[Federal Register Volume 63, Number 223 (Thursday, November 19, 1998)]
[Notices]
[Pages 64258-64260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30769]


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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.

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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 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. The Federal Financial Institutions 
Examination Council (FFIEC), of which the agencies are members, has 
approved for public comment proposed revisions to the Report of Assets 
and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 
002) and the extension, without revision, of the Report of Assets and 
Liabilities of Non-U.S. Branches that are Managed or Controlled by a 
U.S. Branch or Agency of a Foreign Bank (FFIEC 002s). Both reports are 
currently approved collections of information. The Board is publishing 
the proposed revisions and extension 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 FFIEC should 
modify the proposed revisions and the extension prior to giving its 
final approval. The Board will then submit the revisions to OMB for 
review and approval.

DATES: Comments must be submitted on or before January 19, 1999.

ADDRESSES: Interested parties are invited to submit written comments to 
the agency listed below. All comments, which should refer to the OMB 
control number, will be shared among the agencies.

[[Page 64259]]

    Written comments should be addressed to Jennifer J. Johnson, 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets, NW, Washington, DC 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, NW 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 261.12 of the Board's Rules Regarding Availability of 
Information, 12 CFR 261.12(a).
    A copy of the comments may also be submitted to the OMB desk 
officer for the Board: Alexander T. Hunt, Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, room 3208, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: A copy of the proposed revisions and 
extensions of the collections of information may be requested from the 
Board's clearance officer whose name appears below.
    Mary M. McLaughlin, Chief, Financial Reports Section, (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 contact Diane 
Jenkins, (202) 452-3544, Board of Governors of the Federal Reserve 
System, 20th and C Streets, NW, Washington, DC 20551.

SUPPLEMENTARY INFORMATION: Proposal to revise and extend the following 
currently approved collections of information:
    1. Report 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.
    Estimated Number of Respondents: 506.
    Estimated Total Annual Responses: 2,024.
    Estimated Time per Response: 23.15 burden hours.
    Estimated Total Annual Burden: 46,856 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 and other public policy purposes. The Federal Reserve System 
collects and processes this report 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, 1999, report date. The proposed 
revisions are summarized as follows:
    High-Risk Mortgage Securities: The agencies are proposing to 
eliminate the High-Risk Mortgage securities items on Schedule RAL. U.S. 
branches report the fair value and amortized cost of ``High-risk 
mortgage securities'' in Memorandum items 5 and 6, respectively. The 
definition of high-risk mortgage securities was taken from the 
Supervisory Policy Statement on Securities Activities, which the FFIEC 
approved and the agencies adopted in December 1991, effective February 
10, 1992 (57 FR 4029, February 3, 1992). In April 1998, the FFIEC and 
the agencies rescinded this policy statement and approved in its place 
a Supervisory Policy Statement on Investment Securities and End-User 
Derivatives Activities, effective May 26, 1998 (63 FR 20191, April 23, 
1998). In adopting the new policy statement, the agencies removed the 
previous policy statement's specific constraints concerning investments 
in high-risk mortgage securities, including its ``high risk'' tests. 
The new policy provides broader guidance covering all investment 
securities, including the establishment by each institution of 
appropriate risk limits. Accordingly, the agencies are proposing to 
eliminate the two memorandum items for high-risk mortgage securities.

Instructional Changes

    Computer Software Costs--In March 1998, the American Institute of 
Certified Public Accountants (AICPA) issued Statement of Position (SOP) 
98-1, Accounting for the Costs of Computer Software Developed or 
Obtained for Internal Use. SOP 98-1 provides guidance on whether costs 
of internal-use software should be capitalized (and then amortized) or 
expensed as incurred. Internal-use software has the following 
characteristics:
    (a) The software is acquired, internally developed, or modified 
solely to meet the entity's internal needs, and
    (b) During the software's development or modification, no 
substantive plan exists or is being developed to market the software 
externally. This SOP is effective for financial statements for fiscal 
years beginning after December 15, 1998. The SOP encourages earlier 
application in fiscal years for which annual financial statements have 
not been issued. For FFIEC 002 purposes, U.S. branches must adopt this 
SOP upon its effective date based on their fiscal year. Early 
application is permitted in the FFIEC 002 in accordance with the 
transition guidance in the SOP. The FFIEC 002 instructions will be 
revised to conform with SOP 98-1, including a new Glossary entry on 
computer software costs that summarizes SOP 98-1 and other relevant 
accounting standards.
    Unsuitable Investment Practices--As mentioned above, the FFIEC and 
the agencies rescinded the Supervisory Policy Statement on Securities 
Activities in April 1998 and approved in its place a Supervisory Policy 
Statement on Investment Securities and End-User Derivatives Activities. 
The new policy statement does not retain the section of the former 
policy statement addressing the reporting of securities activities, 
including a description of practices considered unsuitable when 
conducted in an institution's investment portfolio. In their Federal 
Register notice publishing the Supervisory Policy Statement on 
Investment Securities and End-User Derivatives Activities (63 FR 
20191), the agencies stated their intent to separately issue 
supervisory guidance on the reporting of investment securities. The 
agencies are proposing to add guidance on this reporting matter to the 
Glossary section of the FFIEC 002 instructions. This approach will make 
guidance more readily accessible to U.S. branches as they prepare the 
FFIEC 002.
    Re-Booking Charged-Off Loans--When a U.S. branch makes a full or 
partial direct write-down of a loan or lease that is uncollectible, the 
branch establishes a new cost basis for the asset. Some U.S. branches 
may attempt to reverse the previous write-down and ``re-book'' the 
charged-off loan or lease after concluding that the prospects for

[[Page 64260]]

recovering the charge-off have improved. Re-booking a charged-off loan 
is not an acceptable practice under generally accepted accounting 
principles and, therefore, is not acceptable for FFIEC 002 purposes. 
The Glossary entry for ``Assets Classified Loss'' will be revised to 
indicate that once a new cost basis has been established for a loan or 
lease through a direct write-down of the asset, this cost basis may not 
be ``written up'' at a later date.
    Consolidation of Subsidiaries--Some U.S. branches have requested 
that the FFIEC clarify whether subsidiaries of U.S. branches should be 
consolidated in the FFIEC 002. Consistent with U.S. generally accepted 
accounting principles (GAAP), subsidiaries that are controlled by a 
U.S. branch should be consolidated in the FFIEC 002. Accordingly, the 
general instructions will be revised to indicate that, consistent with 
GAAP, a U.S. branch should consolidate all entities in which it 
maintains a controlling financial ownership interest, e.g., a direct or 
indirect ownership interest of more than 50 percent of an entity's 
outstanding voting shares.
    2. Report Title: Report of Assets and Liabilities of a Non-U.S. 
Branch that is Managed or Controlled by a U.S. Branch or Agency of a 
Foreign (Non-U.S.) Bank.
    Form Number: FFIEC 002S.
    OMB Number: 7100-0273.
    Frequency of Response: Quarterly.
    Affected Public: U.S. branches and agencies of foreign banks.
    Estimated Number of Respondents: 130.
    Estimated Total Annual Responses: 520.
    Estimated Time per Response: 6 burden hours.
    Estimated Total Annual Burden: 3,120 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) and is 
given confidential treatment (5 U.S.C. 552(b)(8)).
    Small businesses are not affected.
    Abstract: On a quarterly basis, all U.S. branches and agencies of 
foreign banks are required to file detailed schedules of their assets 
and liabilities in the form FFIEC 002. The FFIEC 002S is a separate 
supplement to the FFIEC 002 that collects information on assets and 
liabilities of any non-U.S. branch that is ``managed or controlled'' by 
a U.S. branch or agency of the foreign bank. Managed or controlled 
means that a majority of the responsibility for business decisions, 
including but not limited to decisions with regard to lending or asset 
management or funding or liability management, or the responsibility 
for recordkeeping in respect of assets or liabilities for that foreign 
branch resides at the U.S. branch or agency. A separate FFIEC 002S must 
be completed for each managed or controlled non-U.S. branch. The FFIEC 
002S must be filed quarterly along with the U.S. branch's or agency's 
FFIEC 002. The data are used:
    (1) To monitor deposit and credit transactions of U.S. residents;
    (2) For monitoring the impact of policy changes;
    (3) For analyzing structural issues concerning foreign bank 
activity in U.S. markets;
    (4) For understanding flows of banking funds and indebtedness of 
developing countries in connection with data collected by the 
International Monetary Fund (IMF) and the Bank for International 
Settlements (BIS) that are used in economic analysis; and (5) To 
provide information to assist in the supervision of U.S. offices of 
foreign banks, which often are managed jointly with these branches.
    Current Actions: The proposal to extend for three years, without 
revision, the Report of Assets and Liabilities of a Non-U.S. Branch 
that is Managed or Controlled by a U.S. Branch or Agency of a Foreign 
(Non-U.S.) Bank (FFIEC 002S) that is the subject of this notice has 
been approved by the FFIEC.
    Request for Comment: Comments submitted in response to this Notice 
will be shared among the agencies and will be summarized or included in 
the Board's request 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 as well as other relevant 
aspects of the information collection requests. Comments are invited 
on:
    (a) Whether the proposed revisions to the FFIEC 002 and the 
extension of the FFIEC 002S 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, 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 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.

Board of Governors of the Federal Reserve System, November 10, 1998.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 98-30769 Filed 11-18-98; 8:45 am]
BILLING CODE 6210-01-P