FDIC Federal Register Citations

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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

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); Federal

Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision

(OTS), Treasury.

ACTION: Joint notice and request for comment.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction

Act of 1995 (44 U.S.C.

[[Page 7116]]

chapter 35), the OCC, the Board, the FDIC, and the OTS (the

``agencies'') may not conduct or sponsor, and the respondent is not

required to respond to, an information collection unless it displays a

currently valid Office of Management and Budget (OMB) control number.

The Federal Financial Institutions Examination Council (FFIEC), of

which the agencies are members, has approved the agencies' publication

for public comment of a proposal to revise the reporting of risk-based

capital information in the Consolidated Reports of Condition and Income

(Call Report) for banks and the Thrift Financial Report (TFR) for

savings associations, which are currently approved collections of

information for the agencies. These proposed reporting revisions are

based on the agencies' joint notice of proposed rulemaking (NPR) on

proposed revisions to their existing risk-based capital framework, an

approach known as Basel IA (71 FR 77445, December 26, 2006), the

comment period for which ends on March 26, 2007. At the end of the

comment periods for the Basel IA NPR and this reporting proposal, the

agencies will review all comments and recommendations they receive on

both proposals, which may result in modifications of the proposed Basel

IA risk-based capital rules and these related proposed reporting

revisions. Before any proposed Basel IA reporting revisions are

implemented, the agencies will submit them to OMB for review and

approval.

DATES: Comments must be submitted on or before April 16, 2007.

ADDRESSES: Interested parties are invited to submit written comments to

any or all of the agencies. All comments, which should refer to the OMB

control number(s), will be shared among the agencies.

OCC: Communications Division, Office of the Comptroller of the

Currency, Public Information Room, Mailstop 1-5, Attention: 1557-0081,

250 E Street, SW., Washington, DC 20219. In addition, comments may be

sent by fax to (202) 874-4448, or by electronic mail to

regs.comments@occ.treas.gov. You can inspect and photocopy comments at

the OCC's Public Information Room, 250 E Street, SW., Washington, DC

20219. You can make an appointment to inspect 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://.

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 the OMB

control number for this information collection in the subject line of

the message.

FAX: 202-452-3819 or 202-452-3102.

Mail: Jennifer J. Johnson, Secretary, Board of Governors

of the Federal Reserve System, 20th Street and Constitution Avenue,

NW., Washington, DC 20551.

All public comments are available from the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm

as submitted,

unless modified for technical reasons. Accordingly, your comments will

not be edited to remove any identifying or contact information. Public

comments may also be viewed electronically or in paper in Room MP-500

of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m.

and 5 p.m. on weekdays.

FDIC: You may submit comments, which should refer to ``Consolidated

Reports of Condition and Income, 3064-0052,'' by any of the following

methods:

http://www.FDIC.gov/regulations/laws/federal/notices.html.. E-mail: 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), Clearance Officer,

Attn: Comments, Room MB-2088, Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC 20429.

Hand Delivery: Comments may be hand delivered to the guard

station at the rear of the 550 17th Street Building (located on F

Street) on business days between 7 a.m. and 5 p.m.

Public Inspection: All comments received will be posted without

change to http://www.fdic.gov/regulations/laws/federal/notices.html

including any personal information provided. Comments may be inspected

at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive,

Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.

OTS: You may submit comments, identified by ``1550-0023 (TFR:

Schedule CCR),'' by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

E-mail address: infocollection.comments@ots.treas.gov.

Please include ``1550-0023 (TFR: Schedule CCR)'' in the subject line of

the message and include your name and telephone number in the message.

Fax: (202) 906-6518.

Mail: Information Collection Comments, Chief Counsel's

Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,

DC 20552, Attention: ``1550-0023 (TFR: Schedule CCR).''

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:

``1550-0023 (TFR: Schedule CCR).''

Instructions: All submissions received must include the agency name

and OMB Control Number for this information collection. All comments

received will be posted without change to the OTS Internet Site at

http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any

personal information provided.

Docket: For access to the docket to read background documents or

comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1

In addition, you may inspect comments at the Public Reading Room,

1700 G Street, NW., by appointment. To make an appointment for access,

call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, 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

proposed revisions discussed in this notice, please contact any of the

agency clearance officers whose names appear below.

OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dickerson,

(202) 874-5090, Legislative and Regulatory Activities Division, Office

of the

[[Page 7117]]

Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.

Board: Michelle E. Shore, Federal Reserve Board Clearance Officer,

(202) 452-3829, Division of Research and Statistics, Board of Governors

of the Federal Reserve System, 20th and C Streets, NW., Washington, DC

20551. Telecommunications Device for the Deaf (TDD) users may call

(202) 263-4869.

FDIC: Steven F. Hanft, Paperwork Clearance Officer, (202) 898-3907,

Legal Division, Federal Deposit Insurance Corporation, 550 17th Street,

NW., Washington, DC 20429.

OTS: Marilyn K. Burton, OTS Clearance Officer, at

marilyn.burton@ots.treas.gov, (202) 906-6467, or facsimile number (202)

906-6518, Litigation Division, Chief Counsel's Office, Office of Thrift

Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION: The agencies are proposing to revise the

reporting of risk-based capital information in the Call Report and the

TFR, which are currently approved collections of information for the

agencies. These proposed reporting revisions are based on the agencies'

joint notice of proposed rulemaking (NPR) on proposed revisions to

their existing risk-based capital framework, an approach known as Basel

IA (71 FR 77445, December 26, 2006). At the end of the comment periods

for the Basel IA NPR and this notice, the agencies will review the

comments on both proposals and, as a result, may modify the proposed

Basel IA risk-based capital rules and the proposed reporting

requirements described in this notice. Before implementing any proposed

changes to the Call Report or the TFR, the agencies will submit any

such changes to OMB for review and approval.

1. Report Title: Consolidated Reports of Condition and Income (Call

Report).\1\

Form Number: FFIEC 031 (for banks with domestic and foreign

offices) and FFIEC 041 (for banks with domestic offices only).

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\1\ The estimated times per response for the Call Report that

are presented for the OCC, the Board, and the FDIC are averages that

vary by agency because of differences in the composition of the

banks under each agency's supervision (e.g., size distribution of

banks, types of activities in which they are engaged, existence of

foreign offices, and risk-based capital rules used by banks). The

average reporting burden for the Call Report on an ongoing basis is

estimated to range from 16 to 645 hours per quarter, depending on an

individual bank's circumstances.

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Frequency of Response: Quarterly.

Affected Public: Business or other for-profit.

OCC:

OMB Number: 1557-0081.

Estimated Number of Respondents: 1,900 national banks.

Estimated Time per Response: 44.57 burden hours.

Estimated Total Annual Burden: 338,732 burden hours.

Board:

OMB Number: 7100-0036.

Estimated Number of Respondents: 905 state member banks.

Estimated Time per Response: 51.32 burden hours.

Estimated Total Annual Burden: 185,778 burden hours.

FDIC:

OMB Number: 3064-0052.

Estimated Number of Respondents: 5,234 insured state nonmember

banks.

Estimated Time per Response: 35.73 burden hours.

Estimated Total Annual Burden: 748,043 burden hours.

2. Report Title: Thrift Financial Report (TFR: Schedule CCR).

Form Number: OTS 1313 (for savings associations).

Frequency of Response: Quarterly.

Affected Public: Business or other for-profit.

OTS:

OMB Number: 1550-0023.

Estimated Number of Respondents: 854 savings associations.

Estimated Time per Response: 58.5 burden hours.

Estimated Total Annual Burden: 197,598 burden hours.

The estimated times per response shown above represent estimates of

the ongoing average reporting burden per bank or savings association

(institution) per response after those institutions that are expected

to opt in to the proposed Basel IA risk-based capital rules have made

the one-time systems and other recordkeeping changes needed to support

their ability to measure their risk-based capital ratios under the

proposed Basel IA approach and report the results of this measurement

process in the proposed revised Call Report Schedule RC-R and TFR

Schedule CCR. The agencies estimate that 428 institutions will choose

to adopt the proposed Basel IA risk-based capital rules. The agencies

also estimate that, on average, these institutions will incur an

incremental ongoing burden of between 5 and 15 hours per quarter, which

is reflected in the estimated time per response and estimated total

annual burden shown above for each agency. Across all institutions

supervised by the agencies, this represents an average estimated

increase in reporting burden of 0.5 hours per institution.

In addition, the institutions that are expected to opt in to Basel

IA will incur capital and start-up costs associated with implementing

the one-time systems and other recordkeeping changes needed to support

their reporting of Basel IA risk-based capital information in the Call

Report and TFR. These costs will vary in amount from institution to

institution depending upon an institution's individual circumstances

and the extent of its involvement, if any, with the particular assets,

derivatives, and off-balance-sheet items whose risk-based capital

treatment under the Basel IA proposal differs from their treatment

under the existing risk-based capital rules. For those institutions

that opt in to the proposed Basel IA capital rules, the agencies

estimate that the one-time capital and start-up costs that would be

incurred to enable them to report risk-based capital information in the

Call Report and TFR for those assets, derivatives, and off-balance-

sheet items accorded a different treatment under the proposed Basel IA

reporting revisions would range from $10,000 to $300,000 per

institution.

General Description of Reports

These information collections are mandatory: 12 U.S.C. 161 (for

national banks), 12 U.S.C. 324 (for state member banks), 12 U.S.C. 1817

(for insured state nonmember commercial and savings banks), and 12

U.S.C. 1464(v) (for savings associations). Except for selected data

items, these information collections are not given confidential

treatment.

Abstract

Institutions submit Call Report and TFR data to the agencies each

quarter for the agencies' use in monitoring the condition, performance,

and risk profile of individual institutions and the industry as a

whole. Call Report and TFR data provide the most current statistical

data available for evaluating institutions' corporate applications, for

identifying areas of focus for both on-site and off-site examinations,

and for monetary and other public policy purposes. The agencies use

Call Report and TFR data in evaluating interstate merger and

acquisition applications to determine, as required by law, whether the

resulting institution would control more than 10 percent of the total

amount of deposits of insured depository institutions in the United

States. Call Report and TFR data are also used to calculate all

institutions' deposit insurance and Financing Corporation assessments,

national banks' semiannual assessment fees, and the OTS's assessments

on savings associations.

[[Page 7118]]

Current Actions

I. Overview

On December 26, 2006, the agencies issued a joint notice of

proposed rulemaking (NPR) requesting comment on an alternative approach

for computing risk-weighted assets and credit equivalent amounts of

off-balance-sheet items for purposes of calculating the risk-based

capital ratios of banks, bank holding companies, and savings

associations (banking organizations), an approach known as Basel IA (71

FR 77445). In general, the agencies proposed in the Basel IA NPR to:

(1) Expand the number of risk weight categories;

(2) Allow the use of external credit ratings to risk weight certain

exposures;

(3) Expand the range of recognized collateral and eligible

guarantors;

(4) Use loan-to-value ratios to risk weight most residential

mortgages;

(5) Increase the credit conversion factor for certain commitments

with an original maturity of one year or less;

(6) Assess a capital charge for securitizations of revolving

exposures with early-amortization features; and

(7) Remove the 50 percent limit on the risk weight for certain

derivative transactions.

As proposed in the Basel IA NPR, the application of the Basel IA

risk-based capital rules would be optional. According to the Basel IA

NPR, a banking organization would have to apply all of the proposed

Basel IA changes to its risk-based capital calculations if it chose to

use the Basel IA risk-based capital approach, which would affect the

denominator of the organization's risk-based capital ratios. The

agencies did not propose any changes to the numerator used in these

ratios in the Basel IA NPR.

The agencies currently collect data pertaining to the composition

of an institution's risk-based capital ratios under the current risk-

based capital framework in Call Report Schedule RC-R, Regulatory

Capital, and TFR Schedule CCR, Consolidated Capital Requirement. These

schedules also collect data pertaining to a banking organization's

leverage ratio. In their present forms, Schedule RC-R and Schedule CCR

consist of sections in which banking organizations report the

components of Tier 1 capital, Tier 2 capital, and total risk-based

capital; the calculation of total assets for the leverage ratio;

various adjustments to regulatory capital measures; leverage and risk-

based capital ratios; the risk-weighting of on-balance-sheet assets;

the credit conversion and risk-weighting of derivatives and off-

balance-sheet items; the calculation of total risk-weighted assets; and

the current credit exposure and remaining maturities of derivative

contracts covered by the risk-based capital standards.

As proposed in the Basel IA NPR, unless a banking organization uses

the risk-based capital framework proposed in the agencies' separate

Basel II NPR (71 FR 55380, September 25, 2006), a banking organization

could elect to adopt the proposed Basel IA capital rules or it could

continue to calculate its risk-based capital ratios under the existing

risk-based capital rules. Therefore, because the Basel IA proposal

would affect the calculation of a banking organization's total risk-

weighted assets, the agencies are proposing only to revise Call Report

Schedule RC-R and TFR Schedule CCR. These proposed revisions would add

a second set of sections in which institutions that opt to apply the

Basel IA capital rules would report the risk-weighting of on-balance-

sheet assets, the credit conversion and risk-weighting of derivatives

and off-balance-sheet items, and the calculation of total risk-weighted

assets. Basel IA institutions would complete this alternative set of

risk-weighting sections in lieu of the comparable risk-weighting

sections currently contained in Schedule RC-R and Schedule CCR that

pertain to the existing risk-based capital rules. Institutions that

continue to calculate their risk-based capital ratios under the

existing risk-based capital rules would continue to complete the

current set of risk-weighting sections in Schedule RC-R and Schedule

CCR; they would not complete the proposed Basel IA alternative risk-

weighting sections of these schedules.

In addition, the agencies would add a question to Schedule RC-R and

Schedule CCR in which each institution would indicate whether it

calculates its risk-based capital ratios under the existing risk-based

capital rules or the Basel IA capital rules. Existing items within

Schedule RC-R and Schedule CCR that cross-reference that schedule's

item for ``total risk-weighted assets'' would be revised to refer to

the ``total risk-weighted assets'' item determined under the existing

risk-based capital rules or the Basel IA approach, as appropriate.

These proposed revisions to Call Report Schedule RC-R and TFR

Schedule CCR, which have been approved for publication by the FFIEC,

would take effect as of the first quarter-end Call Report and TFR date

following the effective date of the agencies' final rule amending their

risk-based capital standards to implement the Basel IA alternative

risk-based capital framework.\2\

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\2\ The Board currently collects data pertaining to the

composition of a bank holding company's risk-based capital ratios

under the existing risk-based capital rules in Schedule HC-R,

Regulatory Capital, of the Consolidated Financial Statements for

Bank Holding Companies (FR Y-9C; OMB No. 7100-0128). Revisions

comparable to those proposed to Call Report Schedule RC-R would be

considered for the FR Y-9C, Schedule HC-R, and a separate notice and

request for comment would be published in the Federal Register in

the future. Comments received in response to the proposed Call

Report revisions would be taken into consideration for the

comparable proposed revisions to the FR Y-9C.

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II. Proposed Basel IA Alternative Risk-Weighting Sections in Schedule

RC-R and Schedule CCR

The current on-balance-sheet asset risk-weighting section of

Schedule RC-R and Schedule CCR includes separate line items for the

major asset categories along with columns (Schedule RC-R) and rows

(Schedule CCR) for four of the five risk-weight categories in the

agencies' existing risk-based capital framework: zero percent, 20

percent, 50 percent, and 100 percent. Assets subject to the 200 percent

risk weight are handled through an adjustment that, in general, doubles

the balance sheet amount of the asset.

The current section of Schedule RC-R for derivatives and off-

balance-sheet items contains separate data items for the categories of

these exposures that are covered by the existing risk-based capital

framework. This section also includes columns for the credit equivalent

amounts of these exposures and for the four risk-weight categories

mentioned above. The current Schedule CCR does not include a separate

section for off-balance-sheet items. Instead, these items are subject

to a credit conversion factor and the credit equivalent amounts of the

converted items are included in the appropriate risk weight category on

Schedule CCR. The credit equivalent amounts of derivatives are included

in a risk weight category no higher than 50 percent.

For each category of assets, derivatives, and off-balance-sheet

items, an institution allocates the individual asset amounts or credit

equivalent amounts within that exposure category across the risk-weight

columns (Schedule RC-R) or into the risk-weight rows (Schedule CCR)

based on the risk weight or weights appropriate to the individual asset

or credit equivalent amount. In the current risk-weighted assets

section of Schedule RC-R and Schedule CCR, the asset amounts and credit

equivalent amounts in each risk weight category are totaled and then

[[Page 7119]]

multiplied by the applicable risk weight to produce the institution's

risk-weighted assets by risk weight category. The risk-weighted assets

in each category, together with the institution's market risk

equivalent assets (if the institution is subject to the market risk

rule within the risk-based capital standards \3\), are summed to arrive

at the institution's risk-weighted assets before any deductions for

excess allowance for loan and lease losses and allocated transfer risk

reserve. Following these deductions, the institution reports its total

risk-weighted assets, which generally serves as the denominator for the

institution's risk-based capital ratios.

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\3\ The OTS has not yet implemented a market risk rule for

savings associations, but has proposed such a rule in a separate

notice of proposed rulemaking. See 71 FR 55958 (September 25, 2006).

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The structure of the sections of existing Schedule RC-R and

Schedule CCR that institutions use to report the risk-weighting of on-

balance-sheet assets, the credit conversion and risk-weighting of

derivatives and off-balance-sheet items, and the calculation of total

risk-weighted assets, which have been described above, provides a

suitable starting point for the Basel IA alternative version of these

sections. Therefore, the agencies are proposing to add modified

versions of these sections to Schedule RC-R and Schedule CCR and to

designate them as the Basel IA alternative, which only those

institutions that have opted in to Basel IA would complete. The

proposed modifications are discussed in the following paragraphs.

The Basel IA proposal would increase the number of risk-weight

categories to which on- and off-balance-sheet credit exposures may be

assigned, specifically by adding risk weights of 35 percent, 75

percent, and 150 percent. Therefore, in the proposed Basel IA

alternative risk-weighting sections of these revised schedules, the

agencies would add columns (Schedule RC-R) and rows (Schedule CCR) for

these three additional risk-weight categories. The agencies would also

include in the proposed Basel IA alternative risk-weighting sections a

specific column in Schedule RC-R and a specific row in Schedule CCR for

the existing 200 percent risk-weight category that the current

schedules provide for indirectly.\4\

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\4\ The FDIC, the Board, and the OCC (the banking agencies) are

also proposing to add a 200 percent risk-weight column to the

existing Basel I risk-weighting sections of Schedule RC-R, thereby

replacing the current indirect method of applying the 200 percent

risk weight with a direct method. The OTS is proposing to add a row

to Schedule CCR to also replace the current indirect method.

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The Basel IA proposal increases the credit conversion factor for

various commitments with an original maturity of one year or less.

Under this proposal, short-term commitments, to which the current risk-

based capital standards generally apply a zero percent credit

conversion factor, would be assigned a 10 percent credit conversion

factor. The resulting credit equivalent amount would then be risk

weighted according to the underlying asset(s) or the obligor after

considering any applicable collateral, guarantees, or the external

rating of the facility. Under the Basel IA proposal, commitments that

are unconditionally cancelable would retain their existing zero percent

credit conversion factor.

The current section of Schedule RC-R for risk-weighting the credit

equivalent amount of derivatives and off-balance-sheet items includes

data items for unused commitments that cover commitments with an

original maturity exceeding one year and eligible liquidity facilities

for asset-backed commercial paper programs with an original maturity of

one year or less. Because other short-term commitments are generally

subject to a zero percent credit conversion factor under the agencies'

existing risk-based capital rules, they are not reported in the current

Schedule RC-R. In order to implement the proposed Basel IA 10 percent

credit conversion factor for these other short-term commitments

(excluding commitments that are unconditionally cancelable), the

banking agencies propose to add new data items for such commitments to

the Basel IA alternative risk-weighting section in the revised Schedule

RC-R. No additional data items are required for Schedule CCR.

Under the Basel IA proposal, loan-to-value (LTV) ratios would be

used to determine the risk weight to which first lien and junior lien

one-to-four family residential mortgage loans, including those held for

sale and those held in portfolio,\5\ would be assigned. The agencies

have proposed this LTV approach for one-to-four family residential

mortgages to increase the risk sensitivity of their risk-based capital

standards while minimizing the overall burden to banks. To aid in

minimizing burden, the Basel IA NPR includes a transitional rule that

would provide an option for banking organizations opting in to the

proposed Basel IA approach to continue to risk weight existing

residential mortgages using the existing risk-based capital standard.

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\5\ Loans ``held in portfolio'' are those loans that the bank

has the intent and ability to hold for the foreseeable future or

until maturity or payoff.

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Given the significant change in approach to the risk-weighting of

one-to-four family residential mortgages under the Basel IA proposal,

the banking agencies are seeking the ability to monitor the effect of

this LTV-based approach at individual banks under their supervision

that opt in to Basel IA and across all such banks that opt in.

Therefore, the banking agencies are proposing to add new data items to

the Basel IA alternative risk-weighting section of Schedule RC-R for

assets to enable them to track the allocation across the risk-weighting

categories of residential mortgages to which the proposed Basel IA LTV-

based risk-weighting approach has been applied. In these new data

items, banks supervised by the banking agencies would report breakdowns

by risk-weight category of (a) Their one-to-four family residential

mortgages held for sale that are risk-weighted using the LTV-based

approach separately from their other loans and all leases held for sale

and (b) their one-to-four family residential mortgages held in

portfolio that are risk-weighted using the LTV-based approach

separately from their other loans and all leases held in portfolio.\6\

The OTS believes that the current Schedule CCR captures sufficient

information to meet this monitoring purpose. Therefore, OTS is not

proposing any changes to Schedule CCR to address this allocation

tracking function.

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\6\ Banks that exercise the option to continue to risk weight

existing residential mortgages using the existing risk-based capital

standard would report these mortgages in the data items for their

other loans and leases held for sale or held in portfolio.

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In the Basel IA NPR, the agencies proposed to risk weight mortgage

loans with negative amortization features consistent with the risk-

based capital treatment for other unfunded commitments (for example,

lines of credit). Under the proposed approach, the unfunded portion of

the maximum negative amortization amount would be handled separately

from the funded portion of the loan. The unfunded portion would be

treated as a commitment (based on the original maturity of the

commitment, i.e., the original time period the negative amortization

feature would be available), converted to a credit equivalent amount,

and then risk weighted based on the LTV for the maximum contractual

loan amount (i.e., the sum of the drawn amount of the loan and the

unfunded portion of the maximum negative amortization amount). For

banks, the unfunded portion of the maximum negative

[[Page 7120]]

amortization amount would be reported in the appropriate data item for

unused commitments in the Basel IA alternative risk-weighting section

for off-balance-sheet items in revised Schedule RC-R. The funded

portion of a mortgage loan with negative amortization features would be

risk-weighted based on the LTV of the funded portion and reported in

the asset data item on revised Schedule RC-R for either (a) The one-to-

four family residential mortgages held for sale that are risk-weighted

using the LTV-based approach or (b) the one-to-four family residential

mortgages held in portfolio that are risk-weighted using the LTV-based

approach, as appropriate. Savings associations would compute the risk-

weighted amount by applying the appropriate credit conversion factor to

the amount of the unfunded commitment and including this amount in the

appropriate risk weight category for the LTV of the loan on the

Schedule CCR. As with other off-balance-sheet credit equivalent amounts

under the Basel IA proposal, no additional data items are required for

Schedule CCR.

Another feature of the Basel IA NPR is the proposed assessment of a

risk-based capital charge for securitizations of revolving exposures

with early-amortization features. The early-amortization capital charge

would be levied against the credit equivalent amount of the off-

balance-sheet investors' interest (that is, the total amount of

securities or other interests issued by a trust or special purpose

entity to investors that is not on the securitizing banking

organization's balance sheet) and would be imposed only in the event

that the excess spread on the securitization has declined to a

predetermined percentage of the excess spread trapping point.\7\ As the

level of excess spread approaches the early amortization trigger, the

credit conversion factor to be applied to the amount of investors'

interest would increase from zero percent to 100 percent, thereby

producing an increase in the capital charge.

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\7\ The excess spread trapping point is the point at which a

banking organization is required by the documentation governing a

securitization to divert and hold excess spread in a spread or

reserve account, expressed as a percentage.

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Because no capital charge is imposed on investors' interests in

revolving securitizations with early-amortization features under the

existing risk-based capital framework, the banking agencies are

proposing to add new data items for these investors' interests to the

off-balance-sheet items section of revised Schedule RC-R for the

purpose of reporting the credit equivalent amount of these interests

and then risk-weighting this off-balance-sheet exposure. As with other

off-balance-sheet credit equivalent amounts, no additional data items

are required for Schedule CCR. However, when reporting on its revolving

securitizations with early-amortization features on Schedule RC-R or

Schedule CCR, an institution will need to determine the credit

equivalent amount for each individual securitization based on the

credit conversion factor specific to that securitization rather than

applying a single credit conversion factor to the total of all

investors' interests. The credit equivalent amount for each

securitization would then be assigned to the risk weight category

appropriate to the securitized assets.

The Basel IA proposed rule would remove the 50 percent risk-weight

limit that applies to certain derivative contracts. The risk weight

assigned to the credit equivalent amount of a derivative contract would

instead be the risk weight assigned to the derivative counterparty

after consideration of any collateral or guarantees. The data items for

derivative contracts in the current section of Schedule RC-R for risk-

weighting derivatives and off-balance-sheet items do not permit the

credit equivalent amount of a derivative contract to be assigned a risk

weight greater than 50 percent. As a consequence, the data items for

derivatives in the Basel IA alternative risk-weighting section for

derivatives and off-balance-sheet items in revised Schedule RC-R will

permit these credit equivalent amounts to be assigned to the full range

of risk-weight categories. No modification will be necessary on

Schedule CCR to address this change in Basel IA.

The Basel IA proposed rule would expand the use of external credit

ratings to risk-weight most categories of externally-rated exposures,

including sovereign and corporate debt securities and rated loans. At

present, external credit ratings can be used to risk-weight only asset-

backed and mortgage-backed securities and other positions in

securitization transactions (except credit-enhancing interest-only

strips). The Basel IA proposal would also expand the range of

recognized collateral to include a broader array of externally-rated,

liquid, and readily marketable financial instruments. The agencies'

existing risk-based capital standards recognize limited types of

collateral, including cash on deposit and securities issued or

guaranteed by the U.S. government, U.S. government agencies, and U.S.

government-sponsored agencies. Finally, the Basel IA proposal would

expand the range of eligible guarantors by recognizing entities that

have long-term senior debt that, in general, is rated at least

investment grade, provided the guarantee meets certain additional

criteria. The agencies' existing risk-based capital standards limit the

recognition of third party guarantees. Currently recognized guarantees

include those provided by the U.S. government and U.S. government-

sponsored agencies, U.S. depository institutions, and qualifying U.S.

securities firms.

When risk-weighting on-balance-sheet assets and the credit

equivalent amounts of derivatives and off-balance-sheet items in

existing Schedule RC-R and Schedule CCR, institutions take currently

recognized external credit ratings, collateral, and guarantees into

account when they allocate assets and credit equivalent amounts to

risk-weight categories. Institutions are not required to separately

identify or report on their use of the ratings-based approach or

eligible collateral or guarantees in existing Schedule RC-R and

Schedule CCR. The agencies would maintain this same reporting approach

for the expanded recognized external credit ratings, collateral, and

guarantees in the Basel IA alternative risk-weighting sections for on-

balance-sheet assets and for the credit equivalent amount of

derivatives and off-balance-sheet items in revised Schedule RC-R and

Schedule CCR.

III. Request for Comment

Public comment is requested on all aspects of this joint notice.

Comments are invited on:

(a) Whether the proposed revisions to the Call Report and TFR

collections of information are necessary for the proper performance of

the agencies' functions, including whether the information has

practical utility;

(b) The accuracy of the agencies' estimates of the burden of the

information collections as they are proposed to be revised, including

the validity of the methodology and assumptions used;

(c) Ways to enhance the quality, utility, and clarity of the

information to be collected;

(d) Ways to minimize the burden of information collections on

respondents, including through the use of automated collection

techniques or other forms of information technology; and

(e) Estimates of capital or start up costs and costs of operation,

maintenance, and purchase of services to provide information.

Comments submitted in response to this joint notice will be shared

among

[[Page 7121]]

the agencies and will be summarized or included in the agencies'

requests for OMB approval. All comments will become a matter of public

record.

Dated: February 8, 2007.

Stuart E. Feldstein,

Assistant Director, Legislative and Regulatory Activities Division,

Office of the Comptroller of the Currency.

Board of Governors of the Federal Reserve System, February 6,

2007.

Jennifer J. Johnson,

Secretary of the Board.

Dated at Washington, DC, this 8th day of February, 2007.

Federal Deposit Insurance Corporation.

Valerie J. Best,

Assistant Executive Secretary.

Dated: February 6, 2007.

Deborah Dakin,

Senior Deputy Chief Counsel, Regulations and Legislation Division,

Office of Thrift Supervision.

[FR Doc. 07-639 Filed 2-13-07; 8:45 am]

BILLING CODE 4810-33-P