Schedule RC-C, part I, items 1.c.(2)(a) and (b).
    Some banks have asked whether Memorandum items 2.a and 2.b should
include servicing of home equity lines of credit because such lines are
also secured by 1-4 family residential properties. Information on
securitizations and asset sales involving home equity lines is reported
in column

[[Page 49372]]

B of the body of Schedule RC-S. To resolve the questions about the
scope of Memorandum items 2.a and 2.b, the agencies are proposing to
clarify the instructions by stating that these two items should include
servicing of closed-end loans secured by first or junior liens on 1-4
family residential properties only. Servicing of home equity lines
would be included in Memorandum item 2.c.
2. Officer Declaration and Director Attestation Requirements and
Signatures
    The Call Report must be signed by an authorized officer of the bank
and attested to by not less than two directors (trustees) for state
nonmember banks and three directors for national and State member
banks. As required by statute, the officer declaration and director
attestation address the correctness of the information reported in the
Call Report. The statute also recognizes that banks are responsible for
maintaining procedures to ensure the accuracy of this information.
    Given the importance placed upon the quality of the information
reported in the Call Report, the agencies believe that the chief
executive officer and chief financial officer are the most appropriate
officers within a bank to sign a declaration concerning the preparation
of the report. Similarly, because of the duties normally carried out by
the audit committee of the board of directors, audit committee members
are the most appropriate directors to attest to the correctness of the
report. The agencies recognize, however, that some banks may not have
audit committees and that, at some banks, the same individual may
perform the functions of both the chief executive officer and the chief
financial officer.
    The agencies plan to revise the existing officer declaration to
require that the Call Report be signed by each bank's chief executive
officer (or the person performing similar functions) and chief
financial officer (or the person performing similar functions), who may
be the same person. The revised declaration would also state that these
officers are responsible for establishing and maintaining adequate
internal control over financial reporting, including controls over
regulatory reports. The director attestation would be revised to
require that the directors who sign be members of the bank's audit
committee. If the bank has no audit committee or if the committee has
less than the two or three directors required to attest to the Call
Report, other directors would sign the attestation. The revised
director attestation would also indicate that the directors signing the
attestation have reviewed the bank's Call Report.

III. Request for Comment

    Public comment is requested on all aspects of this joint notice. As
previously mentioned, the agencies particularly wish to encourage banks
and other interested parties to comment on such matters as data
availability, data alternatives, and reporting thresholds for each
proposal for new or revised data. In addition, comments are invited on:
    (a) Whether the proposed revisions to the Call Report 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. Written comments should address the accuracy of the burden
estimates and ways to minimize burden as well as other relevant aspects
of the information collection request.

    Dated: August 16, 2005.
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, August 18,
2005.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 17th day of August, 2005.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05-16680 Filed 8-22-05; 8:45 am]

BILLING CODE 4810-33-P
 


Last Updated 08/23/2005 Regs@fdic.gov