FDIC Federal Register Citations

[Federal Register: September 25, 2006 (Volume 71, Number 185)]

[Notices]

[Page 55981-55986]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr25se06-68]

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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. 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. The Federal Financial Institutions Examination

Council (FFIEC), of which the agencies are members, has approved the

agencies' publication for public comment of proposed 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. The proposal describes the scope of reporting and

the proposed reporting requirements. At the end of the comment period,

the comments and recommendations received will be analyzed to determine

the extent to which the FFIEC should modify the proposed reporting

requirements prior to giving its final approval. The agencies will then

submit the proposed reporting requirements to OMB for review and

approval and, upon approval, OMB will assign control numbers.

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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 proposed

regulatory text in the notice of proposed rulemaking entitled Risk-

Based Capital Standards: Advanced Capital Adequacy Framework.

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DATES: Comments must be received on or before January 23, 2007.

ADDRESSES: Interested parties are invited to submit written comments to

any or all of the agencies. All comments will be shared among the

agencies.

OCC: You may submit comments, identified by ``OMB Control No. 1557-

NEW,'' by any of the following methods:

E-mail: regs.comments@occ.treas.gov. Include ``OMB Control

No. 1557-NEW'' in the subject line of the message.

Fax: (202) 874-4448.

Mail: Public Information Room, Office of the Comptroller

of the Currency, 250 E Street, SW., Mailstop 1-5, Washington, DC 20219;

Attention: OMB Control No. 1557-NEW.

Public Inspection: You may inspect and photocopy comments at the

Public Information Room. You can make an appointment to inspect the

comments by calling (202) 874-5043.

Board: You may submit comments, which should refer to ``Advanced

Capital Adequacy Framework Regulatory Reporting Requirements,'' 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

``Advanced Capital Adequacy Framework Regulatory Reporting

Requirements'' 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 ``Advanced

Capital Adequacy Framework Regulatory Reporting Requirements,'' by any

of the following methods:

http://www.FDIC.gov/regulations/laws/federal/notices.html.

E-mail: comments@fdic.gov. Include ``Advanced Capital

Adequacy Framework Regulatory Reporting Requirements'' in the subject

line of the message.

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

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

NW., Washington, DC 20429.

Hand Delivery: Comments may be hand delivered to the guard

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

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

Public Inspection: All comments received will be posted without

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

including any personal information provided. Comments may be inspected

at the FDIC Public Information Center, Room E-1002, 3502 North Fairfax

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

OTS: You may submit comments, identified by ``Advanced Capital

Adequacy Framework Regulatory Reporting Requirements (1550-NEW),'' 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 ``Advanced Capital Adequacy Framework Regulatory

Reporting Requirements (1550-NEW)'' 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: ``Advanced Capital Adequacy Framework Regulatory

Reporting Requirements (1550-NEW).''

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:

``Advanced Capital Adequacy Framework Regulatory Reporting Requirements

(1550-NEW).''

Instructions: All submissions received must include the agency name

and ``Advanced Capital Adequacy Framework Regulatory Reporting

Requirements (1550-NEW).'' All

[[Page 55982]]

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.

A copy of the comments may also be submitted 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 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 at each agency's Web site as well as the FFIEC's Web

site.\2\

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\2\ For the OCC: http://www.occ.treas.gov; for the FDIC: http://www.fdic.gov;

for the OTS: http://www.ots.treas.gov; for the Board:

http://www.federalreserve.gov/[fxsp0]boarddocs/reportforms/[fxsp0]review.cfm;

and for the FFIEC: http://www.ffiec.gov/

[fxsp0]ffiec--report[fxsp0]--forms.htm.

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OCC: Please direct substantive questions to Lorey Hoffman, Large

Bank Director, Large Bank Supervision, (202) 874-4595, and requests for

copies of the collection to 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 Long, Federal Reserve Board Clearance Officer,

Division of Research and Statistics, Board of Governors of the Federal

Reserve System, Washington, DC 20551 (202-452-3829).

FDIC: Steven F. Hanft, Clearance Officer, at shanft@fdic.gov, (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 implement the

following new information collections.

Report Title: Advanced Capital Adequacy Framework Regulatory

Reporting Requirements.

Form Numbers: 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: 280 hours.

Estimated Total Annual Burden: 58,240 hours.

Board

OMB Number: 7100-NEW.

Estimated Number of Respondents: 6 state member banks.

Estimated Time per Response: 280 hours.

Estimated Total Annual Burden: 6,720 hours.

OMB Number: 7100-NEW.

Estimated Number of Respondents: 15 BHCs.

Estimated Time per Response: 280 hours.

Estimated Total Annual Burden: 16,800 hours.

FDIC

OMB Number: 3064-NEW.

Estimated Number of Respondents: 19 state nonmember banks.

Estimated Time per Response: 280 hours.

Estimated Total Annual Burden: 21,280 hours.

OTS

OMB Number: 1550-NEW.

Estimated Number of Respondents: 5 savings associations.

Estimated Time per Response: 280 hours.

Estimated Total Annual Burden: 5,600 hours.

General Description of Reports

These information collections would be 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). These information collections would be given

confidential treatment (5 U.S.C. 552(b)(4)) except for selected data

items to be released for data collected from a reporting entity during

periods subsequent to its parallel run period (Schedules A and B, and

data items 1-7 of Schedule V).

Abstract

Each bank that qualifies for and applies the advanced internal

ratings-based approach for credit risk and the advanced measurement

approach for operational risk would file quarterly regulatory data for

the agencies' use in assessing and monitoring 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. These data also would support the agencies' efforts to

evaluate the quantitative impact and competitive implications of the

Advanced Capital Adequacy Framework on individual reporting entities

and on an industry-wide basis. The reporting schedules would also

assist banks in understanding expectations surrounding the system

development necessary for implementation and validation of the Advanced

Capital Adequacy Framework. The submitted data that is released

publicly would also provide other interested parties with information

about banks' risk-based capital. In addition, the submitted data would

supplement on-site examination processes.

Current Actions; Risk-Based Capital Standards: Advanced Capital

Adequacy Framework: Regulatory Reporting Requirements

I. Background

The agencies have today published a joint notice of proposed

rulemaking entitled Risk-Based Capital Standards: Advanced Capital

Adequacy Framework (the NPR).\3\ The NPR describes a new regulatory

capital framework for U.S. banks that qualify for and adopt the

advanced internal ratings-based (AIRB) approach for credit risk and the

advanced measurement approach (AMA) for operational risk (together, the

advanced approaches). Included within the NPR are requirements for

public

[[Page 55983]]

disclosure of certain information at the consolidated banking

organization level as well as a reference to certain additional

regulatory reporting requirements for depository institutions (DIs) and

BHCs. The additional regulatory reporting requirements referenced

within the NPR, and described more fully herein, comprise the agencies'

proposed regulatory reporting requirements.

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\3\ Terms used in this text and in the proposed regulatory

reporting schedules and instructions are used as defined in the NPR.

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The agencies, all of which would have access to both the public and

confidential data submitted in these schedules by each bank, would use

the data collected through this proposal to:

Assess the components of each bank's risk-based capital

requirements;

Assess each bank's capital relative to inherent risks and

the agencies' minimum capital requirements;

Monitor the levels and components of the risk-based

capital requirements for banks through peer, outlier, and risk trend

analyses;

Evaluate the quantitative impact and competitive

implications of the implementation of the Advanced Capital Adequacy

Framework on risk-based capital levels within reporting banks and on an

overall industry basis;

Provide market participants, depositors, the public,

supervisors, and other interested parties with information about banks'

risk-based capital; and

Supplement on-site examination processes and decisions

pertaining to the allocation of supervisory resources.

In addition, this proposal would assist supervised institutions in

understanding expectations surrounding the system development necessary

for implementation and validation of the Advanced Capital Adequacy

Framework.

The agencies require the ability to monitor and assess individual

banks' conformance with capital adequacy standards and understand the

capital resulting from the implementation of the Advanced Capital

Adequacy Framework. The current regulatory capital data submitted by

banks would not provide relevant information regarding risk-based

capital under the Advanced Capital Adequacy Framework. As a result, the

agencies outline in this notice their proposed changes in regulatory

capital reporting for banks using the Advanced Capital Adequacy

Framework within the United States. Because the NPR includes

transitional arrangements that involve capital floors linked to the

general risk-based capital rules (as defined in the NPR), the agencies

believe it is necessary to require data submissions under both the

general risk-based capital rules and advanced risk-based capital

frameworks for as long as a bank is subject to risk-based capital

floors.

As noted in the NPR, the agencies intend to conduct analyses to

gauge the impact of the Advanced Capital Adequacy Framework, and the

preparedness of banks to compute risk-based capital consistent with

those requirements, during the parallel run and transitional floor

periods. Data submitted through this proposal, combined with dual

reporting requirements for the general risk-based capital data,\4\

would provide quantitative support for these impact analyses. Such

analyses would also help the agencies evaluate the competitive and

cyclical implications of the Advanced Capital Adequacy Framework

relative to capital requirements for banks subject to the general risk-

based capital rules and the adequacy of capital generated under the

Advanced Capital Adequacy Framework.

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\4\ 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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A bank that applies the proposed advanced approaches would

generally use its internal risk measurement systems to estimate risk

parameters for credit risk exposures and to estimate operational risk

exposure. The bank would use specific risk-based capital formulas to

transform the risk parameters into risk-weighted asset amounts for each

wholesale credit exposure and segment of retail credit exposures. For

each wholesale credit exposure and segment of retail credit exposures,

a bank would assign three quantitative risk parameter estimates:

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; and 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. For each wholesale credit exposure,

the bank would also determine effective maturity (M), which is measured

in years and reflects the effective remaining maturity of the exposure.

These risk parameters are the drivers of the bank's regulatory capital

requirement for wholesale and retail credit exposures and the focus of

much of the proposed regulatory reporting.

Under the advanced approaches, a bank would employ simple risk

weights to determine regulatory capital requirements for certain equity

and securitization exposures, and may use internal models to determine

regulatory capital requirements for other equity and securitization

exposures, as well as for operational risk. The associated proposed

regulatory reporting schedules primarily relate to data on inputs to

and outputs from these internal models and risk-weight functions.

Under the advanced approaches, a bank would use its internal

systems and processes to assess its exposure to operational risk. The

proposed operational risk reporting schedule would capture some of the

critical inputs used by the bank to estimate its operational risk

exposure.

The agencies believe it is necessary to develop surveillance tools

to assist in monitoring banks' risk-based capital measures. Such

surveillance tools include the ability to perform bank-to-bank

comparisons of the risk-based capital drivers underlying banks' capital

measures, the ability to identify potential outliers through bank-to-

peer comparisons, and the ability to monitor banks' capital measures

over time relative to trends in other risk indicators.

The agencies believe that certain information about banks' risk-

based capital calculations that would be submitted under this proposal

should be publicly available to market participants and that such

disclosures at the bank level are consistent with the agencies'

objectives of promoting market discipline as described in part VII of

the preamble of the NPR. The agencies intend that the public data items

contained within this proposal would provide market participants with

basic, summary-level standardized information about the main components

of banks' risk-based capital requirements. The standardized regulatory

reporting information that would be available to the public should

augment the disclosures required for other public financial reporting

purposes.

As is true for any off-site surveillance system, the collection of

advanced risk-based capital data is unlikely to capture the full range

and complexity of bank activities. As a result, the agencies recognize

that it will often not be possible to draw definitive conclusions from

an analysis of data submissions without further follow-up through on-

site supervisory activities. Nevertheless, the agencies believe that

off-site

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analyses of the data described in this proposal would be helpful in

focusing the activities of on-site examiners and deploying supervisory

resources most effectively.

In developing this proposal, the agencies weighed several

considerations. The factors the agencies considered included several

trade-offs between reporting burden and the information needs of bank

supervisors and market participants (for example, the level of

reporting granularity necessary to produce meaningful comparisons of

portfolio-level risks while minimizing reporting compliance costs and

the potential for collected information to promote more informed

decisions by market participants against the sensitive and confidential

nature of risk estimates embedded within the advanced approaches). The

agencies have also tried to anticipate and include data that meet their

long-term data needs because comprehensive requests for data at the

inception of a new reporting regime typically would be less costly to

reporting institutions than the addition of items at a later date. The

agencies believe this proposal appropriately balances these, and other,

competing considerations.

The agencies are publishing the NPR and the regulatory reporting

proposal described herein at the same time as their notice of proposed

rulemaking for the Market Risk Framework and its associated regulatory

reporting proposal so that the industry, and other interested parties,

may assess the full impact of the proposed rules. Part of this

assessment includes an understanding of the requirements of compliant

data systems, including the ability to produce certain high-level

capital information for the public and more detailed, but still

aggregated, summary information about each bank's capital risk

estimates to augment supervisory processes.

II. Scope and Frequency of Reporting

The proposed regulatory reporting requirements associated with the

NPR described herein would apply, on a consolidated basis, to each BHC

and each DI that qualifies for and applies the advanced approaches (see

Part I, Section 1, of the proposed regulatory text in the NPR for a

detailed description of the institutions covered by this notice) as

well as to those banks in the parallel run stage of qualifying to use

the advanced approaches (see Part III, Section 21(c) of the proposed

regulatory text in the NPR). Reporting BHCs and DIs would submit data

quarterly because efforts to monitor banks' progress toward, and

actions under, the Advanced Capital Adequacy Framework require regular

and consistent reports from all of the institutions adopting this

framework.

The agencies expect that the report due dates for the proposal

described herein would be the same as the report due dates currently

required of banks, savings associations, and BHCs when filing their

respective Call Report, TFR, or BHC FR Y-9C report. In addition, the

agencies expect all banks to meet the existing reporting standards for

accuracy and other requirements as currently mandated by their primary

Federal supervisor.

The first reporting period for Schedules A through V for each

reporting entity seeking to qualify for the advanced approaches would

correspond to the first quarter of its parallel run period. All data

collected from each reporting entity on Schedules A through V,

including those data items identified as public data items below, would

remain confidential during the entity's parallel run period. The data

items identified below as public data elements would be available to

the public for each reporting entity for data collected during

reporting periods subsequent to the entity's parallel run period.

Reporting banks would be required to submit capital information

under both this reporting proposal and under the existing risk-based

capital reporting requirements during both the relevant parallel run

period and subsequent transitional floor periods.\5\ The purpose of

this dual reporting requirement is threefold: (1) It would facilitate

dialogue between supervisors and banks as banks bring their systems and

data into compliance with supervisory expectations; (2) it would allow

the agencies to monitor and ensure compliance with existing risk-based

capital rules during the parallel run period and with those rules that

would be in effect during subsequent transitional floor periods; and

(3) it would aid in supervisors' development of comparisons of risk-

based capital results between the Advanced Capital Adequacy Framework

and the existing risk-based capital frameworks for individual

institutions and for the banking industry in the aggregate.

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\5\ See footnote 4.

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III. Overview of the Data Collection Proposal

The agencies believe that banks would produce the data necessary to

support supervisory analyses as part of their calculation of regulatory

capital requirements. Accordingly, the regulatory reporting proposal

requires certain data that would be publicly available and other data

that would not be publicly available. Although this reporting proposal

has not been designed to satisfy the NPR's Pillar 3 public disclosure

requirements, banks may be able to use certain data items submitted

through this proposal to help satisfy certain public disclosure

requirements established in the Advanced Capital Adequacy Framework.

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

Approaches

Regulatory reporting disclosures that would be publicly available

for data collected from a reporting bank during periods subsequent to

its parallel run period comprise various aggregated portfolio drivers

of reporting banks' risk-based capital levels. The intent of these

disclosures is to provide market participants, depositors, supervisors,

the public, and other interested parties with a sufficient level of

detail (comparable, in principle, to risk-based capital information

collected currently) about banks' major capital and risk-weighted asset

components as well as summary information about the composition of

regulatory capital and the risk parameters that underlie risk-weighted

asset calculations.

Proposed Schedules A and B (and data items 1-7 of proposed Schedule

V, Operational Risk) show the data items that would be publicly

available for each reporting entity for reporting periods subsequent to

its parallel run period. Schedule A contains information about the

components of Tier 1 capital, Tier 2 capital, and adjustments to

regulatory capital as defined within the NPR.\6\ Schedule B contains

summary information about risk-weighted assets by risk type, and, in

the case of credit risk exposures, outstanding balances and aggregated

information about the drivers and

[[Page 55985]]

estimates that underlie the calculation of risk-weighted assets. The

general exposure breakdowns in Schedule B are as follows: Wholesale

Exposures (including separate reporting for the following types of

exposures: Corporate; Bank; Sovereign; Construction Income Producing

Real Estate; High Volatility Commercial Real Estate; Income Producing

Real Estate; Eligible Margin Loans, Repo-Style Transactions, and OTC

Derivatives with Cross Product Netting; Eligible Margin Loans, Repo-

Style Transactions, and OTC Derivatives without Cross Product Netting);

Retail Exposures (including separate reporting for the following types

of exposures: Residential Mortgage Closed-end First Liens, Residential

Mortgage Closed-end Junior Liens, Residential Mortgage Revolving

Exposures, Qualifying Revolving Exposures Credit Cards, Qualifying

Revolving Exposures All Other, Other Retail Small Business, and Other

Retail All Other); Securitization Exposures; Equity Exposures; and

Operational Risk. The aggregate data items submitted in Schedule B are

derived from information contained in the more detailed confidential

supporting schedules described below. The exposures and risk parameters

used to calculate these aggregations would apply the definitions

contained in the NPR. The data contained in Schedule B describe the

main summary-level components of banks' risk-weighted assets, but would

not allow users to exactly replicate banks' risk-weighted asset

calculations since the data are averaged, weighted, and rounded.

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\6\ One version of Schedule A would apply to banks and BHCs and

another version of Schedule A would apply to savings associations.

The version for banks and BHCs is modeled after the portion of the

Call Report and BHC FR Y-9C report used to capture information on

the components of and adjustments to Tier 1 and Tier 2 capital under

the existing risk-based capital standards. Similarly, the version of

Schedule A for savings associations is modeled after the portion of

the TFR used to capture such information under the existing

standards. In addition, to the extent the information collected in

the Call Report, BHC FR Y-9C report, and TFR on the components of

and adjustments to Tier 1 and Tier 2 capital under the existing

standards is revised, e.g., for changes in the fair value of

liabilities to which a fair value option is applied that are

attributable to changes in a reporting entity's own

creditworthiness, corresponding revisions would be made to Schedule

A.

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

Approaches

The confidential data submitted in these schedules by each bank

would be shared among the four agencies but would not be released to

the public. Data items that would not be publicly available comprise

additional, but still aggregated, detail about the main data items and

drivers of reporting banks' risk-based capital levels. With respect to

credit portfolios, the focus of these more detailed reports is to

collect information at the level of supervisory PD bands that broadly

reflect risk segments within each portfolio. The proposed reports would

enable supervisors to conduct off-site assessments of banks' regulatory

capital calculations, perform trend analyses of capital changes,

conduct peer analyses of capital and risk parameters, and focus on-site

examination efforts.

The data items contained in Schedules C through V describe the main

components of banks' risk-weighted assets and are essentially expanded

detail of the more summary information contained in the public data

items shown in Schedule B. The data submitted in these schedules would

not be made available to the public (except for data items 1-7 of

Schedule V, Operational Risk, which are proposed to become public

information for each reporting entity for data collected during periods

subsequent to its parallel run reporting period). Supervisors are

requesting these data to support comparisons of certain critical

capital drivers across banks and across time. For the reasons cited

previously, however, the information contained in the columns of the

tables would not allow users to exactly replicate banks' risk-weighted

asset calculations.

A brief description of the content of Schedules C through V

follows. As with the publicly available information described above,

the exposures and risk parameters used to calculate these aggregations

would apply the definitions contained in the NPR.

Wholesale Exposures

Schedules C through K show data items within the wholesale exposure

category that would be submitted under this proposal. Each schedule

represents a sub-portfolio of the wholesale exposure category as listed

on the public Schedule B. For each reported sub-portfolio, the schedule

groups exposures into sub-portfolio segments using supervisor-defined

PD ranges. The reported cells within these schedules then describe the

main risk parameters and characteristics of each sub-portfolio segment.

Retail Exposures

Schedules L through R show data items within the retail exposure

category that would be submitted under this proposal. Again, each

schedule represents a sub-portfolio of the retail exposure category as

listed on the public Schedule B. PD ranges are used to sub-divide each

sub-portfolio into segments.\7\ The reported cells within these

schedules then describe the main risk parameters and characteristics of

each sub-portfolio segment. The retail schedules also incorporate risk

characteristics that are believed to be commonly used drivers within

banks' risk management and measurement processes, including the

distribution of each sub-portfolio segment by loan-to-value ranges

(applies only to real estate exposures), weighted average credit bureau

score, and weighted average account age.\8\

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\7\ Unlike the wholesale credit exposure reporting schedules,

the PD ranges for retail exposures differ from sub-portfolio to sub-

portfolio.

\8\ For qualifying and other non-mortgage retail exposures, the

EAD of accounts under two years old is reported instead of weighted

average age for each sub-portfolio exposure segment.

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Securitization Exposures

Schedules S and T show data items within the securitization

exposure class that would be submitted under this proposal. Schedule S

provides information by rating categories about exposures subject to

either the Ratings-Based Approach (RBA) or the Internal Assessment

Approach (IAA). Schedule T provides certain memoranda information about

unrated securitization exposures, exposures treated under the

Supervisory Formula Approach, synthetic securitizations, and risk-

weighted assets relating to early amortization features of

securitizations as prescribed in the NPR.\9\

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\9\ Amounts are further broken down by retail and non-retail.

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Equities

Schedule U provides information about a bank's equity exposures by

type of exposure and by approach to measuring required capital.

Schedule U also provides information on equity exposures subject to

specific risk weights and equity exposures to investment funds. A bank

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.

Operational Risk

Schedule V shows the data items within the operational risk

exposure class that banks would submit under this proposal. Data items

submitted in this schedule include various details about historical

operational losses, on a stand-alone and group-wide basis, for the

current reporting period and those 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.

IV. Request for Comment

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

The agencies wish to encourage banks and other interested parties to

comment on such matters as data availability, data alternatives, and

reporting thresholds for each proposal for new data. The agencies are

particularly interested in responses to the questions that follow

[[Page 55986]]

relating to certain key aspects of the proposal and potential data

collection alternatives.

(1) The agencies seek comment from the industry concerning the

feasibility of collecting certain additional information beyond that

described in this proposal. The purpose of this additional information

is to help identify the causes of changes in credit risk regulatory

capital requirements (for example, due to changes in exposure mix or

changes in the bank's assessment of risk).

To facilitate such analyses, reporting banks would be required to

submit additional data items that summarize current and previous risk

parameters for exposures that were in wholesale and retail credit

portfolios as of the previous reporting period (for example, prior

quarter, prior year)--the ``lookback'' portfolio. The intent of this

lookback-portfolio approach would be to allow the agencies to better

identify reasons for observed changes in regulatory credit risk capital

requirements and allow for peer comparisons of changes from period to

period.

A lookback-portfolio approach would require additional data

collection and processing. For example, banks would need to retain data

on the internal risk rating category to which each exposure was

previously assigned, and the previous EAD of each exposure. The

agencies believe that this data maintenance requirement is consistent

with supervisory expectations described in the NPR and proposed AIRB

guidance in that banks subject to the Advanced Capital Adequacy

Framework are expected to be able to evaluate and explain changes in

risk parameters in order to assess their risk parameter estimation

procedures.

The agencies specifically seek industry comment on the following

questions:

What aggregate summary information might banks submit that

best describes or characterizes period-to-period migration across

internal rating grades or retail segments?

If such information were required, are there particular

formats or other considerations that would reduce the reporting burden

for banks?

(2) The agencies are considering another alternative reporting

treatment with respect to the wholesale and retail portions of the

above proposal (Schedules C-R). This alternative treatment would

complement the lookback-portfolio approach just described but could be

implemented whether or not the lookback-portfolio approach was

implemented. Under this approach, banks would submit data according to

each of their internal obligor rating grades or segments, rather than

in the fixed bands defined in the current regulatory reporting

proposal. In this case, each reporting bank could submit a different

number of rows corresponding to the number of internal risk rating/

segmentation categories employed by that bank for the given portfolio.

The agencies specifically seek industry comment on the following

question:

Would reporting burden be lessened if banks submitted data

using internally-defined obligor grades or segments, rather than

aggregating the grades or segments in supervisory reporting bands?

(3) The agencies request comment on the appropriateness of making

the data items on Schedules A and B and data items 1 through 7 of the

operational risk reporting schedule (Schedule V) available to the

public for each reporting entity for data collected during periods

subsequent to its parallel run reporting periods as currently proposed.

Comments are requested on the extent to which banks are already

providing these data to the public or are planning to make such data

public as well as the timing of these disclosures. In addition,

comments are requested on the perceived risks associated with public

reporting of these data items.

(4) What changes in the proposed regulatory reporting requirements

for the Advanced Capital Adequacy Framework, including additional data

or definitions, would better assist the agencies in reaching their

stated goals? In this regard, the agencies also seek input on possible

alternative ways to capture the requested information and the

appropriateness of the requested data given the stated purposes of the

information collections and the associated reporting burden.

Paperwork Reduction Act

The agencies seek comment on:

(a) Whether the proposed 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 the 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.

Dated: September 6, 2006.

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, September 11,

2006.

Jennifer J. Johnson,

Secretary of the Board.

Dated at Washington, DC, this 8th day of September, 2006.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

Dated: September 7, 2006.

Deborah Dakin,

Senior Deputy Chief Counsel, Regulations and Legislation Division,

Office of Thrift Supervision.

[FR Doc. 06-7674 Filed 9-22-06; 8:45 am]

BILLING CODE 4810-33-P