[Federal Register Volume 61, Number 215 (Tuesday, November 5, 1996)]
[Notices]
[Pages 56957-56960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28357]


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FEDERAL RESERVE SYSTEM


Agency information collection activities: Proposed collection; 
Comment request

AGENCY: Board of Governors of the Federal Reserve System (Board)
ACTION: Notice and request for comment.
SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act of 1995 (44 U.S.C. chapter 35), the Board, the Federal Deposit 
Insurance Corporation (FDIC), and the Office of the Comptroller of the 
Currency (OCC) (the ``Agencies'') may

[[Page 56958]]

not conduct or sponsor, and the respondent is not required to respond 
to, an information collection that has been extended, revised, or 
implemented on or after October 1, 1995, unless it displays a currently 
valid Office of Management and Budget (OMB) control number. Proposed 
revisions to the following currently approved collections of 
information have received approval from the Federal Financial 
Institutions Examination Council (FFIEC), of which the Agencies are 
members, and are hereby published for comment by the Board on behalf of 
the Agencies. At the end of the comment period, the comments and 
recommendations received will be analyzed to determine the extent to 
which the proposed revisions should be modified prior to the Board's 
submission of them to OMB for review and approval. Comments are invited 
on: (a) whether the proposed revisions to the following 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' estimate 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; and 
(d) ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.
DATES: Comments must be submitted on or before January 6, 1997.
ADDRESSES: Interested parties are invited to submit written comments to 
the agency listed below. All comments should refer to the OMB control 
number.
    Written comments should be addressed to Mr. William W. Wiles, 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets, N.W., Washington, D.C. 20551, or delivered to the Board's mail 
room between 8:45 a.m. and 5:15 p.m., and to the security control room 
outside of those hours. Both the mail room and the security control 
room are accessible from the courtyard entrance on 20th Street between 
Constitution Avenue and C Street, N.W. Comments received may be 
inspected in room M-P-500 between 9:00 a.m. and 5:00 p.m., except as 
provided in section 261.8 of the Board's Rules Regarding Availability 
of Information, 12 CFR 261.8(a).
    A copy of the comments may also be submitted to the OMB desk 
officer for the Agencies: Alexander Hunt, Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 3208, Washington, D.C. 20503.
FOR FURTHER INFORMATION CONTACT: A copy of the proposed revisions to 
the collections of information may be requested from the agency 
clearance officers whose name appears below.
    Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829, 
Division of Research and Statistics, Board of Governors of the Federal 
Reserve System, 20th and C Streets, N.W., Washington, D.C. 20551. For 
Telecommunications Device for the Deaf (TDD) users only, Dorothea 
Thompson, (202) 452-3544, Board of Governors of the Federal Reserve 
System, 20th and C Streets, N.W., Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
    Proposal to revise the following currently approved collection of 
information:
Title: Report of Assets and Liabilities of U.S. Branches and Agencies 
of Foreign Banks
Form Number: FFIEC 002
OMB Number: 7100-0032.
Frequency of Response: Quarterly.
Affected Public: U.S. branches and agencies of foreign banks.
Number of Respondents: 513
Total Annual Responses: 2,052
Estimated Time per Response: 22.75 burden hours.
Total Annual Burden: 46,683 burden hours.
    General Description of Report: This information collection is 
mandatory: 12 U.S.C. 3105(b)(2), 1817(a)(1) and (3), and 3102(b). 
Except for select sensitive items, this information collection is not 
given confidential treatment (5 U.S.C. 552(b)(8)). Small businesses 
(that is, small U.S. branches and agencies of foreign banks) are 
affected.
    Abstract: On a quarterly basis, all U.S. branches and agencies of 
foreign banks (U.S. branches) are required to file detailed schedules 
of assets and liabilities in the form of a condition report and a 
variety of supporting schedules. This balance sheet information is used 
to fulfill the supervisory and regulatory requirements of the 
International Banking Act of 1978. The data are also used to augment 
the bank credit, loan, and deposit information needed for monetary 
policy purposes. The report is collected and processed by the Federal 
Reserve on behalf of all three Agencies.
    Current Actions: The proposed revisions to the Report of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) 
that are the subject of this notice have been approved by the FFIEC for 
implementation as of the March 31, 1997, report date. Nonetheless, as 
is customary for FFIEC 002 reporting changes, U.S. branches are advised 
that, for the March 31, 1997, report date, reasonable estimates may be 
provided for any new or revised item for which the requested 
information is not readily available.
    The proposed revisions are summarized as follows:
    Deletions and Reductions in Detail. Based on their review of the 
current content of the FFIEC 002, the Agencies propose that the 
following deletions and reductions in detail be made to the FFIEC 002 
report, generally because the existing items or current levels of 
detail are no longer considered sufficiently useful to warrant their 
continued collection.
    (1) Schedule E - Deposit Liabilities and Credit Balances: Memoranda 
item 1.a, ``Time certificates of deposit of $100,000 or more'' would be 
combined with existing Memoranda item 1.b, ``Other time deposits of 
$100,000 or more.''
    (2) Schedule C, Part I - Loans and Leases: Memoranda item 1, 
``Holdings of commercial paper included in Schedule C, part I'' would 
be deleted. In addition, the instructions would be revised to indicate 
that commercial paper should no longer be reported as a loan in 
Schedule C, but should be reported as a security in Schedule RAL-Assets 
and Liabilities, normally in item 1.c.(2), ``Other bonds, notes, 
debentures, and corporate stock (including state and local securities): 
All other.''
    Modification of Instructions That Differ From GAAP and Related New 
Items. In November 1995, the FFIEC announced that it had approved the 
adoption of generally accepted accounting principles (GAAP) as the 
reporting basis for the commercial bank Reports of Condition and Income 
(Call Report), effective with the March 1997 report date. In addition, 
GAAP should be used as the reporting basis for the FFIEC 002, although 
differences between the U.S. branch's accounting basis and GAAP that 
are not significant would be permitted. If the differences are 
significant, then GAAP should be used in all such cases. Adopting GAAP 
as the reporting basis in the basic schedules of the FFIEC 002 report 
will eliminate existing differences between U.S. branch regulatory 
reporting standards and GAAP, thereby producing greater consistency in 
the information collected in regulatory reports and general purpose 
financial statements and reducing reporting burden. Although FFIEC 002 
instructions that depart from GAAP will be eliminated,

[[Page 56959]]

the instructions will continue to contain and the FFIEC and the 
Agencies will continue when necessary to issue specific reporting 
guidance that falls within the range of acceptable practice under GAAP. 
Each agency also will retain existing authority to require an 
institution to report a transaction on the FFIEC 002 in accordance with 
that agency's interpretation of GAAP.
    In connection with this move to GAAP, the section of the FFIEC 002 
report's General Instructions on ``Applicability of Generally Accepted 
Accounting Principles to Regulatory Reporting Requirements'' would be 
revised. In addition, changes would be made to the following FFIEC 002 
instructions to bring them into conformity with GAAP:
    (1) The treatment of assets sold with recourse in the Glossary 
entry for ``Sales of Assets'' and the section of the Glossary entry for 
``Participations in Pools of Residential Mortgages'' on ``Privately-
issued certificates of participation in pools of residential 
mortgages''
    (2) The treatment of futures, forward, and option contracts in the 
Glossary entry for ``Futures, Forward, and Standby Contracts''
    (3) The general prohibition on the netting of assets and 
liabilities in the FFIEC 002 report set forth in the General 
Instructions
    (4) The initial valuation of foreclosed assets in the instructions 
to Schedule M, Part IV, item 2, ``Other real estate owned''
    (5) The treatment of repurchase agreements to maturity and long-
term repurchase agreements in the Glossary entry for ``Repurchase/
Resale Agreements''
    (6) The treatment of reciprocal balances in the instructions to 
Schedule A, item 3, ``Balances due from depository institutions in the 
U.S.'' and in the Glossary entry for ``Reciprocal Balances''
    (7) The treatment of securities transactions with settlement 
periods exceeding regular way settlement time limits that have been 
reported as forward contracts according to the instructions to Schedule 
L, item 9, ``Gross amounts (for example, notional amounts) of off-
balance sheet derivatives''
    U.S. branches that have engaged in any of the preceding types of 
transactions or activities prior to January 1, 1997, and have reported 
them in the FFIEC 002 report in accordance with the existing 
instructions that differ from GAAP would be permitted to report them in 
accordance with GAAP beginning in 1997. The effect of this retroactive 
application of GAAP on the amount of a U.S. branch's net due from or 
net due to related depository institutions as of January 1, 1997, (that 
is, the amount of the ``catch-up'' adjustment) would be included in 
Schedule RAL, item 2.a or item 5.a, and Schedule M, Part I, item 2.a.
    For some of the preceding types of transactions or activities which 
will be affected by the modification of FFIEC 002 instructions that 
differ from GAAP, the potential change in the reporting of these 
transactions and activities is of concern to the Agencies. In some 
cases, the instructional changes may affect the reported amount of a 
U.S. branch's deposits and, if the U.S. branch is insured, its 
assessment base for deposit insurance purposes. In order to identify 
the extent of U.S. branch involvement in these areas or the effect on 
reported deposits, the Agencies propose to add certain new items to the 
FFIEC 002 report and to modify a number of existing reporting items, as 
follows:
    (1) A new memoranda item would be added to Schedule RAL-- Assets 
and Liabilities (or another schedule if more appropriate) for the 
``Amount of assets netted against liabilities to nonrelated parties 
(excluding deposits in insured branches) on the balance sheet (Schedule 
RAL) in accordance with generally accepted accounting principles.'' 
This item would include securities purchased under agreements to resell 
that have been netted against securities sold under agreements to 
repurchase under Financial Accounting Standards Board (FASB) 
Interpretation No. 41, back-to-back loans involving deposits (excluding 
deposits in insured branches), receivables and payables arising from 
unsettled trades, in-substance defeasance transactions grandfathered 
under FASB Statement No. 125, and any other assets netted against 
liabilities to nonrelated parties (excluding deposits in insured 
branches) under FASB Interpretation No. 39. However, the item would 
exclude netted on-balance sheet amounts associated with off-balance 
sheet derivative contracts and assets netted in accounting for 
pensions.
    (2) For insured U.S. branches, new items would be added to Schedule 
O--Other Data for Deposit Insurance Assessments for the ``Amount of 
assets netted against deposit liabilities of the branch (excluding IBF) 
on the balance sheet (Schedule RAL) in accordance with generally 
accepted accounting principles.'' Amounts would be reported separately 
for assets netted against demand deposits and assets netted against 
time and savings deposits. These items would exclude data on net 
reciprocal demand balances and related adjustments reported in Schedule 
O, Memoranda item 4.
    As indicated above, the existing FFIEC 002 instructions on 
reciprocal balances will be revised to conform with GAAP. At present, 
the instructions require U.S. branches to report reciprocal demand 
balances with commercial banks in the U.S. (including U.S. branches and 
agencies of other foreign banks) on a net basis on the balance sheet 
(Schedule RAL) and in the deposit schedule (Schedule E). All other 
reciprocal deposit relationships are to be reported gross. Because this 
netting instruction differs from the reciprocal deposit netting 
provisions in Section 7(a)(4) of the Federal Deposit Insurance Act, the 
insurance assessments schedule contains three netting-related items 
used to adjust reported deposits so they conform with the statute 
(Schedule O, Memoranda items 4.a through 4.c). The FFIEC 002 
instructions on reciprocal balances, once they are revised in 
accordance with GAAP, will still differ from Section 7(a)(4), but in a 
different manner than at present. Thus, items 4.a through 4.c of 
Schedule O must be modified to ensure that insured U.S. branch 
assessment bases continue to be properly measured. As revised, items 
4.a through 4.c would be as follows:
    (a) ``Amount by which demand deposits would be reduced if the 
reporting branch's reciprocal demand balances with the domestic offices 
of U.S. banks and savings associations (and insured branches in Puerto 
Rico and U.S. territories and possessions) that were reported on a 
gross basis in Schedule E had been reported on a net basis''
    (b) ``Amount by which demand deposits would be increased if the 
reporting branch's reciprocal demand balances with foreign banks and 
foreign offices of U.S. banks (other than insured branches in Puerto 
Rico and U.S. territories and possessions) that were reported on a net 
basis in Schedule E had been reported on a gross basis''
    (c) ``Amount by which demand deposits would be reduced if cash 
items in process of collection were included in the calculation of the 
reporting branch's net reciprocal demand balances with the domestic 
offices of U.S. banks and savings associations (and insured branches in 
Puerto Rico and U.S. territories and possessions) in Schedule E''
    Credit Derivatives. Credit derivatives are off-balance sheet 
arrangements that allow one party, the beneficiary, to transfer the 
credit risk of a ``reference asset'' to another party, the guarantor. 
The market for this new type of

[[Page 56960]]

instrument is expected to grow significantly over the next few years. 
In order to identify the extent of U.S. branches' involvement with 
these instruments, both on an individual institution basis and for the 
industry, the Agencies propose to add two new items to Schedule L, Off-
Balance Sheet Items and to Schedule M, Part V, Off-Balance Sheet Items 
with Related Depository Institutions. The first item would be for the 
notional amount of all credit derivatives on which the reporting U.S. 
branch is the guarantor. The second would be for the notional amount of 
all credit derivatives on which the reporting U.S. branch is the 
beneficiary. U.S. branches would include the notional amounts of credit 
default swaps, total rate of return swaps, and other credit derivative 
instruments.
    Other New Items. Two new memoranda items would be added to Schedule 
RAL - Assets and Liabilities, to itemize and describe significant 
amounts included in items 1.h., ``Other assets including other claims 
on nonrelated parties,'' and 4.f., ``Other liabilities to nonrelated 
parties.'' The reporting branch or agency would itemize and describe 
any amounts included in Schedule RAL item 1.h. that exceed 25 percent 
of that item whenever the balance reported for item 1.h. exceeds 5 
percent of total assets. Similarly, the reporting branch or agency 
would itemize and describe any amounts included in Schedule RAL item 
4.f. that exceed 25 percent of that item whenever the balance reported 
for item 4.f. exceeds 5 percent of total liabilities.
    Another new memoranda item would be added to Schedule RAL to report 
the number of full-time equivalent employees at each U.S. branch. This 
information will serve as one measure of the adequacy of controls of 
U.S. branches in managing their operations, particularly in the area of 
trading activities.
    Other Instructional Changes. In addition to those previously 
mentioned, the following changes, which may affect how some U.S. 
branches report certain information on the FFIEC 002 report, would be 
made to the instructions.
    (1) Reporting of when-issued securities--The instructions for the 
reporting of forward contracts in Schedule L, Off-Balance Sheet Items, 
and Schedule M, Part V, Off-Balance Sheet Items with Related Depository 
Institutions, will be modified to reflect ``gross commitments to 
purchase'' and ``gross commitments to sell'' when-issued securities as 
off-balance sheet derivative contracts.
    (2) Firm commitments to sell residential mortgage loans--The 
instructions to Schedule L, item 9.b, column A, ``Interest rate 
forwards,'' direct U.S. branches to report forward contracts committing 
the U.S. branch to purchase or sell financial instruments and whose 
predominant risk characteristic is interest rate risk. Questions have 
been raised about whether firm commitments to sell loans secured by 1-
to-4 family residential properties should be reported as interest rate 
forwards. The Agencies believe that commitments that have a specific 
interest rate, delivery date, and dollar amount should be considered 
forward contracts and plan to revise this item instruction accordingly.
    Request for Comment. Comments submitted in response to this Notice 
will be summarized or included in the Agencies' requests for OMB 
approval. All comments will become a matter of public record. Written 
comments should address the accuracy of the burden estimates and ways 
to minimize burden including the use of automated collection techniques 
or the use of other forms of information technology as well as other 
relevant aspects of the information collection request.
    Board of Governors of the Federal Reserve System, October 30, 
1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-28357 Filed 11-4-96; 8:45AM]
Billing Code 6210-01-F