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

Agency Information Collection Activities: Submission for OMB

Review; Joint Comment Request

AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;

Board of Governors of the Federal Reserve System (Board); Federal

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

(OTS), Treasury.

ACTION: Notice of information collections to be submitted to OMB for

review and approval under the Paperwork Reduction Act.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction

Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, the FDIC, and

the OTS (the ``agencies'') may not conduct or sponsor, and the

respondent is not required to respond to, an information collection

unless it displays a currently valid Office of Management and Budget

(OMB) control number. On October 31, 2006, the agencies, under the

auspices of the Federal Financial Institutions Examination Council

(FFIEC), requested public comment for 60 days on a proposal to extend,

with revision, the Consolidated Reports of Condition and Income (Call

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

associations, which are currently approved collections of information.

After considering the comments, the FFIEC and the agencies have

modified some of the proposed changes, which will be implemented March

31, 2007, as proposed. Additionally, OTS will incorporate in its OMB

submission the proposed TFR changes published in the Federal Register

on December 1, 2006 (71 FR 69619). These changes will also be

implemented March 31, 2007, as proposed.

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

ADDRESSES: Interested parties are invited to submit written comments to

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

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

OCC: Communications Division, Office of the Comptroller of the

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

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

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

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

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

20219. You can make an appointment to inspect the comments by calling

(202) 874-5043.

Board: You may submit comments, which should refer to

``Consolidated Reports of Condition and Income, 7100-0036,'' by any of

the following methods:

Agency Web Site: http://www.federalreserve.gov Follow the instructions for submitting comments on the http://.

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.

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

Follow the instructions for submitting comments.

E-mail: regs.comments@federalreserve.gov. Include docket

number in the subject line of the message.

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

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

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

NW., Washington, DC 20551.

All public comments are available from the Board's Web site at

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as

submitted, unless modified for technical reasons. Accordingly, your

comments will not be edited to remove any identifying or contact

information. Public comments may also be viewed electronically or in

paper in Room MP-500 of the Board's Martin Building (20th and C

Streets, NW) between 9 a.m. and 5 p.m. on weekdays.

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

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

methods:

http://www.FDIC.gov/regulations/laws/federal/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: March

2007 Revisions),'' by any of the following methods:

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

Follow the instructions for submitting comments.

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

Please include ``1550-0023 (TFR: March 2007 Revisions)'' in the subject

line of the message and include your name and telephone number in the

message.

Fax: (202) 906-6518.

Mail: Information Collection Comments, Chief Counsel's

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

DC 20552, Attention: ``1550-0023 (TFR: March 2007 Revisions).''

Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,

1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:

Information

[[Page 7122]]

Collection Comments, Chief Counsel's Office, Attention: ``1550-0023

(TFR: March 2007 Revisions).''

Instructions: All submissions received must include the agency name

and OMB Control Number for this information collection. All comments

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

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

personal information provided.

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

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

In addition, you may inspect comments

at the Public Reading Room, 1700 G Street, NW., by appointment. To make

an appointment for access, call (202) 906-5922, send an e-mail to

public.info@ots.treas.gov, or send a facsimile transmission to (202)

906-7755. (Prior notice identifying the materials you will be

requesting will assist us in serving you.) We schedule appointments on

business days between 10 a.m. and 4 p.m. In most cases, appointments

will be available the next business day following the date we receive a

request.

Additionally, commenters may send a copy of their comments to the

OMB desk officer for the agencies by mail to the Office of Information

and Regulatory Affairs, U.S. Office of Management and Budget, New

Executive Office Building, Room 10235, 725 17th Street, NW.,

Washington, DC 20503, or by fax to (202) 395-6974.

FOR FURTHER INFORMATION CONTACT: For further information about the

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

clearance officers whose names appear below. In addition, copies of the

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

). Copies of the TFR can be

obtained from the OTS's Web site (http://www.ots.treas.gov/main.cfm?catNumber=2&catParent=0

).

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

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

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

20219.

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

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

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

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

(202) 263-4869.

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

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

NW., Washington, DC 20429.

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

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 requesting OMB approval to

revise and extend for three years the Call Report and the TFR, which

are currently approved collections of information.

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

Report).

Form Number: Call Report: FFIEC 031 (for banks with domestic and

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

Frequency of Response: Quarterly.

Affected Public: Business or other for-profit.

OCC

OMB Number: 1557-0081.

Estimated Number of Respondents: 1,900 national banks.

Estimated Time per Response: 44.33 burden hours.

Estimated Total Annual Burden: 336,925 burden hours.

Board

OMB Number: 7100-0036.

Estimated Number of Respondents: 905 state member banks.

Estimated Time per Response: 51.02 burden hours.

Estimated Total Annual Burden: 184,692 burden hours.

FDIC

OMB Number: 3064-0052.

Estimated Number of Respondents: 5,234 insured state nonmember

banks.

Estimated Time per Response: 35.27 burden hours.

Estimated Total Annual Burden: 738,413 burden hours.

The estimated time per response for the Call Report is an average

that varies by agency because of differences in the composition of the

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

of institutions, types of activities in which they are engaged, and

existence of foreign offices). The average reporting burden for the

Call Report is estimated to range from 16 to 630 hours per quarter,

depending on an individual institution's circumstances.

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

Form Number: OTS 1313 (for savings associations).

Frequency of Response: Quarterly.

Affected Public: Business or other for-profit.

OTS

OMB Number: 1550-0023.

Estimated Number of Respondents: 845 savings associations.

Estimated Time per Response: 57.1 burden hours.

Estimated Total Annual Burden: 193,139 burden hours.

General Description of Reports

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

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

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

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

these information collections are not given confidential treatment.

Abstract

Institutions submit Call Report and TFR data to the agencies each

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

and risk profile of individual institutions and the industry as a

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

data available for evaluating institutions' corporate applications, for

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

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

Call Report and TFR data in evaluating interstate merger and

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

resulting institution would control more than ten percent of the total

amount of deposits of insured depository institutions in the United

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

institutions' deposit insurance and Financing Corporation assessments,

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

on savings associations.

Current Actions

I. Overview

On October 31, 2006, the agencies requested comment on proposed

revisions to the Call Report and the TFR (71 FR 63848). All four

agencies proposed to replace certain information currently collected in

the Call Report and TFR for deposit insurance assessment purposes with

the information described in proposed amendments to Part 327 of the

FDIC's regulations (71 FR 28790, May 18,

[[Page 7123]]

2006).\1\ The four agencies also proposed to revise the information

collected in the Call Report and TFR on time deposits, particularly

with respect to certain retirement accounts affected by the FDIC's

amended deposit insurance regulations.

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\1\ On November 30, 2006, the FDIC published a final rule

amending Part 327 of its regulations to improve and modernize its

operational systems for deposit insurance assessments (71 FR 69270).

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In addition, the OCC, the Board, and the FDIC (the banking

agencies) proposed to implement a number of other changes to the Call

Report requirements, most of which are expected to apply to a small

percentage of banks. First, the banking agencies proposed to revise the

Call Report to collect certain data on fair value measurements from

those institutions that choose, under generally accepted accounting

principles, to apply a fair value option to one or more financial

instruments and one or more classes of servicing assets and liabilities

and from certain institutions that report trading assets and

liabilities. The banking agencies also proposed to collect an item for

regulatory capital calculation purposes to capture the change in the

fair value of liabilities accounted for under a fair value option that

is attributable to a change in a bank's own creditworthiness. Second,

in order to meet supervisory data needs, the banking agencies proposed

to collect certain data in the Call Report on 1-4 family residential

mortgages with terms that allow for negative amortization. Finally, the

banking agencies proposed to clarify the Call Report instructions for

assets serviced for others by explicitly stating that such servicing

includes the servicing of loan participations.

The OTS's other changes to the TFR were addressed separately in its

notices published on July 31, 2006 (71 FR 43286), and December 1, 2006

(71 FR 69619). These changes will be incorporated in this OMB

submission, and will take effect on March 31, 2007.

The revisions to the Call Report and the TFR set forth herein,

which were approved for publication by the FFIEC, were proposed to take

effect as of March 31, 2007, and, for certain deposit insurance

assessment revisions, March 31, 2008. After considering the comments

and other actions since the publication of the proposal, the agencies

approved certain modifications to the initial set of proposed

revisions. The agencies will move forward with these modified reporting

changes on March 31, 2007, and March 31, 2008. For the March 31, 2007,

report date only, institutions may provide reasonable estimates for any

new or revised Call Report or TFR item for which the requested

information is not readily available.

The agencies collectively received comments from five respondents:

one banking organization, one national banking trade association, a

trade association of community organizations, a financial institution

data processing servicer, and a government agency. All of these

respondents except the government agency addressed the proposed

reporting of information on 1-4 family residential mortgages with

negative amortization features. The trade association of community

organizations supported the collection of the total amount of these

mortgages in the Call Report while the banking organization and the

banking trade association addressed the proposal to collect certain

additional data on these mortgages from banks with a significant volume

of negatively amortizing residential mortgages. The data processing

servicer commented on the proposed March 31, 2007, effective date for

reporting this information.

With respect to the other proposed revisions to the Call Report and

the TFR, the banking organization stated that it ``generally supports

the Agencies' ``proposed changes'' and the banking trade association

expressed support for ``the majority of changes proposed by the

agencies.'' This latter commenter observed that the proposed changes to

the data reported for deposit insurance assessment purposes should be

conformed to the FDIC's final rule on the operational procedures

governing deposit insurance assessments that was published after the

proposed changes to the Call Report and TFR were published for comment

on October 31, 2006. This commenter also urged the agencies to proceed

cautiously with the proposed reporting schedule that would capture data

on banks' use of the fair value option under a yet-to-be issued final

accounting standard.

A summary of the agencies' responses to the comments and the final

revisions are presented below.

II. Discussion of Revisions

A. Deposit Insurance Assessment Revisions to the Call Report and TFR

On May 18, 2006, the FDIC issued proposed amendments to Part 327 of

its regulations, ``Assessments,'' to improve and modernize its

operational systems for deposit insurance assessments. Under these

proposed amendments, the FDIC's computation of deposit insurance

assessments for certain institutions would be determined using daily

averages for deposits rather than quarter-end balances. On November 30,

2006, the FDIC published a final rule amending Part 327 of its

regulations largely as proposed on May 18.

In conjunction with these amendments to Part 327 of the FDIC's

regulations, the agencies proposed to revise and reduce the overall

reporting requirements related to deposit insurance assessments in both

the Call Report and the TFR in order to simplify regulatory reporting.

The proposed revised reporting requirements contained the following key

elements:

Institutions would separately report (a) gross deposits as

defined in Section 3(l) of the Federal Deposit Insurance Act (FDI Act)

(12 U.S.C. 1813(l)) before any allowable exclusions and (b) allowable

exclusions;

The same data items would be reported for both quarter-end

and daily average deposits;

All institutions would report using quarter-end deposits

and allowable exclusions; and

All institutions with $300 million or more in assets, and

other institutions that meet specified criteria, would also report

daily averages for deposits and allowable exclusions in addition to

quarter-end amounts.

The proposal also provided an interim period covering the March 31,

2007, through December 31, 2007, report dates, during which

institutions would have the option to submit Call Reports and TFRs

using either the current or revised formats for reporting data for

measuring their assessment base. An institution that chose to begin

reporting under the revised format in any quarter during the interim

period would be required to continue to report under the revised format

through the rest of the interim period and would not be permitted to

revert back to the current reporting format. The revised reporting

format would take effect for all institutions on March 31, 2008, at

which time the current reporting format would be eliminated. Although

no institution that chose to report under the revised format during the

2007 interim period would be required to report daily averages during

this period, any institution could elect to report daily averages as of

any quarter-end report date in 2007. However, once an institution began

to report daily averages (even during the interim period), it would be

required to continue to report daily averages each quarter thereafter

in its Call Report or TFR.

In its May 18, 2006, proposed amendments to Part 327 of its

regulations, the FDIC proposed to revise

[[Page 7124]]

the definition of the assessment base to be consistent with Section

3(l) of the FDI Act. This was intended to eliminate the need for

periodic updates to the FDIC's assessment regulations in response to

outside factors and allow a simplification of the associated reporting

requirements. In addition, the FDIC proposed to use daily average

deposits and exclusions over the quarter instead of quarter-end totals

for deposits and exclusions to compute the assessment base for

institutions with $300 million or more in assets and other institutions

who meet specified criteria. All other institutions could opt

permanently to determine their assessment base using daily averages. In

its final rule amending Part 327, the FDIC raised the size threshold

for using daily average deposits and exclusions to compute an

institution's assessment base from $300 million to $1 billion.

At present, 23 items are required in the Call Report to determine a

bank's assessment base and eight items are required in the TFR to

determine a savings association's assessment base. The agencies

proposed to change the way the assessment base is reported in the Call

Report and the TFR. As proposed, these changes would effectively reduce

the number of reported items to as few as two for certain small

institutions (without foreign offices) and no more than six for other

institutions. Specifically, the banking agencies proposed to replace

items 1 through 12 (including their subitems) on Schedule RC-O, ``Other

Data for Deposit Insurance and FICO Assessments,'' and OTS proposed to

replace the eight items in the section of Schedule DI, ``Consolidated

Deposit Information,'' for ``Deposit and Escrow Data for Deposit

Insurance Premium Assessments'' with the following six items:

Total Deposit Liabilities Before Exclusions (Gross) as

Defined in Section 3(l) of the FDI Act and FDIC Regulations;

Total Allowable Exclusions (including Foreign Deposits);

Total Foreign Deposits (included in Total Allowable

Exclusions);

Total Daily Average of Deposit Liabilities Before

Exclusions (Gross) as Defined in Section 3(l) of the FDI Act and FDIC

Regulations;

Total Daily Average Allowable Exclusions (including

Foreign Deposits); and

Total Daily Average Foreign Deposits (included in Total

Daily Average Allowable Exclusions).

The total amount of allowable exclusions from the assessment base

would be reported separately for any institution that maintains such

records as will readily permit verification of the correctness of its

assessment base. The allowable exclusions, which are set forth in

Section 3(l)(5) and other sections of the FDI Act and in the FDIC's

regulations, include foreign deposits (including International Banking

Facility deposits), reciprocal balances, drafts drawn on other

depository institutions, pass-through reserve balances, depository

institution investment contracts, and deposits accumulated for the

payment of personal loans that are assigned or pledged to assure

payment at maturity. The net amount of unposted debits and credits

would no longer be considered within the definition of the assessment

base.

In addition to quarter-end balance reporting, institutions that

meet certain criteria would be required to report average daily deposit

liabilities and average daily allowable exclusions to determine their

assessment base effective March 31, 2008. The amounts to be reported

would be averages of the balances as of the close of business for each

day for the calendar quarter. For days that an office of the reporting

institution (or any of its subsidiaries or branches) is closed (e.g.,

Saturdays, Sundays, or holidays), the amounts outstanding from the

previous business day would be used. An office is considered closed if

there are no transactions posted to the general ledger as of that date.

According to the agencies' October 31 reporting proposal, the

requirement for an institution to report daily averages beginning March

31, 2008, would have applied to any institution that had $300 million

or more in total assets either in its Call Report or TFR for March 31,

2007, regardless of its asset size in subsequent quarters. In addition,

if an institution reported $300 million or more in total assets in two

consecutive Call Reports or TFRs beginning with its June 30, 2007,

report, daily average reporting would have begun on the later of March

31, 2008, or the report date six months after the second consecutive

quarter. Daily average reporting beginning March 31, 2008, would also

have applied to any institution that became newly insured after March

31, 2007. An institution reporting less than $300 million in total

assets in its Call Report or TFR for March 31, 2007, would be permitted

to continue to determine its assessment base using quarter-end balances

until it met the two-consecutive-quarter asset size test for reporting

daily averages unless it opted to determine its assessment base using

daily averages. After an institution began to report daily averages for

its total deposits and allowable exclusions, either voluntarily or

because it was required to do so, the institution would not be

permitted to switch back to reporting only quarter-end balances.

In its comment letter, the banking trade association ``point[ed]

out that the threshold for average daily balance reporting requirements

in the final FDIC ruling is $1 billion, which differs from the $300

million threshold proposed by the FDIC on May 18, 2006,'' and upon

which the agencies' October 31 reporting proposal was based. The trade

association added that the reporting threshold in the Call Report and

the TFR ``must be revised to $1 billion to correspond with the final

FDIC rule.'' The agencies concur and are revising the threshold for

average daily balance reporting to $1 billion. In addition,

institutions that become newly insured on or after April 1, 2008, would

be required to report daily average balances beginning in the first

quarterly Call Report or TFR that they file. An institution that

becomes insured after March 31, 2007, but on or before March 31, 2008,

would not be required to report daily average balances in its Call

Report or TFR unless and until it exceeded the $1 billion asset size

threshold.

B. Revision of Certain Time Deposit Information on the Call Report and

TFR

The Federal Reserve uses data from Call Report Schedule RC-E,

Deposit Liabilities, and from TFR Schedule DI, Consolidated Deposit

Information, to ensure accurate construction of the monetary aggregates

for monetary policy purposes.\2\ In order to more accurately calculate

the monetary aggregates, the banking agencies proposed to revise two

Schedule RC-E items, Memorandum items 2.b, ``Total time deposits of

less than $100,000,'' and 2.c, ``Total time deposits of $100,000 or

more,'' and add a new Memorandum item 2.c.(1) to this schedule.

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\2\ In order to calculate the money stock measure M2, the

Federal Reserve takes M1 (which consists of currency held by the

public, traveler's checks, demand deposits, and other checkable

deposits) and adds (1) savings deposits, (2) small-denomination time

deposits (time deposits in amounts of less than $100,000) less

Individual Retirement Account (IRA) and Keogh balances at depository

institutions, and (3) balances in retail money market mutual funds,

less IRA and Keogh balances at money market mutual funds.

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In Schedule RC-E, Memorandum item 2.b would be revised to include

brokered time deposits issued in denominations of $100,000 or more that

are participated out by the broker in shares of less than $100,000 as

well as brokered certificates of deposit issued in

[[Page 7125]]

$1,000 amounts under a master certificate of deposit (when information

on the number of $1,000 amounts held by each of the broker's customers

is not readily available to the bank). Memorandum item 2.c would be

revised to exclude such brokered time deposits. In addition, because

the deposit insurance limit for certain retirement plan deposit

accounts increased from $100,000 to $250,000 in 2006, a new Memorandum

item 2.c.(1) would be added to Schedule RC-E to separately identify the

portion of the total time deposits of $100,000 or more reported in

Memorandum item 2.c that represents IRA and Keogh Plan accounts.

For the same reasons, OTS proposed to add two new items to Schedule

DI of the TFR. These data items would be (1) Time Deposits of $100,000

or More (excluding brokered time deposits participated out by the

broker in shares of less than $100,000 and brokered certificates of

deposit issued in $1,000 amounts under a master certificate of deposit)

and (2) IRA/Keogh Accounts included in Time Deposits of $100,000 or

More.

The agencies received no comments on the proposed time deposit

reporting changes, which they will implement as proposed.

C. Reporting of Certain Fair Value Measurements and the Use of the Fair

Value Option in the Call Report

On September 15, 2006, the Financial Accounting Standards Board

(FASB) issued Statement No. 157, Fair Value Measurements (FAS 157),

which is effective for banks and other entities for fiscal years

beginning after November 15, 2007. Earlier adoption of FAS 157 is

permitted as of the beginning of an earlier fiscal year, provided the

bank has not yet issued a financial statement or filed a Call Report

for any period of that fiscal year. Thus, a bank with a calendar year

fiscal year may voluntarily adopt FAS 157 as of January 1, 2007. The

fair value measurements standard provides guidance on how to measure

fair value and would require banks and other entities to disclose the

inputs used to measure fair value based on a three-level hierarchy for

all assets and liabilities that are remeasured at fair value on a

recurring basis.\3\

The FASB plans to issue a final standard, The Fair Value Option for

Financial Assets and Financial Liabilities, in the first quarter of

2007. This standard would allow banks and other entities to report

certain financial assets and liabilities at fair value with the changes

in fair value included in earnings. The banking agencies anticipate

that relatively few banks will elect to use the fair value option for a

significant portion of their financial assets and liabilities.

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\3\ The FASB's three-level fair value hierarchy gives the

highest priority to quoted prices in active markets for identical

assets or liabilities (Level 1) and the lowest priority to

unobservable inputs (Level 3). Level 1 inputs are quoted prices in

active markets for identical assets or liabilities that the

reporting bank has the ability to access at the measurement date

(e.g., the Call Report date). Level 2 inputs are inputs other than

quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly. Level 3 inputs

are unobservable inputs for the asset or liability.

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According to the FASB's Web site (http://www.fasb.org), the FASB

Board has tentatively decided to require that the effective date of the

final fair value option standard be the same as the effective date of

FAS 157. Thus, the final fair value option standard should be effective

for financial statements issued for fiscal years beginning after

November 15, 2007. The FASB Board has also tentatively decided to

permit an entity to early adopt the final fair value option standard

provided that the entity also adopts all of the requirements

(measurement and disclosure) of FAS 157 concurrent with or prior to the

early adoption of the final fair value option standard. Furthermore,

the FASB Board would permit early adoption of the final fair value

option standard within 120 days of the beginning of the entity's fiscal

year, thereby making the fair value option election retroactive to the

beginning of that fiscal year (or the date of initial recognition, if

later) provided that the entity has not yet issued any interim

financial statements for that fiscal year. Thus, a bank with a calendar

year fiscal year that voluntarily adopts FAS 157 as of January 1, 2007,

would also be able to adopt the final fair value option standard as of

that same date.

The banking agencies proposed to clarify the Call Report

instructions to explain where financial assets and liabilities measured

under the fair value option should be reported in the existing line

items of the Call Report. The banking agencies also proposed to add a

new Schedule RC-Q to the Call Report to collect data, by major asset

and liability category, on the amount of assets and liabilities to

which the fair value option has been applied along with separate

disclosure of the amount of such assets and liabilities whose fair

values were estimated under level two and under level three of the

FASB's fair value hierarchy. The categories are:

Securities held for purposes other than trading with

changes in fair value reported in current earnings;

Loans and leases;

All other financial assets and servicing assets;

Deposit liabilities;

All other financial liabilities and servicing liabilities;

and

Loan commitments (not accounted for as derivatives).

In addition, the banking agencies proposed to collect data on

trading assets and trading liabilities in the new schedule from those

banks that complete Schedule RC-D, Trading Assets and Liabilities,

i.e., banks that reported average trading assets of $2 million or more

for any quarter of the preceding calendar year. In the proposed new

schedule, such banks would report the carrying amount of trading assets

and trading liabilities whose fair values were estimated under level

two and under level three of the FASB's fair value hierarchy.

The FASB's fair value measurements standard requires banks and

other entities to consider the effect of a change in their own

creditworthiness when determining the fair value of a financial

liability. The banking agencies proposed to add one new item to

Schedule RC-R, Regulatory Capital, for the cumulative change in the

fair value of all financial liabilities accounted for under the fair

value option that is attributable to changes in the bank's own

creditworthiness. This amount would be excluded from the bank's

retained earnings for purposes of determining Tier 1 capital under the

banking agencies' regulatory capital standards.

Finally, the banking agencies proposed to clarify the instructions

to Schedule RI for the treatment of interest income on financial assets

and interest expense on financial liabilities measured under a fair

value option. The instructions would be modified to instruct banks to

separate the contractual year-to-date amount of interest earned on

financial assets and interest incurred on financial liabilities that

are reported under a fair value option from the overall year-to-date

fair value adjustment and report these contractual amounts in the

appropriate interest income or interest expense items on Schedule RI.

Only one commenter, the banking trade association, offered comments

on fair value option reporting, urging ``the agencies to proceed

cautiously with any major revisions to the Call Report or TFR prior to

the official release of the Fair Value Option statement.'' The trade

association also requested that the agencies delay the March 31, 2007,

effective date of the proposed reporting revisions related to the fair

value option if the release of the FASB's final fair

[[Page 7126]]

value option standard is delayed beyond its expected issuance in the

first quarter of 2007. The trade association did not address the

proposed reporting revisions for the fair value option and fair value

measurements themselves.

The banking agencies agree on the need for caution in implementing

their proposed reporting revisions related to the fair value option and

fair value measurements. Accordingly, once the FASB issues its final

fair value option standard, only if banks are permitted to adopt this

standard in the first quarter of 2007 for other financial reporting

purposes would the fair value option reporting requirements in the Call

Report take effect as of March 31, 2007. Otherwise, these reporting

requirements would be delayed until banks can elect the fair value

option for other financial reporting purposes. Additionally, the

banking agencies will proceed with the new Schedule RC-R item for fair

value changes included in retained earnings that are attributable to

changes in a bank's own creditworthiness. This item will initially

reflect the banking agencies' determination that banks should exclude

from Tier 1 capital the cumulative change in the fair value of

financial liabilities accounted for under a fair value option that is

included in retained earnings and is attributable to changes in the

bank's own creditworthiness. If the scope of the banking agencies'

determination concerning changes in the fair value of liabilities

attributable to changes in own creditworthiness is later modified, the

new Schedule RC-R item would be modified accordingly.

D. Reporting of Certain Data in the Call Report on 1-4 Family

Residential Mortgage Loans With Terms That Allow for Negative

Amortization

The banking agencies proposed to collect certain Call Report items

to monitor the extent of bank holdings of closed-end 1-4 family

residential mortgage loan products whose terms allow for negative

amortization. As proposed, all banks would report the total amount of

their holdings of such closed-end mortgage loans in a new memorandum

item in Schedule RC-C, Part I, Loans and Leases. The banking agencies

also proposed to collect two additional memorandum items on Schedule

RC-C and another new memorandum item on Schedule RI, Income Statement,

from banks with a significant volume of negatively amortizing 1-4

family residential mortgage loans. The two additional Schedule RC-C

memorandum items would be (1) the total maximum remaining amount of

negative amortization contractually permitted on closed-end loans

secured by 1-4 family residential properties and (2) the total amount

of negative amortization on closed-end loans secured by 1-4 family

residential properties that is included in the carrying amount of these

loans. The Schedule RI memorandum item would be the year-to-date

noncash income on closed-end loans with a negative amortization feature

secured by 1-4 family residential properties.

The banking agencies' proposal stated that the threshold for

identifying banks with a significant volume of negatively amortizing

residential mortgage loans would be based on the aggregate amount of

these loans being in excess of either a certain dollar amount, e.g.,

$100 million or $250 million, or a certain percentage of the total

loans and leases (in domestic offices) reported on Schedule RC-C, e.g.,

five percent or ten percent. For reporting during 2007, a bank with

negatively amortizing loans would determine whether it met the size

threshold for reporting the three additional memorandum items using

data reflected in its December 31, 2006, Call Report. For reporting in

2008 and subsequent years, the determination would be based on data

from the previous year-end Call Report. Thus, banks with negatively

amortizing 1-4 family residential mortgage loans in excess of the

reporting threshold as of the end of any particular calendar year would

report these three items for the entire next calendar year.

The banking agencies requested comment on the specific dollar

amount and percentage of loans that should be used in setting the size

threshold for additional reporting on negatively amortizing loans. As

mentioned above, the comments from the banking organization and the

banking trade association addressed this threshold. In this regard, the

banking organization recommended that the agencies base their reporting

threshold only on a percentage of an institution's total loans and

leases and not also include a fixed dollar amount of negatively

amortizing loans in the threshold test. The organization stated that

using a percentage test ``is more in line with the Agencies' goals of

ensuring the safety and soundness of institutions while minimizing the

burden of information collection'' because ``safety and soundness

concerns become more prominent only as an institution's concentration

in these loans increases relative to the rest of its portfolio.''

In its comments, the banking trade association referred to the

agencies' Interagency Guidance on Nontraditional Mortgage Product

Risks, which they published at the beginning of October 2006,\4\ noting

that this guidance ``specifically states that the agencies did not

intend to establish concentration caps for institutions that

underwrite'' nontraditional mortgages, including the residential

mortgages with negative amortization features on which data would be

reported in the Call Report. The trade association expressed concern

that the establishment of a reporting threshold for reporting certain

data on these loans would be ``a de facto concentration limit above

which heightened regulatory scrutiny could be implied for such loans.''

This ``would be inconsistent with the Interagency Guidance.'' As a

consequence, the trade association suggested eliminating the entire

proposed reporting requirement for negatively amortizing residential

mortgage loans. Alternatively, if the proposed reporting requirement

were to be retained, the trade association recommended eliminating the

reporting threshold for the three additional items and requiring all

banks to report these items.

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\4\ See 71 FR 58609, October 4, 2006.

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The banking agencies have considered these comments that focus on

the reporting threshold. The intent of the proposal to establish a

reporting threshold for certain additional data on negatively

amortizing residential mortgage loans was not to establish

concentration limits for these mortgage products. Rather, as the

agencies noted in their proposal, they currently ``have no readily

available means of identifying the industry's exposure'' to these

products, which led them to propose to collect certain data to assist

them in ``monitor[ing] the extent of use of negatively amortizing

residential mortgage loans in the industry.'' Thus, the reporting of

data on these mortgages is intended to support agency analysis at both

the institution level and the industry level. The threshold for

reporting additional data on negatively amortizing residential mortgage

loans that are present at an institution in a significant volume was

designed to limit the reporting burden on institutions, particularly

small banks, with a nominal volume of these loans. A threshold based

solely on a percentage of total loans and leases would not enable the

banking agencies to gain an industry perspective on the amount of

remaining contractually permitted negative amortization, capitalized

negative amortization, and noncash income from negative amortization

and how they relate to the amount of negatively amortizing residential

mortgages. Therefore, the banking agencies will

[[Page 7127]]

proceed with a reporting threshold for the three additional data items

that incorporates both a dollar amount test and a percentage test. More

specifically, banks would report the three additional data items

pertaining to their negatively amortizing residential mortgages if the

amount of these mortgages exceeds the lesser of $100 million or 5

percent of their total loans and leases (in domestic offices), both

held for sale and held for investment.

The data processing servicer commented on the proposed March 31,

2007, effective date for reporting this information. The servicer

observed that the end of the proposal's comment period is less than 90

days before this effective date, while it typically needs a minimum of

180 days to implement programming changes after requirements are

finalized. As a consequence, the servicer stated that it would not be

able to commit to completing the programming, testing, and

implementation of changes to its mortgage software by March 31, 2007,

to enable its client banks to report the proposed information on

negatively amortizing residential mortgages.

The Interagency Guidance on Nontraditional Mortgage Product Risks

indicates that management information and reporting systems ``should

allow management to detect changes in the risk profile of its

nontraditional mortgage loan portfolio. The structure and content

should allow the isolation of key loan products, risk-layering loan

features, and borrower characteristics.'' The guidance further provides

that ``[a]t a minimum, information should be available by loan type,''

such as for the closed-end residential mortgage loans with negative

amortization features that are the subject of this Call Report

proposal, and ``by borrower performance (e.g., payment patterns,

delinquencies, interest accruals, and negative amortization).'' These

risk management expectations for information systems were set forth

approximately 180 days before the March 31, 2007, effective date of the

proposed Call Report items for negatively amortizing residential

mortgages. In addition, as previously mentioned, for the March 31,

2007, report date, banks may provide reasonable estimates for these new

Call Report items if the requested information is not readily

available.

E. Call Report Instructional Clarification for Servicing of Loan

Participations

Banks report the outstanding principal balance of loans and other

assets serviced for others in Memorandum items 2.a, 2.b, and 2.c of

Schedule RC-S, ``Servicing, Securitization, and Asset Sale

Activities.'' The instructions for these Memorandum items do not

explicitly state whether a bank that has sold a participation in a loan

or other financial asset, which it continues to service, should include

the servicing in Memorandum item 2.a, 2.b, or 2.c, as appropriate.

Because the absence of clear instructional guidance has resulted in

questions from bankers and has produced diversity in practice among

banks, the banking agencies propose to clarify the instructions to

these Schedule RC-S Memorandum items to explicitly state that the

amount of loan participations serviced for others should be included in

these items. The banking agencies received no comments specifically

addressing this instructional clarification, which will be implemented

as proposed.

III. Other Matters

Section 601 of the Financial Services Regulatory Relief Act of 2006

(Relief Act) removed several statutory reporting requirements relating

to insider lending by banks and savings associations. One of these

amendments, which became effective on October 13, 2006, eliminated the

requirement that an institution include a separate report with its Call

Report or TFR each quarter on any extensions of credit the institution

has made to its executive officers since the date of its last Call

Report or TFR.\5\ Accordingly, institutions were no longer required to

report on such extensions of credit beginning December 31, 2006, and

the ``Special Report'' on loans to executive officers, which has been

included with the Call Report and TFR in previous quarters, is being

discontinued. Because the reporting burden of this ``Special Report''

has been included in the burden for the Call Report and TFR information

collections, the agencies have adjusted the burden of these collections

in response to this statutory change and the elimination of the

reporting requirement.

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\5\ In keeping with the Relief Act, the Board amended Regulation

O (12 CFR part 215) to eliminate the insider loan reporting

requirements addressed in Section 601, effective December 11, 2006

(71 FR 71472, December 11, 2006). The FDIC repealed Part 349 of its

regulations (12 CFR part 349), which covered certain insider loan

reporting requirements addressed in Section 601, effective December

22, 2006 (71 FR 78337, December 29, 2006). The OCC's regulations (12

CFR part 31) and the OTS's regulations (12 CFR part 563) incorporate

Regulation O by reference and, therefore, do not require amendment.

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To improve the timeliness with which Call Report data become

available to the public, the banking agencies will start posting

individual bank data on the Internet earlier than in the past. This

change will occur in conjunction with the implementation of the FFIEC's

Central Data Repository Public Data Distribution (CDR PDD) site as the

Web site for obtaining individual bank Call Report data. At present,

individual bank Call Reports for which the analyses have been completed

are released to the public beginning the third Friday after the report

date (e.g., January 19, 2007, for the December 31, 2006, report) and

additional bank reports are posted each Friday thereafter. Beginning

with the March 31, 2007, report, the banking agencies plan to begin

posting individual bank Call Report data on the CDR PDD Web site 15

calendar days after the report date (e.g., April 15, 2007). However, no

individual bank data will be posted until 72 hours after that data has

been accepted by the banking agencies and is incorporated within the

Central Data Repository.

IV. Request for Comment

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

Comments are invited on:

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

collections of information are necessary for the proper performance of

the agencies' functions, including whether the information has

practical utility;

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

information collections as they are proposed to be revised, including

the validity of the methodology and assumptions used;

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

information to be collected;

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

respondents, including through the use of automated collection

techniques or other forms of information technology; and

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

maintenance, and purchase of services to provide information.

Comments submitted in response to this joint notice will be shared

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

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

record.

[[Page 7128]]

Dated: February 8, 2007.

Stuart E. Feldstein,

Assistant Director, Legislative and Regulatory Activities Division,

Office of the Comptroller of the Currency.

Board of Governors of the Federal Reserve System, February 5,

2007.

Jennifer J. Johnson,

Secretary of the Board.

Dated at Washington, DC, this 2nd day of February, 2007.

Federal Deposit Insurance Corporation.

Valerie J. Best,

Assistant Executive Secretary.

Dated: January 31, 2007.

Deborah Dakin,

Senior Deputy Chief Counsel, Regulations and Legislation Division,

Office of Thrift Supervision.

[FR Doc. 07-677 Filed 2-13-07; 8:45 am]

BILLING CODE 4810-33-P