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FDIC Federal Register Citations

[Federal Register: January 24, 2008 (Volume 73, Number 16)]
[Notices]               
[Page 4220-4229]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja08-84]                         
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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 (collectively, 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 September 25, 2006, the agencies, under the 
auspices of the Federal Financial Institutions Council (FFIEC), 
requested public comment on a proposal to implement new regulatory 
reporting requirements for banks \1\ that qualify for and adopt the 
Advanced Capital Adequacy Framework to calculate their risk-based 
capital requirement or are in the parallel run stage of qualifying to 
adopt this framework (71 FR 55981). The agencies have made certain 
modifications to the proposed reporting requirements as described in 
this notice both in response to comments received and to reflect 
requirements of the final rule implementing the Advanced Capital 
Adequacy Framework (72 FR 69288, referred to hereafter as the final 
rule). The FFIEC, of which the agencies are members, has approved 
publication of these reporting requirements and the agencies are 
submitting these reporting requirements to OMB for review and approval. 
Upon approval, OMB control numbers will be obtained.
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    \1\ For simplicity, and unless otherwise indicated, this notice 
uses the term ``bank'' to include banks, savings associations, and 
bank holding companies (BHCs). The terms ``bank holding company'' 
and ``BHC'' refer only to bank holding companies regulated by the 
Board and do not include savings and loan holding companies 
regulated by the OTS. For a detailed description of the institutions 
covered by this notice, refer to Part I, Section 1, of the final 
rule entitled Risk-Based Capital Standards: Advanced Capital 
Adequacy Framework.

DATES: Comments must be submitted on or before February 25, 2008. These 
reporting requirements are effective April 1, 2008, and institutions 
subject to these requirements must begin reporting data at the end of 
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the first quarter in which they have begun their parallel run period.

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, Mail Stop 1-5, Attention: 1557-NEW, 
250 E Street, SW., Washington, DC 20219. In addition, comments may be 
sent by fax to (202) 874-4448, or by electronic mail to regs.comments@occ.treas.gov. 
You may personally inspect and photocopy 
comments at the OCC's Public Information Room, 250 E Street, SW., 
Washington, DC. For security reasons, the OCC requires that visitors 
make an appointment to inspect comments. You may do so by calling (202) 
874-5043. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.

    Board: You may submit comments, which should refer to ``FFIEC 101'' 
by any of the following methods:
     Agency Web Site:     http://www.federalreserve.gov 
    Follow the instructions for submitting comments on the http://.
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 ``FFIEC 101,'' 
by any of the following methods:    http://www.FDIC.gov/regulations/laws/federal/notices.html..     
    E-mail:     comments@FDIC.gov. Include ``FFIEC 101'' in the 
subject line of the message.
     Mail: Valerie Best (202-898-3907), Supervisory Counsel, 
Attn: Comments, Room F-1070, 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 ``FFIEC 101'' by any of 
the following methods:
     E-mail address: 
    infocollection.comments@ots.treas.gov. 
Please include ``FFIEC 101'' 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: ``FFIEC 101.''
     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 Collection Comments, Chief Counsel's Office, Attention: 
``FFIEC 101.''
    Instructions: All submissions received must include the agency name 
and OMB

[[Page 4221]]

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, 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 
regulatory reporting requirements discussed in this notice, please 
contact any of the agency clearance officers whose names appear below. 
In addition, copies of reporting schedules and instructions can be 
obtained from the FFIEC's Web site.\2\
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    \2\ http://www.ffiec.gov/ffiec_report_forms.htm.

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    OCC: Mary Gottlieb, OCC Clearance Officer (202-874-5090), 
Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Michelle Shore, Federal Reserve Board Clearance Officer, 
Division of Research and Statistics, Board of Governors of the Federal 
Reserve System, 20th and C Streets, NW., Washington, DC 20551 (202-452-
3829). Telecommunications Device for the Deaf (TDD) users may call 
(202) 263-4869.
    FDIC: Valerie Best (202-898-3812), Supervisory Counsel, Legal 
Division, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: Ira L. Mills at ira.mills@ots.treas.gov, (202) 906-6531, or 
facsimile number (202) 906-6518, Regulations and Legislation 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 
implement the following new information collection.
    Report Title: Advanced Capital Adequacy Framework Regulatory 
Reporting Requirements.
    Form Number: FFIEC 101.
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.

OCC

    OMB Number: 1557-NEW.
    Estimated Number of Respondents: 52 national banks.
    Estimated Time per Response: 625 hours.
    Estimated Total Annual Burden: 130,000 hours.

Board

    OMB Number: 7100-NEW.
    Estimated Number of Respondents: 6 state member banks.
    Estimated Time per Response: 625 hours.
    Estimated Total Annual Burden: 15,000 hours.
    OMB Number: 7100-NEW.
    Estimated Number of Respondents: 15 BHCs.
    Estimated Time per Response: 625 hours.
    Estimated Total Annual Burden: 37,500 hours.

FDIC

    OMB Number: 3064-NEW.
    Estimated Number of Respondents: 19 state nonmember banks.
    Estimated Time per Response: 625 hours.
    Estimated Total Annual Burden: 47,500 hours.

OTS

    OMB Number: 1550-NEW.
    Estimated Number of Respondents: 5 savings associations.
    Estimated Time per Response: 625 hours.
    Estimated Total Annual Burden: 12,500 hours.

General Description of Reports

    This information collection is mandatory for banks using the 
Advanced Capital Adequacy Framework: 12 U.S.C. 161 (for national 
banks), 12 U.S.C. 324 and 12 U.S.C. 1844(c) (for state member banks and 
BHCs respectively), 12 U.S.C. 1817 (for insured state nonmember 
commercial and savings banks), and 12 U.S.C. 1464 (for savings 
associations). This information collection will be given confidential 
treatment (5 U.S.C. 552(b)(4)) except for selected data items 
(Schedules A and B, and data items 1-2 of the operational risk Schedule 
S) that will be released for reporting periods after an institution has 
successfully completed its parallel run period and is qualified to use 
the advanced approaches for regulatory capital purposes. The agencies 
will not publicly release information submitted during an entity's 
parallel run period.

Abstract

    Each bank that qualifies for and applies the advanced internal 
ratings-based approach to calculate regulatory credit risk capital and 
the advanced measurement approaches to calculate regulatory operational 
risk capital, as described in the final rule, is required to file 
quarterly regulatory data. The agencies will use these data to assess 
and monitor the levels and components of each reporting entity's risk-
based capital requirements and the adequacy of the entity's capital 
under the Advanced Capital Adequacy Framework; to evaluate the impact 
and competitive implications of the Advanced Capital Adequacy Framework 
on individual reporting entities and on an industry-wide basis; as one 
input to develop an interagency study at the end of the second 
transitional floor period as described more fully in the final rule 
implementing the Advanced Capital Adequacy Framework; and to supplement 
on-site examination processes. The reporting schedules will also assist 
banks in understanding expectations around the system development 
necessary for implementation and validation of the Advanced Capital 
Adequacy Framework. Submitted data that is released publicly following 
a reporting entity's parallel run period will also provide other 
interested parties with information about banks' risk-based capital.

Current Actions

Risk-Based Capital Standards: Advanced Capital Adequacy Framework: 
Regulatory Reporting Requirements

 I. Background

    On September 25, 2006, the agencies issued for comment a joint 
notice of proposed regulatory capital reporting requirements (71 FR 
55981) for U.S. banks that qualify for and adopt the advanced internal 
ratings-based (AIRB) approach for calculating regulatory credit risk 
capital and the advanced measurement approaches (AMA) for

[[Page 4222]]

calculating regulatory operational risk capital (together, the advanced 
approaches). These proposed regulatory reporting requirements were 
issued concurrently with the joint notice of proposed rulemaking 
seeking public comment on a new risk-based capital framework for banks 
(71 FR 55830). On December 7, 2007, the agencies published final rules 
implementing the new risk-based capital framework (72 FR 69288). This 
notice describes the final risk-based capital reporting requirements 
for banks that qualify for and adopt the new risk-based capital 
framework or are in the parallel run stage of qualifying to adopt this 
framework.
    Data items contained within the reporting proposal pertained to the 
risk parameters and drivers of a bank's regulatory capital measures 
under the AIRB and AMA approaches. The reporting proposal identified a 
number of uses for the data to be submitted, which included the ability 
of the agencies to monitor risk-based capital requirements, assess the 
components of these requirements, evaluate the impact of implementing 
the new advanced approaches, and supplement on-site examination 
processes relating to the implementation of the new advanced 
approaches. The proposal also indicated that certain summary 
information would be made available to the public for reporting periods 
after a bank has qualified to use the advanced approaches for 
regulatory capital to provide a sufficient degree of public disclosure 
to market participants.
    The agencies have evaluated comments received on the reporting 
proposal and have made changes to the reporting requirements as 
described below. Certain changes to the reporting requirements, 
collected data elements, and reporting instructions have also been made 
to conform reporting to changes made to the final rule.

II. Comment Overview

    The agencies received sixteen comment letters that directly 
addressed the reporting proposal. In addition to providing responses to 
the specific questions posed by the agencies, a number of commenters 
identified both general and technical issues relating to the reporting 
requirements, report schedules, and reporting instructions. Some 
additional comments focused primarily on the Pillar 3 disclosure 
requirements of the joint notice of proposed rulemaking, but also 
included less specific comments on regulatory reporting.
    In general, commenters reflected concerns over the perceived 
burdens of the proposed reporting requirements without sufficient 
offsetting benefits in terms of the analytical needs of supervisors and 
the information needs of investors and other public users of financial 
information. Specific areas of concern identified in the comments 
covered a range of issues including concerns about (1) the length of 
time allowed following a quarter-end to file reports with the agencies, 
(2) public disclosures of certain risk estimates used to calculate 
risk-weighted assets for credit risk portfolios, (3) public disclosures 
of certain data items contained in the operational risk schedule, (4) 
the reporting of credit risk portfolios not defined in the proposed 
rulemaking, (5) the reporting of data elements not required for 
calculation of regulatory capital, and (6) potential duplication or 
inconsistencies of the reporting requirements with Pillar 3 
disclosures.
    The agencies have made a number of modifications to the reporting 
requirements in light of these comments. Among the changes that address 
concerns about reporting burden, the agencies have eliminated three 
schedules and approximately 600 reportable data items, expanded the 
submission deadlines during a bank's parallel run period, and allowed 
more data items to be reported on an optional basis (depending on 
information availability, e.g., information pertaining to pre-credit 
risk mitigation risk estimates for wholesale exposures when the 
substitution approach is used, and various data items pertaining to 
operational risk modeling). Additionally, in recognition of concerns 
about report certification requirements, the agencies have adopted 
alternative certification language that focuses on meeting the 
requirements imposed by the final rule and reporting instructions as 
opposed to a statement attesting to the accuracy of data items that 
include parameter estimates.
    The reporting proposal raised three specific questions for 
industry's consideration. First, the agencies asked about the 
feasibility of collecting additional information to help isolate the 
causes of changes in regulatory credit risk-based capital requirements 
(the lookback portfolio approach). The agencies have decided not to 
pursue the collection of this additional information at this time but 
intend to explore with the industry in the future ways to facilitate 
such analyses. Second, the agencies asked about the desirability of 
using an alternative approach to fixed bands for reporting wholesale 
and retail schedules. Although the majority of commenters favored the 
alternative approach, the agencies have decided to retain the fixed 
band approach to achieve greater comparability among reporting banks. 
Third, the agencies asked about the appropriateness of making certain 
data items available to the public for reporting periods subsequent to 
a bank's parallel run period. With the exception of certain information 
contained in the operational risk schedule (data items 3 through 7 of 
this schedule), the agencies have decided to continue to require public 
disclosure of all other data items contained in Schedules A and B, and 
data items 1 and 2 only of the operational risk schedule, for reporting 
periods after a bank has qualified to use the advanced approaches for 
regulatory capital purposes. The agencies believe that such disclosures 
are consistent with Pillar 3 of the Advanced Capital Adequacy Framework 
and will provide useful information to investors and other market 
participants about a bank's capital structure, risk exposures, and main 
components of a bank's regulatory capital calculations. As in the 
reporting proposal, all other information submitted per these reporting 
requirements will remain confidential.
    One commenter also indicated its belief that the burden estimate 
provided in the reporting proposal of 280 hours per respondent was 
significantly understated. Although the final reporting requirements 
require submission of significantly less data items than under the 
reporting proposal, the agencies have revised their estimates of 
reporting burden on a per respondent basis upward in recognition of 
reporting burdens incurred by banks on other types of regulatory 
reports and the level of detail required to be submitted under these 
reports.
    Certain other modifications, such as the elimination of data items 
relating to expected loss given default, were made to conform the 
reporting requirements and instructions to the final rule. A complete 
discussion of comments, and changes made to the reporting requirements, 
is contained in the following sections.

III. Scope and Frequency of Reporting

Banks That Are Required To Submit Reports
    The reporting requirements associated with the final rule will 
apply, as proposed, to each BHC, on a consolidated basis, and each 
depository institution that qualifies for and applies the advanced 
approaches (section I of the final rule provides a detailed discussion 
of institutions covered by these reporting requirements), as well as

[[Page 4223]]

banks in the parallel run stage of qualifying to use the advanced 
approaches. The agencies did not receive any comments objecting to the 
scope of application of these reporting requirements as stated.
Frequency of Reports
    As proposed, the reports described herein are to be submitted to 
the agencies on a quarterly basis. The agencies did not receive 
comments that generally opposed quarterly reporting. However, as 
discussed below, some commenters argued for less frequent or lagged 
reporting of certain data elements relating to operational risk.
Reporting Due Dates
    A number of commenters raised concerns over the proposed 
requirement to align reporting due dates with those currently required 
for banks, savings associations, and BHCs that file Consolidated 
Reports of Condition and Income (Call Reports), Thrift Financial 
Reports (TFRs), and BHC FR Y-9C reports, respectively. These commenters 
offered a range of alternative reporting deadlines but generally argued 
for extended deadlines through at least the parallel run and 
transitional floor periods. The agencies agree that it is reasonable to 
extend reporting deadlines through the parallel run period to 60 days 
following the end of a quarter. However, the agencies believe that once 
a bank qualifies to use the advanced approaches and enters the 
transitional floor period, the bank should have the ability to fully 
support regulatory capital calculations to coincide with the timing of 
other financial disclosures. Accordingly, after a bank's parallel run 
period, the agencies are requiring submission of the information 
required by this notice within the same timeframes set forth in the 
reporting instructions for the Call Report, TFR, and BHC FR Y-9C filed 
by banks, savings associations, and BHCs, respectively.
Report Certification Requirements
    Under the reporting proposal, banks would be required to meet the 
same reporting standards that are applied to other regulatory reports 
including certification by a bank's Chief Financial Officer attesting 
to the correctness of the reports. While acknowledging the 
reasonableness of requiring certifications of reported information, one 
commenter raised concerns over certifications of the accuracy of risk 
parameter estimates and the procedures used to validate those 
estimates. In recognition of these concerns, the agencies have modified 
the certification requirements for this regulatory report submission. 
These report certifications are substantially similar to those required 
for banks' Pillar 3 disclosures in that they require one or more senior 
officers of the reporting entity to attest that the risk estimates and 
other information submitted to the agencies meet the requirements set 
forth in the final rule and reporting instructions.
Initial Reporting Period
    For those banks subject to these reporting requirements, the first 
reporting period (as proposed) will correspond to the quarter-end of 
the first quarter of a bank's parallel run period. Although no 
commenters objected to this requirement, some commenters did raise 
concerns over the ability to implement those systems changes necessary 
to meet these reporting requirements without a sufficient amount of 
time between publishing these requirements and the first reporting 
period. The agencies are mindful of the tight timeframes for banks 
whose first reporting period corresponds to the quarter-end following 
the effective date of the final rule. The agencies expect that systems 
development will be an iterative process during the parallel run 
period, with steady improvement in overall reporting and gradual 
reduction of manual processes prior to qualification.
Relationship to Other Regulatory Reporting of Risk-Based Capital
    As proposed, banks subject to these reporting requirements will 
submit capital information under both this notice and under the 
existing risk-based capital reporting requirements (the general risk-
based capital rules) during their respective parallel run periods and 
subsequent transitional floor periods.\3\ A bank would discontinue 
reporting under the general risk-based capital rules once it is 
permitted to exit its third transitional floor period. The agencies 
received no comments on this requirement.
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    \3\ General risk-based capital data under the existing risk-
based capital standards are currently captured in the Consolidated 
Reports of Condition and Income (Call Report) for banks (Form FFIEC 
031 or FFIEC 041); OMB No. 1557-0081 for the OCC, 7100-0036 for the 
Board, and 3064-0052 for the FDIC), the Thrift Financial Report 
(TFR) for savings associations (OTS Form 1313; OMB No. 1550-0023), 
and the Consolidated Financial Statements for Bank Holding Companies 
(Board Form FR Y-9C; OMB No. 7100-0128).
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Electronic Submission of Reports
    Consistent with requirements for the agencies' reports which 
collect data under the existing risk-based capital reporting 
requirements, banks subject to these reporting requirements must submit 
these reports in an electronic format using file specifications and 
formats determined by the agencies.

IV. Overview of the Data Reporting Requirements

    The reporting proposal contained 22 separate schedules: One 
schedule (Schedule A) detailing banks' capital elements (the numerator 
of the risk-based capital calculation); one schedule (Schedule B) that 
summarizes the components of risk-weighted assets for categories of 
credit risk portfolios, operational risk exposures, and market risk; 
and 20 schedules (Schedules C through V) that provide additional detail 
on the risk parameters and drivers of credit risk-weighted and 
operational risk-weighted assets. For wholesale and retail credit 
exposures, the reporting schedules contain information on the risk 
parameters used in specific risk-based capital formulas to determine 
risk-weighted asset amounts, namely: Probability of default (PD, which 
measures the likelihood that an obligor will default over a one-year 
horizon); loss given default (LGD, which is an estimate of the economic 
loss if a default occurs during downturn economic conditions); exposure 
at default (EAD, which is measured in dollars and is an estimate of the 
amount that would be owed to the bank at the time of default); and, for 
wholesale credit exposures, an exposure's effective maturity (M, which 
is measured in years and reflects the effective remaining maturity of 
the exposure). The retail credit risk schedules also include 
information on loan-to-values, credit bureau scores, and account 
seasoning, which are likely to be important risk drivers within these 
portfolios. For securitization, equity, and operational risk exposures, 
the reporting schedules include data on the main inputs to, and outputs 
of, internal models and regulatory risk weight functions used to 
determine risk-weighted assets for these exposures.
    Several commenters raised concerns about burdens associated with 
and the need for reporting of certain types of credit exposures not 
explicitly defined outside the reporting proposal. These exposure types 
include Construction Income Producing Real Estate (IPRE) and Other 
Retail Exposures--Small Business. In response to industry concerns, the 
agencies have consolidated several schedules. Specifically, the final 
reporting requirements consolidate reporting of Construction IPRE and 
non-construction IPRE exposures into one IPRE schedule (new Schedule 
F), consolidate reporting

[[Page 4224]]

of Qualifying Revolving Exposures--Credit Cards and Qualifying 
Revolving Exposures--All Other into one Qualifying Revolving Exposure 
schedule (new Schedule N), and consolidate reporting of Other Retail 
Exposures--Small Business and Other Retail Exposures--All Other into 
one Other Retail Exposure schedule (new Schedule O). With these 
schedule consolidations, the final reporting requirements require the 
submission of 19 schedules instead of the 22 schedules contained in the 
reporting proposal.

A. Publicly Available Risk-Based Capital Data for the Advanced 
Approaches

Content of Schedules A and B
    Schedule A contains information about the components of Tier 1 and 
Tier 2 capital, as well as adjustments to regulatory risk-based capital 
as defined in the final rule. Certain modifications were made to data 
item captions, schedule footnotes, and instructions for clarification 
purposes and to conform the reporting requirements to the final rule. 
More specifically, in Part 1 of Schedule A for banks and BHCs, data 
item 6b, ``Qualifying trust preferred securities,'' as well as the 
deduction in data item 7b, ``LESS: Cumulative change in fair value of 
all 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,'' were added to derive the appropriate 
numerator for the Tier 1 risk-based capital calculation. In addition, 
the deductions in data items 10a and 16a, ``LESS: Insurance 
underwriting subsidiaries' minimum regulatory capital (for BHCs only)'' 
were added to conform to the final rule and are necessary to derive the 
numerator for both the Tier 1 and Tier 2 risk-based capital 
calculation. A number of proposed data items relating to the regulatory 
leverage capital ratio were also eliminated from Part 1 of the schedule 
because they are reported in other regulatory reports.
    Schedule B contains summary information about risk-weighted assets 
by exposure categories, and for credit risk exposures, outstanding 
balances and aggregated information about the estimates that underlie 
the calculation of risk-weighted assets. The information in Schedule B 
is largely unchanged from the reporting proposal with some minor 
modifications. The modifications include: (1) The addition of data item 
24 for unsettled transactions (balance sheet amount and risk-weighted 
assets) in response to industry comments, (2) the addition of data item 
28 for the calculation of total credit risk-weighted assets scaled by 
the 1.06 multiplier contained in the final rule, (3) the addition of 
data item 29 to recognize risk-weighted asset deductions for excess 
eligible credit reserves not included in Tier 2 capital (to be 
consistent with paragraph (a)(2) of section 13 of the final rule), (4) 
the elimination of three data items for exposure types whose reporting 
has been consolidated with other exposure types as described above, and 
(5) changes to various caption headings to align them with the 
descriptions and definitions contained in the final rule.
    The agencies received the following technical comments on data 
elements contained in Schedule B, Summary of Risk Weighted Assets for 
Banks Approved to Use the Advanced Approaches:
     Several commenters recommended re-labeling line 30 in the 
reporting proposal from Immaterial Exposures to Credit Exposures on 
Other Methods. These commenters argued that a broader exposure category 
was needed for the inclusion of unsettled securities transactions and 
other exposures where it is not feasible to estimate risk parameters 
under the advanced approaches. The agencies have modified Schedule B to 
include a separate data item for reporting the balance sheet amounts 
and risk-weighted assets associated with unsettled transactions (data 
item 24). The agencies note that the final rule specifically addresses 
and defines credit exposures that are not included within a defined 
exposure category, as well as non-material portfolios of exposures. 
Schedule B has been modified to include reporting of the risk-weighted 
assets and balance sheet amounts for these categories of exposures as 
described in the final rule;
     Several commenters sought clarification that the Expected 
Credit Loss (ECL) column in Schedule B should be reported after 
considering credit risk mitigation (CRM) effects. The agencies confirm 
that all ECL data items within the reporting schedules are to be 
reported on a post-CRM basis; and
     One commenter requested revisions to Schedule B to allow 
for agreement between aggregated credit portfolio (balance sheet) 
information and amounts listed in other regulatory reports such as Call 
Reports and the BHC FR Y-9C report. The agencies acknowledge the 
desired objective conveyed by this commenter to ensure that regulatory 
capital calculations encompass all exposures within a bank. However, 
the agencies believe it is more important to delineate exposures by 
exposure categories (and subcategories) as defined within the final 
rule since each of these exposures is associated with a specific set of 
risk weight curves, risk weight functions, or calculation approaches. 
As a result, the agencies have decided not to redefine exposure 
categories to be consistent with those defined within other regulatory 
reports. The agencies have also decided not to impose additional burden 
of reconciling the financial information contained in these reports to 
balance sheet information contained in other regulatory reports. 
Rather, the agencies believe that the comprehensiveness of these 
reports can be confirmed through other means such as on-site reviews.
Publicly Available Information
    The agencies received a number of comments relating to the public 
disclosure of information reported in Schedules A and B, and data items 
1 through 7 of the Operational Risk schedule. These commenters argued 
for limited or phased-in disclosure of Schedule B data items in 
particular, limiting disclosure of Schedule B data items to risk-
weighted assets by exposure type and related on- and off-balance sheet 
amounts, or flexibility in timing of submissions when an institution 
views certain information as proprietary in nature. These commenters 
generally argued that components of the risk-weighted asset calculation 
such as PD, LGD, and EAD are not well understood, are incomplete 
measures of risk, are not comparable across institutions, and may be 
subject to misinterpretation by investors and other market 
participants.
    After consideration, the agencies have decided to retain public 
disclosure of all data items in Schedules A and B (as modified) for 
reporting periods after a bank has qualified to use the advanced 
approaches for regulatory capital purposes (i.e., once a bank enters 
its first transitional floor period). All reported information will 
remain confidential during the bank's parallel run. The agencies 
believe such disclosures, at the bank level, are consistent with the 
Advanced Capital Adequacy Framework and will provide useful information 
to investors and other market participants about a bank's capital 
structure, its risk exposures, and the main components and risk drivers 
underlying the bank's regulatory capital calculations. Although the 
agencies agree with industry comments that care must be taken in making 
comparisons of aggregated risk parameters across institutions, the 
agencies note that comparability concerns have been substantially 
reduced by changes made to the final rule (such as the elimination

[[Page 4225]]

of expected loss given default or ELGD and the adoption of the New 
Accord's definition of default for wholesale credit exposures). As with 
the Pillar 3 disclosure requirements, the agencies believe public 
disclosure of the information in Schedules A and B is consistent with 
the objectives of market discipline and transparency advanced within 
the final rule and will provide investors and other market participants 
with a basic set of summary-level standardized information about the 
main components of banks' risk-based capital requirements. As noted in 
the proposed reporting requirements, banks may be able to use certain 
data items in these disclosures to augment Pillar 3 disclosures 
required by the final rule.
    Data items 1 and 2 only of the operational risk schedule (Schedule 
S), will also be made publicly available for reporting periods after a 
bank has qualified to use the advanced approaches for regulatory 
capital purposes (i.e., once an institution enters into its first 
transitional floor period). This requirement is a modification of the 
reporting proposal, which proposed making data items 1 through 7 of 
this schedule publicly available along with information in Schedules A 
and B. A number of commenters raised concerns that data items 3 through 
7 of the operational risk schedule contain proprietary or sensitive 
information. In light of these comments, the agencies have reevaluated 
whether these data elements are appropriate for public disclosure and 
have concluded they are not. Therefore, all operational risk schedule 
data items with the exception of data items 1 and 2 will remain 
confidential. Commenters generally agreed that data items 1 and 2 of 
this schedule were appropriate for public disclosure.

B. Non-Publicly Available Risk-Based Capital Data for the Advanced 
Approaches

    With the exception of data items 1 and 2 in Schedule S, information 
submitted in Schedules C through S will be shared among the four 
agencies but will not be released to the public. The data elements 
contained in these schedules will provide the agencies with additional, 
aggregated detail about the components and main drivers of reporting 
banks' risk-based capital levels. The agencies will use this 
information to help focus on-site supervisory examination efforts by 
facilitating off-site monitoring of banks' regulatory capital 
calculations and regulatory capital trends, and to facilitate peer 
comparisons of capital and capital risk estimation parameters.
Reporting of Credit Risk by Fixed Supervisory Bands
    For the wholesale and retail credit portfolios (Schedules C through 
O), aggregated information is reported at the level of fixed 
supervisory PD bands as defined within the reporting proposal. The 
agencies received a number of comments on the use of supervisory PD 
bands for purposes of aggregating information in the wholesale and 
retail schedules (question 2 of the reporting proposal). Most 
commenters indicated such aggregations would impose reporting burdens 
over an alternative approach discussed in the reporting proposal that 
would have allowed banks to report information by internal loan grades 
and internal segments. One commenter indicated indifference to the two 
reporting approaches for wholesale exposures. However, this latter 
commenter indicated that reporting of retail exposures by fixed PD 
bands would be more practical since reporting by internal segments 
could be unwieldy, given the large number of possible segments and 
segmentation schemes within a given bank, and would reduce, if not 
eliminate, comparability. One commenter supported reporting by fixed PD 
band and suggested that reporting burdens could actually increase to 
achieve comparability under the alternative approach.
    The agencies have considered these comments and have decided to 
retain reporting by fixed supervisory PD bands as presented in the 
reporting proposal. While the agencies acknowledge some incremental 
reporting burden related to this approach, the agencies believe this 
reporting format achieves the desired objective of facilitating peer 
comparisons of risk-weighted asset and risk parameter estimation 
information. Moreover, the agencies believe that the alternative 
approach could introduce incremental reporting burdens over the adopted 
approach given the need to develop rules for combining and aggregating 
the large number of possible segmentation schemes used by banks.
Lookback Portfolio Reporting
    The agencies also received many comments opposing the data 
collection alternative presented in question 1 of the reporting 
proposal. This alternative involved collecting additional information 
to help identify causes of changes in credit risk regulatory capital 
requirements (the lookback portfolio proposal). Commenters were 
strongly opposed to this alternative, citing significant additional 
reporting burdens and concerns about the lack of specificity of the 
alternative. Many of these same commenters indicated that changes in 
regulatory capital could be better and more efficiently identified 
through alternative processes such as on-site reviews. After 
considering these comments, the agencies have decided at this time not 
to require submissions of the additional information suggested by this 
alternative lookback reporting proposal.
    The agencies continue to see merit in being able to identify 
whether changes in a bank's assessment of risk are due to changes in 
the mix of exposures held or due to changes in risk assessments. As a 
result, the agencies intend to publish a proposal for comment that 
would facilitate such analyses. This notice would identify safety and 
soundness issues that could be addressed by additional data items 
contained in the proposal as well as other alternatives beyond a formal 
reporting process for obtaining this information. Comments received on 
this proposal will directly influence the agencies' decision whether to 
collect additional information beyond what is contained in the 
reporting requirements contained in this notice.
Wholesale Exposures
    Data reported in Schedules C through J include information about 
the risk-weighted assets, balance sheet exposures, number of obligors, 
and main components or aggregated risk parameter estimates of the risk-
based capital calculation for wholesale credit exposures. Each schedule 
represents a sub-portfolio of the wholesale exposure category and each 
portfolio corresponds to a data item on the summary Schedule B. The 
wholesale sub-portfolios are as follows: Corporate (Schedule C); Bank 
(Schedule D); Sovereign (Schedule E); Income Producing Real Estate or 
``IPRE'' (Schedule F); High Volatility Commercial Real Estate or 
``HVCRE'' (Schedule G); Eligible Margin Loans, Repo-Style Transactions, 
and OTC Derivatives with Cross-product Netting (Schedule H); Eligible 
Margin Loans and Repo-Style Transactions without Cross-product Netting 
(Schedule I); and OTC Derivatives without Cross-product Netting 
(Schedule J). As discussed above, exposures reported in these schedules 
are to be grouped into more detailed sub-portfolio segments using the 
fixed supervisory PD bands.
    Several commenters raised concerns about the reporting proposal's 
requirement to calculate and disclose the impact of guarantees and 
credit derivatives on risk-weighted assets for wholesale exposures. 
These commenters indicated that such a requirement would impose 
significant burden on

[[Page 4226]]

institutions whose current practice is not to maintain separate risk 
information for obligors and guarantors on certain exposures. Some of 
these commenters suggested an alternative reporting approach that would 
require reporting of the EAD amounts associated with exposures where 
risk is mitigated by guarantees or credit derivatives.
    The agencies have considered these comments and note that similar 
concerns were raised with respect to the application of the 
substitution approach described in the agencies' proposed rule. For 
reporting, the agencies have revised the reporting instructions 
relating to credit risk mitigation to conform to the final rule. 
Specifically, banks need not calculate and report the impact of 
guarantees and credit derivatives on risk-weighted assets where a bank 
extends credit based solely on the financial strength of a guarantor, 
provided the bank applies the PD substitution approach to all exposures 
of that obligor. The agencies believe that this modification to the 
reporting instructions should alleviate much of the concern expressed 
in the comments since reporting the effects of credit risk mitigation 
on risk-weighted assets would be required only in those situations 
where the bank is required by the final rule to maintain separate 
internal risk ratings for a wholesale obligor and the guarantor or 
credit provider under a credit derivative. The agencies note that 
reporting under the double default approach is not affected by this 
modification since separate internal risk ratings are a necessary 
requirement to calculate regulatory risk-based capital using this 
approach. In those cases where it is feasible to do so, the agencies 
are retaining the approach contained in the reporting proposal to 
require institutions to report the impact of credit risk mitigation on 
risk-weighted assets rather than adopt the suggestion made in some 
comments to report the EAD related to exposures eligible for the 
substitution, LGD adjustment, or double default approaches.
    One commenter also questioned the need for a separate column for 
the weighted average LGD percentage before consideration of guarantees 
and credit derivatives, arguing that banks have little incentive to use 
the LGD adjustment approach since adjustment is subject to a floor 
based on the PD substitution approach (i.e., the risk-based capital 
requirement for a hedged exposure can never be lower than that of a 
direct exposure to the protection provider). Notwithstanding any 
disincentives to using the LGD adjustment approach, banks subject to 
the advanced approaches have the option of using this approach to 
reduce capital requirements against hedged wholesale exposures. 
Therefore, the agencies have decided to retain these columns in the 
wholesale schedules. The agencies intend to reevaluate the need for 
this information in light of actual submissions.
    The agencies received the following technical comments relating to 
data to be reported in Schedules C through J:
     Two commenters indicated possible confusion in Schedule E 
of where to reflect the impact of sovereign guarantees since such 
guarantees often are used to reduce corporate exposures, not sovereign 
exposures. These commenters noted that the confusion could be 
eliminated by adopting a recommendation to report the EAD of exposures 
eligible for the substitution, LGD adjustment, or double default 
approaches. In response, the agencies have modified the reporting 
instructions to indicate that while banks should generally use the 
underlying obligor as the basis for categorizing wholesale credit 
exposures, the categorization of wholesale exposures may be determined 
by the guarantor in cases where a PD is not assigned to the obligor;
     One commenter sought clarification of the term ``Number of 
Obligors'' listed as a column in Schedules C through G under the 
following scenarios: (i) When a bank has multiple facilities 
outstanding to one borrower; (ii) when a bank lends to both a 
subsidiary and to a parent of that same facility; and (iii) when a bank 
has two exposures to an obligor, one with no guarantee and the other 
with a guarantee. The agencies note that similar comments were received 
with respect to the internal risk rating assignment process described 
in the proposed rule and that a formal definition for obligor was 
adopted in the final rule as a result. For reporting purposes, banks 
should apply this same definition when determining how to quantify the 
number of obligors to report in Schedules C through G; \4\
---------------------------------------------------------------------------

    \4\ The final rule defines an obligor as the legal entity or 
natural person contractually obligated on a wholesale exposure 
except that a bank may treat the following exposures as having 
separate obligors: (1) Exposures to the same legal entity or natural 
person denominated in different currencies; (2)(i) an income-
producing real estate exposure for which all or substantially all of 
the repayment of the exposure is reliant on cash flows of the real 
estate serving as collateral for the exposure; the bank, in economic 
substance, does not have recourse to the borrower beyond the real 
estate serving as collateral; and no cross-default or cross-
acceleration clauses are in place other than clauses obtained solely 
out of an abundance of caution; and (ii) other credit exposures to 
the same legal entity; and (3)(i) a wholesale exposure authorized 
under section 364 of the U.S. Bankruptcy Code (11 U.S.C. 364) to a 
legal entity or natural person who is a debtor-in-possession for 
purposes of Chapter 11 of the Bankruptcy Code; and (ii) other credit 
exposures to the same legal entity or natural person.
---------------------------------------------------------------------------

     One commenter sought clarification that exposures reported 
in the new Schedules I and J include transactions not subject to cross-
product netting but may be subject to single-product netting. The 
agencies confirm this interpretation; and
     One commenter indicated that the PD ranges for the 
reporting of eligible margin loans, repo-style transactions, and OTC 
derivatives (new Schedules H through J) should be consistent with the 
PD ranges contained in other wholesale schedules. The agencies believe 
that the different PD ranges for exposures in these schedules, which 
contain a larger number of lower-risk PD bands, will likely result in 
more meaningful reported distributions of exposures across the credit 
quality spectrum for these sub-portfolios. Accordingly, the agencies 
have decided to retain the PD bands as proposed. However, to capture a 
larger range of low-risk exposures and achieve better comparability 
across exposure categories, the agencies have also decided to widen one 
of the PD bands and align the end points of two PD bands with those in 
other wholesale credit schedules. Specifically, the PD band for line 2 
on these schedules was widened to 0.03 to 0.10 (from 0.03 to 0.05 in 
the reporting proposal); and the PD bands for lines 3 and 4 were 
changed to 0.10 to 0.15 and 0.15 to 0.25, respectively (from 0.05 to 
0.10 and 0.10 to 0.25, respectively).
    The agencies made two additional clarifications in the instructions 
to the wholesale exposure Schedules C through J to conform reporting to 
the final rule. Both of these clarifications relate to the basis for 
assigning exposures to the fixed supervisory PD bands specified within 
each wholesale exposure schedule. Generally, these assignments should 
be based on the PD estimates associated with the internal loan rating 
assigned to the obligor. However, consistent with the final rule, an 
exception is made in cases where the bank extends credit based solely 
on the financial strength of the guarantor provided that all of the 
bank's exposures to an obligor are fully covered by eligible guarantees 
and the bank applies the PD substitution approach to all of those 
exposures. In these cases, banks may use the PD estimate associated 
with the internal loan grade assigned to the guarantor for purposes of 
assigning exposures to a given fixed supervisory PD band. Another 
exception is made for eligible purchased wholesale exposures

[[Page 4227]]

(as defined in the final rule). For these exposures, banks should use 
segment-level risk estimates for purposes of assigning exposures to a 
given fixed supervisory PD band.\5\ This treatment is consistent with 
paragraph (d)(4) of section 31 of the final rule.
---------------------------------------------------------------------------

    \5\ Reporting of other risk parameters (LGD, EAD, M, and ECL) 
for eligible purchased wholesale exposures should also be done on a 
segment-level basis.
---------------------------------------------------------------------------

    The agencies made the following additional modifications to 
Schedules H, I, and J: (1) To conform reporting to the final rule, the 
agencies added a data item 13 to columns C and E in Schedules H and I 
to capture the EAD and risk-weighted asset amounts associated with 
eligible margin loans subject to a 300 percent risk weight, (2) data 
items for reporting the number of counterparties were eliminated from 
all three schedules, and (3) certain captions and footnotes were 
modified for clarity and to conform to the terminology used in the 
final rule.
Retail Exposures
    Data reported in Schedules K through O include information about 
the risk-weighted assets, balance sheet exposures, the number of 
accounts, and the main components or risk parameters of the risk-based 
capital calculation for retail credit exposures. These schedules also 
incorporate information pertaining to risk characteristics believed to 
be commonly used drivers within banks' risk management and measurement 
processes, to include information on loan-to-values, credit bureau 
scores, and account seasoning. Each schedule represents a sub-portfolio 
of the retail exposure category and each portfolio corresponds to a 
data item on the public Schedule B. These retail sub-portfolios are as 
follows: Residential Mortgage--Closed-end First Lien Exposures 
(Schedule K); Residential Mortgage--Closed-end Junior Lien Exposures 
(Schedule L); Residential Mortgage--Revolving Exposures (Schedule M); 
Qualifying Revolving Exposures (Schedule N); and Other Retail Exposures 
(Schedule O). As with the wholesale credit schedules, exposures 
reported in these schedules are to be grouped into more detailed sub-
portfolio segments using the fixed supervisory PD bands.
    Many commenters objected to the inclusion of information pertaining 
to loan-to-values (LTV) and EAD of accounts with updated LTVs for 
mortgage exposures. These commenters indicated in general that this 
risk driver information was not necessary for determination of risk-
based capital requirements, is not always used in a bank's segmentation 
processes, and is not always readily available and therefore 
potentially burdensome to collect (particularly information pertaining 
to updated LTVs). The agencies note that the instructions accompanying 
the reporting proposal required reporting of LTV-related information 
only to the extent the information is available. The agencies continue 
to believe that LTV is likely to be an important risk driver for 
mortgage exposures and will be used by many institutions in the 
mortgage segmentation process. Several commenters also questioned the 
collection of weighted average bureau scores, and the names and types 
of credit scoring systems used, for retail exposures. These commenters 
indicated in general that this risk driver information was not 
necessary for determination of risk-based capital requirements, is not 
always used in a bank's segmentation processes, and may not be 
meaningful for banks that use internal scores or behavioral scores in 
their risk measurement and segmentation processes. Some commenters also 
indicated that some scoring systems (for example, non-U.S. scores) 
would not align with each other, making the calculation of weighted 
averages either incomplete or potentially misleading. The agencies note 
that the instructions accompanying the reporting proposal required 
reporting of credit bureau score information only to the extent the 
information is available, and only for commonly-mapped scoring systems 
used for the largest proportion of exposures in a sub-portfolio when 
multiple scoring systems are used. The agencies continue to believe 
that credit bureau scores are likely to be an important risk driver for 
many types of retail exposures and will be used by many institutions in 
their retail segmentation processes.
    Some commenters also raised concerns about reporting the age of 
mortgage exposures. These commenters indicated that this information is 
not always used to segment mortgage loan exposures and that there could 
be a number of possible ways to interpret the term ``average age'' used 
to calculate the weighted average age of a mortgage exposure depending 
on whether the loan was originated or purchased. These commenters 
indicated that it would be significantly burdensome to determine months 
since origination for purchased loans and sought confirmation that the 
number of months on books could be used instead. The agencies believe 
that loan seasoning is likely to be an important risk driver for many 
types of retail exposures, especially for closed-end mortgage 
exposures. Accordingly, for closed-end mortgages, the agencies are 
retaining the definition of account age, which requires that banks 
determine the age of an account (in months) with respect to the 
account's origination date. For revolving exposures, the agencies agree 
that account age (in months) should be determined with respect to the 
time on the bank's books. For all other retail exposures, the agencies 
will allow banks the flexibility to determine the age of an account 
using a reference point deemed most logical by the reporting bank.
    The agencies received the following technical comments relating to 
data to be reported in Schedules K through O:
     Two commenters indicated that it was not a common practice 
to include both junior and senior lien positions in the calculation of 
LTVs when only the senior lien position was held. These comments 
recommended that only senior lien positions be included in the 
calculation for first lien exposures. The agencies agree with this 
comment and have revised the footnotes and instructions for first lien 
mortgage exposures accordingly;
     A commenter sought confirmation that LTV cell values do 
not cumulate across the columns. The agencies confirm that the LTV cell 
values do not cumulate across the columns and have reworded the 
appropriate footnotes in the mortgage schedules; and
     A commenter indicated that if LTV reporting is retained, 
an additional column should be added to encompass exposures where the 
LTV is unknown. Since the reporting of LTV information is required only 
when the information is available, the agencies do not believe it is 
necessary to collect information pertaining to exposures with unknown 
LTVs.
    After further consideration, the agencies have made an additional 
modification to the retail credit risk schedules to eliminate all 
columns requiring the reporting of weighted average LGD before 
consideration of eligible guarantees and credit derivatives. The 
agencies believe that the quantification of this data item could have 
imposed an excessive burden on banks since it would have required 
disentangling the effect of credit risk mitigation on LGDs assigned to 
a retail segment. Accordingly, the LGD estimates reflected in all 
retail credit exposure schedules should be inclusive of any credit risk 
mitigation effects.

[[Page 4228]]

Securitization Exposures
    Schedule P provides information by rating categories about 
exposures subject to either the Ratings-Based Approach (RBA) or the 
Internal Assessment Approach (IAA). Schedule Q provides additional 
memoranda information about unrated securitization exposures, exposures 
treated under the Supervisory Formula Approach (SFA), synthetic 
securitizations, and risk-weighted assets relating to early 
amortization features of securitizations as prescribed in the final 
rule.
    The agencies did not receive any substantive comments on the 
securitization exposure schedules but did receive the following 
technical comments:
     One commenter requested clarification on how to report 
long-term securitization exposures rated more than one category below 
investment grade, and short-term securitization exposures rated below 
the third highest grade. The agencies have clarified reporting 
instructions to indicate that such exposures are not to be reported in 
Schedule P. These low-rated exposures are to be included in the 
appropriate data items of Schedule A (lines 9f and 17c);
     One commenter requested clarification about the possible 
inconsistency of reporting between data items 1 and 2 on the 
securitization detail schedule (new Schedule Q) and data item 5 of 
schedule for securitization exposures subject to either the RBA or IAA 
(Schedule P). As described below, the agencies have made a number of 
modifications to the securitization detail schedule to improve the 
consistency and logical flow of the schedule as well as to conform 
reported data items and captions with the final rule; and
     Multiple comments were received about the burdens 
associated with calculating the risk-weighted assets for securitization 
exposures not capped under section 42(d) of the final rule (data item 
6b of Schedule T in the reporting proposal). The agencies have removed 
this data item from the new Schedule Q.
    The following additional modifications were made to the 
securitization detail schedule (new schedule Q) to more comprehensively 
capture securitization deductions specified in the final rule and to 
consolidate certain data items on the schedule: (1) Data item 1 was 
added to require reporting of deductions under the RBA and IAA 
approaches; (2) proposed data item 1, ``unrated exposures requiring 
deduction because no IRB treatment for the underlying exposures,'' was 
replaced by data item 2, requiring reporting of all other 
securitization deductions; (3) proposed data item 2, deductions under 
the SFA, was consolidated with proposed data item 3 requiring reporting 
of exposures and risk-weighted assets for this approach (see data item 
3); (4) reporting of exposures and risk-weighted assets of synthetic 
exposures and hedged synthetic exposures on proposed data items 4 and 5 
were consolidated into one line (see data item 4); and (5) the captions 
for proposed data items 7 and 8, relating to investors' interest in 
securitization, were modified to conform to the terminology used in the 
final rule.
Equity Exposures
    Data reported in Schedule R contains exposure amount and risk-
weighted asset information about a bank's equity exposures by type of 
exposure and by approach to measuring required capital including equity 
exposures subject to specific risk weights and equity exposures to 
investment funds. Banks would also complete the appropriate section of 
the schedule based on whether it uses a simple risk weight approach, a 
full internal models approach, or a partially modeled approach to 
measuring required capital for equity exposures.
    The agencies received the following technical comments on the 
equity risk schedule:
     Two commenters indicated that the flow of the schedule's 
sections was confusing and recommended that the schedule be redesigned. 
These commenters also requested clarification of reporting for certain 
data items such as equity investments in investment funds that have 
material liabilities. In response, the agencies have modified the 
equity schedule to more closely align with the structure and flow of 
the equity risk capital calculation approaches contained in the final 
rule. The agencies have also developed more specific reporting 
instructions and modified captions of reported data items to conform 
with the terminology used in the final rule. With respect to the 
treatment of equity investments in investment funds with material 
liabilities, the agencies refer to the discussion of such investments 
in section V.F.4 in the preamble of the final rule.
    The agencies made several additional modifications to the equity 
schedule to simplify reporting and conform data items within the 
schedule to the final rule. These changes include the following: (i) 
The elimination of proposed data items 7 and 8, for ``excluded equity 
exposures to investment funds'' and ``aggregate equity exposures in 
hedge pairs with smaller adjusted carrying value;'' (ii) the 
elimination of reporting for the 100 percent risk-weight category for 
FHLB/Farmer Mac exposures proposed data item 4 (such exposures are risk 
weighted at 20 percent under the final rule); (iii) the addition of 
data item 9, ``600 percent risk weight equity exposures under the 
Simple Risk Weighted Approach (SRWA)'' to conform with the final rule; 
(iv) the addition of data item 14 for reporting exposures to investment 
funds eligible for treatment under the Money Market Fund Approach 
defined within the final rule; and (v) splitting proposed data items 
13, 18, and 22 to better conform with the logical flow of the 
calculation of risk-weighted assets for equity exposures under the 
final rule using one of three different approaches: the SRWA, the full 
Internal Models Approach (IMA), or the partial IMA.
Operational Risk
    The new Schedule S provides data items pertaining to risk-based 
capital held against operational risk as well as various details about 
historical operational losses used to model operational risk capital. 
The schedule also contains data items related to scenarios, 
distribution assumptions, and loss caps used to model operational risk 
capital.
    The agencies received several comments objecting to quarterly 
disclosures of certain data contained in the proposed operational risk 
schedule, particularly those disclosures pertaining to the disclosure 
of historical loss event frequency and severity information. These 
commenters indicated that such disclosures were contrary to the 
principles outlined in the Basel Committee's New Accord and represented 
only a portion of information that is used to develop regulatory 
capital for operational risk. After considering these comments, the 
agencies have made several modifications to the reporting requirements 
for operational risk data items that includes the elimination of 
certain data items (i.e., the reporting of current period loss 
distribution information) and the inclusion of conditional reporting 
for a number of data items depending on whether a bank uses a given 
technique (e.g., historical loss distributions or scenario analyses) or 
parameterization assumption (e.g., loss threshold) to develop 
regulatory capital requirements for operational risk. In cases where 
these techniques or

[[Page 4229]]

assumptions are not used, banks would report either ``N/A'' or ``0'' 
(none) for these data items, as discussed in the instructions.
    Several commenters also raised a question about which specific 
subsidiaries the operational risk disclosures would apply to. The 
agencies believe that all banking subsidiaries that qualify for and 
adopt the advanced approaches for calculating regulatory capital should 
be required to submit information about the regulatory capital held 
against operational risk capital to include certain details about the 
information used to model operational risk capital. In those situations 
where a banking subsidiary does not use a specified technique or 
assumption, it will be allowed to report either ``N/A'' or ``0'' 
depending on the context of the reported data item.
    The agencies received the following technical comments on the 
operational risk schedule:
     Several commenters requested clarification whether column 
B in the proposed operational risk reporting schedule refers to the 
quarterly reporting period for the schedule or for a model that may be 
annual. The agencies have decided to eliminate column B from the 
schedule;
     Several commenters requested clarification on how to 
report starting and ending dates for event loss data when these dates 
differ for frequency and for severity estimation purposes. The agencies 
have revised the schedule to request starting and ending dates for both 
historical frequency and severity distribution data, and only to the 
extent a bank uses this information to model operational risk capital 
(see data items 8a through 8d);
     Several commenters requested clarification of how to 
report loss thresholds in data item 9 of the schedule when multiple 
thresholds are used within the modeling framework. The agencies have 
clarified the instructions to require reporting of the largest 
threshold used;
     Several commenters requested clarification of how to 
report the number and dollar amount of individual loss events in data 
items 11 through 15 of the schedule when losses below internal 
thresholds are aggregated without capturing the number of individual 
events. Another commenter also requested that banks be allowed to 
report losses on an event basis rather than a dollar volume basis and 
that banks be allowed to report such information on a one quarter 
lagged basis. The agencies have clarified the instructions to specify 
that a loss event may encompass multiple loss transactions as long as 
they are all related to the same event. However, losses that do not 
relate to the same event should be considered separate loss events and 
should be separately counted for purposes of reporting data items 11 
through 15. The instructions have also been clarified to state that 
reporting of the dollar volume of losses in data item 15 should be 
calculated on an event basis. In addition, data item 14a for loss 
events ``less than $10,000'' and data item 15a for the dollar amount of 
losses ``Less than $10,000'' have been added to provide a comprehensive 
distribution of loss events. The agencies have eliminated the 
requirement to report loss event information pertaining to the 
``current reporting period'' and therefore see no need to allow banks 
to report remaining loss event information on a one quarter lagged 
basis;
     Two commenters requested confirmation that information 
pertaining to the number of scenarios used to model operational risk 
capital on data items 16 through 18 referred to the number of relevant 
industry events. The agencies have clarified the reporting instructions 
to state that only scenarios used in calculating the risk-based capital 
requirements for operational risk should be included in these data 
items. In addition, data item 18a, for scenario analysis in the range 
of ``less than $1 million'' was added in order to provide a 
comprehensive distribution of scenario data;
     Several commenters requested clarification of information 
pertaining to distributional assumptions in data items 20 and 21 as to 
whether the change in assumptions refers to a change in a parameter of 
a distribution or a change in the distribution class or type. The 
agencies have clarified the instructions to specify that the change in 
assumptions refers to a change in distribution type. Further, no 
reporting is required when the bank does not use a frequency or 
severity distribution to model risk-based capital for operational risk; 
and
     Several commenters requested confirmation that the 
agencies would accept ``not applicable'' in response to the loss cap 
information requested in data items 22 through 24 when a bank does not 
use loss caps. The agencies have clarified the instructions to report 
the number ``0'' on line 22 and ``N/A'' in lines 23 and 24 when no loss 
caps are used.

V. Request for Comment

    Public comment is requested on all aspects of this joint notice. 
Comments are invited on:
    (a) Whether the proposed new 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 
proposed information collections, 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. All comments will become a matter of public record.

    Dated: January 10, 2008.
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, January 17, 
2008.
Robert deV. Frierson,
Deputy Secretary of the Board.
    Dated at Washington, DC, this 14th day of January, 2008.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Dated: January 17, 2008.
Deborah Dakin,
Senior Deputy Chief Counsel, Regulations and Legislation Division, The 
Office of Thrift Supervision.
 [FR Doc. E8-1198 Filed 1-23-08; 8:45 am]


BILLING CODE 4810-33-P

Last Updated 01/24/2008 Regs@fdic.gov