[Federal Register Volume 69, Number 215 (Monday, November 8, 2004)]
[Notices]
[Pages 64760-64761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24843]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

SUMMARY: Notice is hereby given of the final approval of proposed 
information collection by the Board of Governors of the Federal Reserve 
System (Board) under OMB delegated authority, as per 5 CFR 1320.16 (OMB 
Regulations on Controlling Paperwork Burdens on the Public). Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the OMB 83-Is and supporting statements and approved collection of 
information instrument(s) are placed into OMB's public docket files. 
The Federal Reserve 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 OMB control number.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer -Cindy Ayouch--Division of Research and Statistics, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202-452-
3829).
    OMB Desk Officer-Mark Menchik--Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 10235, Washington, DC 20503, or email to 
[email protected].

Final approval under OMB delegated authority of the extension for three 
years, with revision, of the following report:

    Report title: Consolidated Bank Holding Company Report of Equity 
Investments in Nonfinancial Companies.
    Agency form number: FR Y-12.
    OMB Control number: 7100-0300.
    Frequency: Quarterly and semi-annually.
    Reporters: Bank holding companies.
    Annual reporting hours: 1,696 hours.
    Estimated average hours per response: 16 hours.
    Number of respondents: 28.
    General description of report: This information collection is 
mandatory pursuant to Section 5(c) of the Bank Holding Company Act (12 
U.S.C. 1844(c)) and data may be exempt from disclosure pursuant to 
Sections (b)(4) and (b)(8) of the Freedom of Information Act (5 U.S.C. 
552(b)(4) and (b)(8)).
    Abstract: The FR Y-12 was implemented as of September 30, 2001, in 
response to the Gramm-Leach-Bliley Act (GLB Act) of 1999, which 
broadened the scope of permissible investments in nonfinancial 
companies. The FR Y-12 collects information from certain domestic bank 
holding companies (BHCs) on their investments in nonfinancial companies 
on three schedules: Type of Investments, Type of Security, and Type of 
Entity within the Banking Organization. Large BHCs report on a 
quarterly basis, and small BHCs report semi-annually.
    Current Actions: The Federal Reserve will revise the FR Y-12 
reporting form and instructions to enhance the Federal Reserve's 
ability to monitor and supervise the private equity merchant banking 
(PEMB) activity across all BHCs for purposes of safety and soundness. 
The revisions to the FR Y-12 include (1) modifying the reporting 
threshold to reduce regulatory burden; (2) adding a memorandum item to 
Schedule A to collect data on ``Investments managed for others;'' (3) 
adding a memorandum item to Schedule B to identify whether the BHC 
holds any warrants received in connection with equity investment 
activity; (4) simplifying Schedule C by eliminating three columns used 
to collect data on direct investments in public entities, direct 
investments in nonpublic entities, and all indirect investments; and 
(5) adding Schedule D ``Nonfinancial Investment Transactions During the 
Reporting Period'' to collect information on all PEMB activity of the 
BHC during the reporting period and to better reflect the industry's 
focus on monitoring ``cash in and cash out.'' The Federal Reserve will 
defer implementation of the revised FR Y-12 until March 31, 2005, to 
coincide with the implementation of proposed revisions to the FR Y-9C 
and FR Y-9SP reports (OMB No. 7100-0128).
    The Federal Reserve received one comment letter from a banking 
trade association. The comment is summarized and addressed below.

Addition of Memorandum Item ``Investments managed for others''

    The Federal Reserve proposed to add a memorandum item to collect 
information on the extent of the BHC's role in managing private equity 
investments for others. This item would be used to collect new 
information on the extent of the institution's PEMB operations. 
Significant investment funds management activity could increase the 
inherent legal and reputational risk of the institution.
    The commenter opposed the addition of this memorandum item for 
three reasons. First, the commenter felt the proposed instructions did 
not adequately define the scope of the item and questioned whether any 
such investments managed through a BHC's trust, brokerage or mutual 
fund businesses were to be included. The Federal Reserve clarified the 
instructions for memorandum item 4 by defining the BHCs management 
relationship ``as serving as a general partner in a limited partnership 
or performing a similar function in a private equity fund.'' The 
Federal Reserve also added an exclusion for investments managed through 
a bank trust department in a fiduciary capacity. Second, the commenter 
felt the collection of these data would be burdensome as there is not 
typically a standard reporting category for such business lines. During 
the development stage of modifying the FR Y-12, the Federal Reserve 
consulted with several large BHCs on the proposed addition of this item 
and concluded from the responses received that this information was 
readily available for reporting purposes and should not be burdensome. 
Third, the commenter felt that reporting this item would be outside the 
scope of the FR Y-12 because the form collects information on the types 
of investments made by BHCs and their subsidiaries in nonfinancial 
companies. The Federal Reserve believes that the collection of these 
data are necessary to accurately and efficiently conduct off-site 
monitoring of information regarding the extent of the institution's 
PEMB operation.

[[Page 64761]]

Addition of a Schedule for ``Nonfinancial Investment Transactions 
During the Reporting Period''

    The Federal Reserve proposed adding a schedule that would collect 
data on all PEMB activity of the BHC, on an aggregate basis, for the 
reporting period. Columns A and B would collect acquisition cost and 
carrying value for all purchases, returns of capital, and net changes 
in valuation made for all direct investments. Columns C and D would 
collect data on the same items for all transactions involving indirect 
(fund) investments. These data would provide valuable insight into the 
scope of activity on a transaction basis and, when reviewed over time, 
would provide critical trend data useful for industry studies as well 
as BHC supervisory monitoring.
    The commenter strongly opposed the addition of the schedule and 
felt the intended use of the data was unclear. The commenter also 
stated that the reasons provided for collecting the data did not fully 
justify the costs to the industry. The Federal Reserve disagreed with 
this comment stating that these data will enhance off-site monitoring 
of PEMB activity and will better facilitate risk-focused supervision by 
providing supervisors with significant insights into the level of 
activities that are not necessarily discernible by reviewing only 
aggregate balances.
    The commenter stated that these data currently are not readily 
available and providing such detail would require the implementation of 
new tracking systems to capture the detail, as proposed. The Federal 
Reserve believes the items should be readily available on a BHC's 
internal tracking systems of associated cash flows. In meeting with 
several large BHCs, company representatives emphasized that PEMB 
participants track commitments to invest, cash flows associated with 
new investments, and the return of cash related to existing investments 
in order to calculate internal rates of return. The new items in this 
schedule would require respondents to slot the cash flows and valuation 
adjustments.

Revised Instructions for Acquisition Costs

    The commenter stated that the definition for ``Acquisition Costs'' 
was unclear and conflicted with previous guidance. The Federal Reserve 
clarified the glossary entry for Acquisition Costs in the instructions.

Effective Date

    The commenter urged the Federal Reserve to delay the implementation 
date of these revisions for a minimum of two quarters. The commenter 
felt the additional time would be necessary for BHCs to implement 
changes to their processes and other resources that would be required 
to fulfill the new filing requirements. The Federal Reserve believes 
that the time allotted for implementing the proposed revisions is 
sufficient because of modifications to the proposal for ``Investments 
managed for others'' and because BHCs have until March 2005 before the 
revised reporting goes into effect.

    Board of Governors of the Federal Reserve System, November 3, 
2004.
Jennifer J. Johnson
Secretary of the Board.
[FR Doc. 04-24843 Filed 11-5-04; 8:45 am]
BILLING CODE: 6210-01-S