Revisions to the Reports of Condition and Income (Call Report) for 1998
The Federal Financial Institutions Examination Council (FFIEC) has approved a few revisions to the reporting requirements for the Reports of Condition and Income (Call Report) for 1998. The FFIEC is providing this advance notification to assist you in planning for these upcoming Call Report changes. The changes must be approved by the U.S. Office of Management and Budget (OMB) before they can become final.
On October 2, 1997, the federal banking agencies issued for public comment proposed Call Report revisions for 1998. The revisions approved by the FFIEC, which are described in the attached document, incorporate modifications to the proposal that were prompted by comments. The revisions for 1998 include:
Reducing the frequency for reporting "preferred deposits" in the deposit schedule from quarterly to annually for all banks, and reducing the level of detail in the trading assets and liabilities schedule filed by larger banks;
Adding new items for reporting low level recourse transactions and, for larger banks, capital requirements for market risk;
Changing the reporting basis used for reporting holdings of available-for-sale securities in the domestic office assets and liabilities schedule completed by banks with foreign offices;
Clarifying the reporting requirements relating to allowances and provisions for credit losses;
Modifying the categorization of securitized consumer loans for the purchase of certain types of vehicles in two items collected annually from larger banks; and
Conforming the categorization of
industrial development bonds on the Call Report balance sheet
with a bank's other public reporting.
These Call Report revisions will take effect as of the March 31, 1998, report date. In that Call Report, banks may report a reasonable estimate for any new or revised item for which the requested information is not readily available.
Banks are reminded that the effective date for those provisions of Financial Accounting Standards Board Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," addressing the accounting for collateral and secured borrowings, repurchase agreements, dollar-rolls, securities lending, and similar transactions was deferred until January 1, 1998. For Call Report purposes, banks must apply the provisions of
Statement No. 125 to transactions of these types that occur after December 31, 1997. Banks are encouraged to consult with their outside accountants for assistance in implementing Statement No. 125.
Please forward this letter to the person responsible for preparing Call Reports at your bank. For more information or assistance, national banks and FDIC-supervised banks may contact the FDIC's Call Reports Analysis Section in Washington, DC, toll-free on 1-800-688-3342 or 202-898-6607. Assistance is provided Monday through Friday between 8:00 a.m. and 5:00 p.m. Eastern time. State member banks may contact their district Federal Reserve Bank.
Joe M. Cleaver
Attachment: REVISIONS TO THE REPORTS OF CONDITION AND INCOME (CALL REPORT) FOR 1998 (Available electronically on the FDIC's web site at /banknews
Distribution: Insured Commercial Banks and FDIC-Supervised Savings Banks
The FFIEC will revise the Call Report instructions to give banks the option of reporting their low level recourse exposures in Schedule RC-R under either the gross-up or direct reduction method. In conjunction with this change, new item 3.e will be added to Schedule RC-R for the "Maximum contractual dollar amount of recourse exposure in low level recourse transactions." The reporting of this information will enable the banking agencies to verify the capital and risk-weighted asset amounts reported in item 3 by banks choosing the direct reduction method. Banks applying the direct reduction method on Schedule RC-R would include in item 8 any on-balance sheet asset amounts that represent low level recourse exposures. Banks preferring to report their low level recourse exposures under the gross-up method may continue to do so and would report a zero in new item 3.e.
Capital Requirements for Market Risk (FFIEC 031 and 032 only)
In 1996, the banking agencies amended their risk-based capital standards to require banks with substantial trading activity to hold capital based on their market risk exposure. This new rule applies to banks with either (1) total trading assets and trading liabilities of at least $1 billion or (2) total trading assets and trading liabilities in excess of 10 percent of total assets. The rule took effect on January 1, 1998, for all banks meeting these criteria except those exempted by their supervisory agency. The market risk rule supplements the risk-based capital ratio calculations that focus principally on credit risk and adjusts both the risk-based capital ratio denominator and numerator. These adjustments involve "market risk equivalent assets" for the denominator and "Tier 3 capital" for the numerator.
To enable the agencies and other users of the Call Report to calculate the risk-based capital ratios of those banks subject to the market risk rule, new subitems for "market risk equivalent assets" and "Tier 3 capital" will be added to Schedule RC-R, item 3, "Amounts used in calculating regulatory capital ratios." These new subitems are for the FFIEC 031 and 032 report forms only.
In addition, the FFIEC will revise the instructions for items 4 through 7 of Schedule RC-R, which are the items in which banks report their assets and the credit equivalent amounts of their off-balance sheet items by risk weight category. The FFIEC also will revise the instruction for item 8, "On-balance sheet asset values excluded from and deducted in the calculation of the risk-based capital ratio." As revised, the instructions will tell banks that are subject to the market risk rule to exclude from items 4 through 7 the amounts of their "covered positions" (except foreign exchange positions outside the trading account and over-the-counter derivative positions which must be included in risk-weighted assets). Banks will report the amounts of those "covered positions" that are on-balance sheet assets in item 8. "Covered positions" are all positions in a bank's trading account, and all foreign exchange and commodity positions, whether or not in the trading account.
Reporting by Banks With Foreign Offices of Investment Securities Holdings in the Domestic Office Assets and Liabilities Schedule (FFIEC 031 only)
On the FFIEC 031 version of the Call Report forms, banks with foreign offices report a breakdown of the investment securities they hold in domestic offices by type of security in Schedule RC-H -- Selected Balance Sheet Items for Domestic Offices. These banks currently report their domestic office investment securities in Schedule RC-H on the same basis as they report these securities on the consolidated balance sheet (Schedule RC), i.e., held-to-maturity securities are reported at amortized cost while available-for-sale securities are reported at fair value. In the (consolidated) securities schedule (Schedule RC-B), banks report both the amortized cost and fair value of their held-to-maturity and available-for-sale securities.
The domestic office securities data reported in Schedule RC-H are used in analyses and comparisons which also include data on securities that are held domestically by nonbank sectors and reported on a cost basis. Therefore, banks with foreign offices will begin to report their investment securities held in domestic offices on a cost basis in items 10 through 17 of Schedule RC-H. This means that available-for-sale debt securities will be reflected in these schedule RC-H items at amortized cost rather than at fair value while equity securities will be included at historical cost.
This change will not affect how a bank reports its held-to-maturity and available-for-sale securities on the Call Report balance sheet (Schedule RC) or on the securities schedule (Schedule RC-B).
Schedule RC-H, FFIEC 031 only:
In items 10-17, report the amortized (historical) cost of both held-to-maturity and available-for-sale securities in domestic offices.
U.S. Treasury securities ($ . )
U.S. Government agency obligations (exclude mortgage-backed securities) ($ . )
Securities issued by states and political subdivisions in the U.S. ($ . )
Mortgage-backed securities (MBS):
Issued or guaranteed by FNMA, FHLMC, or GNMA ($ . )
($ . )
Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS):
Issued or guaranteed by FNMA, FHLMC, or GNMA ($ . )
All other mortgage-backed
($ . )
Other domestic debt securities ($ . )
Foreign debt securities ($ . )
Investments in mutual funds and other equity securities with readily determinable fair values ($ . )
All other equity
($ . )
Total amortized (historical) cost of both held-to-maturity and available-for-sale securities (sum of items 10 through 16) ($
Allowance for Credit Losses
The American Institute of Certified Public Accountants' Audit and Accounting Guide for Banks and Savings Institutions, issued as of April 1, 1996, requires the allocation on the balance sheet of the allowance for credit losses between on-balance sheet financial instruments and off-balance sheet credit exposures. Previously, these allowance components often were reported in the aggregate in the allowance for loan and lease losses (ALLL).
During 1997, the FFIEC advised banks to allocate the allowance for credit losses on Schedule RC -- Balance Sheet consistent with their allocation methodology for other financial reporting purposes. For example, portions of the allowance related to off-balance sheet credit exposures that are reported as liabilities are to be included in Schedule RC, item 20, "Other liabilities," and in item 4 of Schedule RC-G -- Other Liabilities. Banks also were advised to aggregate these components of the allowance for credit losses when completing Schedule RI-B, part II -- Changes in Allowance for Loan and Lease Losses. Institutions have been encouraged to disclose the amounts of these components in Schedule RI-E, item 9, "Other explanations."
The FFIEC is retaining this method of reporting the allowance for credit losses. Therefore, Schedule RI-B, part II, will be retitled Changes in Allowance for Credit Losses, and item 4.a of Schedule RI -- Income Statement will be recaptioned "Provision for credit losses." However, Schedule RI-B, part I -- Charge-offs and Recoveries on Loans and Leases will not be changed. In part I, banks will continue to disclose only their loan and lease charge-offs and recoveries.
Net interest income (item 1.g minus 2.f) ($ . )
Provision for credit losses ($ . )
Provision for allocated
($ . )
Part II. Changes in Allowance for Credit Losses
Balance originally reported in the December 31, 1997, Reports of Condition and Income ($ . )
Recoveries (must equal or exceed part I, item 6, column B above) ($ . )
LESS: Charge-offs (must equal or exceed part I, item 6, column A above) ($ . )
Adjustments (see instructions for this schedule) ($ . )
Balance end of current period (sum
of items 1 through 5) (must equal or exceed Schedule RC,
item 4.b) ($
Under the reporting standards in effect prior to the effective date of the revised audit and accounting guide, banks had included all of the portion of the allowance related to off-balance sheet credit exposures in Tier 2 capital for risk-based capital purposes, subject to specified limits. This regulatory capital treatment remains in effect under the new reporting standards set forth in the revised audit and accounting guide.
Reporting of Securitized Consumer Loans for Vehicle Purchases (FFIEC 031 and 032 only)
On the FFIEC 031 and 032 versions of the Call Report forms, banks report annually as of September 30 the amount of their securitized consumer installment loans to purchase private passenger automobiles and the amount of all other securitized consumer installment loans (excluding credit cards and related plans) in Schedule RC-L, Memorandum items 5.a and 5.c, respectively. According to the current instructions for these items, consumer loans for the purchase of pickup trucks and vans go in the "all other" category rather than the "private passenger automobiles" category.
After reviewing the manner in which these data are used for analyzing consumer credit markets, the FFIEC has determined that securitized consumer loans for the purchase of pickup trucks, other light trucks, and vans for personal use should go in the "private passenger automobiles" category. The instructions for Memorandum item 5.a will be revised so that banks can begin to include securitized consumer loans to purchase vans and light trucks (such as pickup trucks) for personal use in this item rather than in Memorandum item 5.c. In addition, the word "installment" will be removed from the captions and instructions throughout Memorandum item 5.
Schedule RC-L, Memoranda, FFIEC 031 and 032 only:
Loans to individuals for household, family, and other personal expenditures that have been securitized and sold (with servicing retained), amounts outstanding by type of loan:
Loans to purchase private passenger automobiles (to be completed for the September report only) ($ . )
Credit cards and related plans (to be completed quarterly) ($ . )
All other consumer credit
(including mobile home loans) (to be completed for the
September report only)
($ . )
Categorization of Industrial Development Bonds on the Balance Sheet
Industrial development bonds (IDBs), sometimes referred to as "industrial revenue bonds," are typically issued by local industrial development authorities to benefit private commercial and industrial development. The Call Report instructions currently require all IDBs that are rated by a nationally-recognized rating service to be reported as securities in item 3.c of Schedule RC-B -- Securities. The instructions also state that nonrated IDBs that meet the definition of a "security" in Financial Accounting Standards Board (FASB) Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities," must be measured in accordance with Statement No. 115.
Unless a bank chooses to review the characteristics of each nonrated IDB it holds, the bank must report its nonrated IDBs as loans in Schedule RC-C -- Loans and Lease Financing Receivables. If a bank decides to review each nonrated IDB, those with more of the characteristics of a security are to be reported in Schedule RC-B while those with more of the characteristics of a loan are to be reported in Schedule RC-C.
In order to achieve greater consistency between a bank's Call Reports and its other public financial statements and to reduce reporting burden, the Call report instructions governing the treatment of IDBs will be revised. As revised, the instructions will indicate that IDBs (both rated and nonrated) should be reported as securities in Schedule RC-B or as loans in Schedule RC-C, consistent with the manner in which the bank reports IDBs on the balance sheet for other financial reporting purposes. All IDBs that meet the definition of a "security" in FASB Statement No. 115 must continue to be measured in accordance with Statement No. 115.