[Federal Register Volume 70, Number 162 (Tuesday, August 23, 2005)]
[Notices]
[Pages 49363-49372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-16680]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


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); and Federal 
Deposit Insurance Corporation (FDIC).

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, and the FDIC 
(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 revisions to the 
Consolidated Reports of Condition and Income (Call Report), which are 
currently approved collections of information. At the end of the 
comment period, the comments and recommendations received will be 
analyzed to determine the extent to which the FFIEC and the agencies 
should modify the proposed revisions prior to giving final approval. 
The agencies will then submit the revisions to OMB for review and 
approval.

DATES: Comments must be submitted on or before October 24, 2005.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the agencies. All comments, which should refer to the OMB 
control number(s), will be shared among the agencies.
    OCC: You may submit comments, identified by [Attention: 1557-0081], 
by any of the following methods:
     E-mail: [email protected]. Include [Attention: 
1557-0081] 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: 1557-0081.
    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 
``Consolidated Reports of Condition and Income, 7100-0036,'' by any of 
the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include docket 
number 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 
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 ``Consolidated 
Reports of Condition and Income, 3064-0052,'' by any of the following 
methods:
     http://www.FDIC.gov/regulations/laws/federal/propose.html.
     E-mail: [email protected]. Include ``Consolidated Reports 
of Condition and Income, 3064-0052'' in the subject line of the 
message.
     Mail: Steven F. Hanft (202-898-3907), Paperwork Clearance 
Officer, Room MB-3064, 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 100, 801 17th Street, NW., 
between 9 a.m. and 4:30 p.m. on business days.
    A copy of the comments may also be submitted to the OMB desk 
officer for the agencies: Mark Menchik, Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, Washington, DC 20503, or electronic mail 
to [email protected].

FOR FURTHER INFORMATION CONTACT: For further information about the 
revisions discussed in this notice, please contact any of the agency 
clearance officers whose names appear below. In addition, copies of 
Call Report forms can be obtained at the FFIEC's Web site (http://www.ffiec.gov/ffiec_report_forms.htm).
    OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dixon, (202) 
874-5090, Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Michelle E. Long, Federal Reserve Clearance Officer, (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 call 
(202) 263-4869.
    FDIC: Steven F. Hanft, Paperwork Clearance Officer, (202) 898-3907, 
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429.

[[Page 49364]]


SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and 
extend for three years the Call Report, which is currently an approved 
collection of information for each of the agencies.
    Report Title: Consolidated Reports of Condition and Income (Call 
Report).
    Form Number: Call Report: FFIEC 031 (for banks with domestic and 
foreign offices) and FFIEC 041 (for banks with domestic offices only).
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
    OCC:
    OMB Number: 1557-0081.
    Estimated Number of Respondents: 1,950 national banks.
    Estimated Time per Response: 43.80 burden hours (represents a 
decrease of 4.47 hours associated with testing and enrollment in the 
Central Data Repository (CDR) and a net increase of 1.81 hours for 
proposed new items and deletions).
    Estimated Total Annual Burden: 341,621 burden hours.
    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 919 State member banks.
    Estimated Time per Response: 50.38 burden hours (represents a 
decrease of 4.01 hours associated with testing and enrollment in the 
CDR and a net increase of 2.01 hours for proposed new items and 
deletions).
    Estimated Total Annual Burden: 185,197 burden hours.
    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 5,243 insured state nonmember 
banks.
    Estimated Time per Response: 34.73 burden hours (represents a 
decrease of 4.16 hours associated with testing and enrollment in the 
CDR and a net increase of 1.79 hours for proposed new items and 
deletions).
    Estimated Total Annual Burden: 728,274 burden hours.
    The estimated time per response for the Call Report is an average 
that varies by agency because of differences in the composition of the 
institutions under each agency's supervision (e.g., size distribution 
of institutions, types of activities in which they are engaged, and 
existence of foreign offices). The average reporting burden for the 
Call Report is estimated to range from 16 to 625 hours per quarter, 
depending on an individual institution's circumstances.
    Furthermore, the effect on reporting burden of the proposed 
revisions to the Call Report requirements will vary from institution to 
institution depending, in some cases, on the institution's asset size 
and, in other cases, on its involvement with the types of activities or 
transactions to which the proposed changes apply. This proposal would 
add several new data items to the Call Report, revise certain existing 
items, eliminate a limited number of items, and remove the burden hours 
associated with testing and enrollment in the new CDR system, which had 
been added to the Call Report burden estimate in 2004, because these 
CDR activities will be completed prior to the implementation of the 
proposed revisions. Since the reduction in burden related to the CDR 
exceeds the net increase in burden from the proposed revisions to the 
content of the Call Report, the proposal as a whole would produce a net 
decrease in reporting burden for banks of all sizes. Nevertheless, the 
proposed new items and revisions of existing items, taken together, 
would have an effect on all banks. Therefore, as discussed more fully 
below in Section I. Overview, the agencies encourage banks and other 
interested parties to comment on such matters as data availability, 
data alternatives, and reporting thresholds for each proposal for new 
or revised data. Such comments will assist the agencies in determining 
the content of the final set of revisions to the Call Report. For 
purposes of this proposal, the following burden estimates include the 
effect of all of the proposed revisions without anticipating any 
possible modifications resulting from the public comment process that 
may lessen the impact of the revisions on some or all banks.

General Description of Reports

    These information collections are mandatory: 12 U.S.C. 161 (for 
national banks), 12 U.S.C. 324 (for State member banks), and 12 U.S.C. 
1817 (for insured State nonmember commercial and savings banks). Except 
for selected items, these information collections are not given 
confidential treatment.

Abstract

    Institutions file Call Reports with the agencies each quarter for 
the agencies' use in monitoring the condition, performance, and risk 
profile of individual institutions and the industry as a whole. In 
addition, Call Reports provide the most current statistical data 
available for evaluating institutions' corporate applications such as 
mergers, for identifying areas of focus for both on-site and off-site 
examinations, and for monetary and other public policy purposes. Call 
Reports are also used to calculate all institutions' deposit insurance 
and Financing Corporation assessments and national banks' semiannual 
assessment fees.

Current Actions

I. Overview

    The agencies last revised the form and content of the Call Report 
in a manner that significantly affected a substantial percentage of 
banks in March 2002. The revisions that have taken effect since March 
2002 (i.e., in March 2003 and June 2005) were narrowly focused on 
certain specific activities in order to improve the information 
available to the agencies for those banks engaging in these activities. 
These focused revisions meant that the new or revised Call Report items 
pertaining to each of these activities were directly applicable to 
small percentages of banks rather than to most or all banks.
    During this recent period of limited revisions to the Call Report, 
the FFIEC and the agencies having been working toward the October 1, 
2005, implementation of the CDR, the Internet-based system they are 
developing to modernize and streamline how Call Report data are 
collected, validated, managed, and distributed. At the same time, the 
agencies have also been carefully evaluating their information needs. 
In this regard, the agencies recognize that the Call Report imposes 
reporting burden, which is a component of the overall regulatory burden 
that banks face. Another contributor to this overall burden is the 
examination process, particularly on-site examinations during which 
bank management and staff spend time and effort responding to inquiries 
and requests for information that are designed to assist examiners in 
evaluating the condition and risk profile of the institution. The 
amount of attention that examiners initially direct to the various risk 
areas of the bank under examination is, in large part, determined from 
Call Report data. These data, and analytical reports generated from 
Call Report data such as the Uniform Bank Performance Report, assist 
examiners in making their preliminary assessments of risks and in 
scoping efforts during the planning phase of the examination process.
    The more risk-focused the information available to examiners from a 
bank's Call Report, the better the job examiners can do before the 
start of their on-site work in making their preliminary assessments as 
to whether each of the risk areas of the bank presents greater than 
normal, normal, or less than normal risk. The degree of perceived risk 
determines the extent of the examination procedures, and the

[[Page 49365]]

resultant regulatory burden, that are initially planned for each risk 
area. If the outcome of these procedures begins to reveal a greater 
than expected level of risk in a particular risk area, the examination 
scope and procedures are adjusted accordingly, adding to the regulatory 
burden imposed on the bank.
    Call Report data are also a vital source of information for the 
agencies' off-site examination and surveillance activities. Among their 
benefits, these activities aid in determining whether the frequency of 
a bank's examination cycle should remain at maximum allowed time 
intervals, thereby lessening overall regulatory burden. More risk-
focused Call Report data enhance the agencies' ability to assess 
whether an institution is experiencing changes in its risk profile that 
warrant immediate follow-up, which may include accelerating the timing 
of an on-site examination.
    In developing this proposal, the agencies have considered a range 
of potential information needs, particularly in the areas of credit 
risk, liquidity, and liabilities, and have identified those additions 
to the Call Report that are believed to be most critical and relevant 
to the agencies as they seek to fulfill their supervisory 
responsibilities. At the same time, the agencies have identified 
certain existing Call Report data that are no longer sufficiently 
critical or useful to warrant their continued collection from either 
all banks or banks that meet certain criteria (e.g., an asset size 
threshold). On balance, the agencies recognize that the reporting 
burden that would result from the addition to the Call Report of all of 
the new items discussed in this proposal would not be fully offset by 
the proposed elimination of, or establishment of reporting thresholds 
for, a limited number of other Call Report items, thereby resulting in 
a net increase in reporting burden. Nevertheless, when viewing these 
proposed revisions to the Call Report within a larger context, they are 
intended to enhance the agencies' on- and off-site supervision 
activities, which should help to control the overall regulatory burden 
on banks.
    Thus, the agencies are requesting comment on the following proposed 
revisions to the Call Report, which would take effect as of March 31, 
2006. For each of the proposed revisions of existing items or proposed 
new items, the agencies are particularly interested in comments from 
banks on whether the information that is proposed to be collected is 
readily available from existing bank records. The agencies also invite 
comment on whether there are particular proposed revisions for which 
the new data would be of limited relevance for purposes of assessing 
risks in a specific segment of the banking industry. In such cases, 
comments are requested on what criteria, e.g., an asset size threshold 
or some other measure, should be established for identifying the 
specific segment of the banking industry that should be required to 
report the proposed new information. Finally, the agencies seek comment 
on whether, for a particular proposed revision, there is an alternative 
set of information that could satisfy the agencies' data needs in that 
area and be less burdensome for banks to report than the new or revised 
items that the agencies have proposed. The agencies will consider all 
of the comments they receive as they formulate a final set of revisions 
to the Call Report for implementation in March 2006.
    (1) Burden-reducing revisions:
     Eliminating Schedule RC-O, Memorandum item 2, ``Estimated 
amount of uninsured deposits,'' for banks with less than $1 billion in 
assets;
     Collecting only the total amount of a bank's holdings of 
asset-backed securities in Schedule RC-B from banks that only have 
domestic offices and are less than $1 billion in assets (but continuing 
to collect the breakdown by type of asset-backed security from all 
other banks);
     Eliminating items for reporting the impact on income of 
derivatives held for purposes other than trading (Schedule RI, 
Memorandum items 9.a through 9.c); and
     Eliminating items pertaining to bankers acceptances 
(Schedule RC, items 9 and 18; Schedule RC-H, items 1 and 2; and 
Schedule RC-L, item 5).
    (2) Revisions of existing items and new items:
     Splitting ``Construction, land development, and other land 
loans'' (CLD&OL loans) into separate categories for 1-4 family 
residential CLD&OL loans and all other CLD&OL loans (Schedule RC-C, 
part I, item 1.a; Schedule RC-N, item 1.a; Schedule RI-B, part I, item 
1.a; and Schedule RC-L, item 1.c.1);
     Splitting loans ``Secured by nonfarm nonresidential 
properties'' (commercial real estate loans) into separate categories 
for owner-occupied and other commercial real estate (Schedule RC-C, 
part I, item 1.e; Schedule RC-N, item 1.e; Schedule RI-B, part I, item 
1.e);
     Replacing the breakdown of ``Lease financing receivables'' 
between leases from U.S. and non-U.S. addressees with a breakdown of 
leases between retail (consumer) leases and commercial leases for banks 
with foreign offices or with domestic offices only and $300 million or 
more in total assets (Schedule RC-C, part I, items 10.a and 10.b; 
Schedule RC-N, items 8.a and 8.b on the FFIEC 031 and Memorandum item 
3.d on the FFIEC 041; and Schedule RI-B, part I, items 8.a and 8.b on 
the FFIEC 031 and Memorandum item 2.d on the FFIEC 041);
     Collecting further information on Federal Home Loan Bank 
advances, which are currently reported in Schedule RC-M, item 5.a, by 
adding breakdowns of advances by type and by next repricing date and by 
splitting the existing item for advances with a remaining maturity of 
more than three years into two items;
     Adding two items to the past due and nonaccrual assets 
schedule (Schedule RC-N) for ``Additions to nonaccrual assets during 
the quarter'' and ``Nonaccrual assets sold during the quarter;''
     Collecting additional information on credit derivatives by 
adding a breakdown by type of contract to the notional amounts 
currently reported in Schedule RC-L, item 7, along with new items for 
the maximum amounts payable and receivable on credit derivatives; 
adding credit derivatives to the existing maturity distribution of 
derivatives in Schedule RC-R, Memorandum item 2; adding credit 
derivatives to the breakdown of trading revenue by type of exposure 
currently collected in Schedule RI, Memorandum item 8; and adding a new 
income statement Memorandum item for the effect on earnings of credit 
derivatives held for purposes other than trading;
     Adding a new Schedule RC-P to collect data pertaining to 
closed-end 1-4 family residential mortgage banking activities for banks 
with $1 billion or more in total assets,\1\ including quarter-end loans 
held for sale and quarterly originations, purchases, and sales, 
segregated between first and junior liens, and noninterest income from 
these activities;
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    \1\ In addition, a smaller bank with significant involvement in 
these activities, as determined by its primary federal regulator, 
could be directed by its regulator to report this information.
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     Changing the category of noninterest income in which banks 
report income from certain sales of annuities from ``Income from other 
insurance activities'' (Schedule RI, item 5.h.(2)) to ``Investment 
banking, advisory, brokerage, and underwriting fees and commissions'' 
(Schedule RI, item 5.d);
     Splitting the income statement item for ``Investment 
banking, advisory, brokerage, and underwriting fees and commissions'' 
(Schedule RI, item 5.d)

[[Page 49366]]

into separate items for fees and commissions from securities brokerage, 
fees and commissions from sales of annuities, and other fees and 
commissions;
     Adding new items for the amounts included in ``Federal 
funds purchased (in domestic offices)'' (Schedule RC, item 14.b) and 
``Other borrowings'' (Schedule RC-M, item 5.b) that are secured;
     Adding an item to Schedule RC-F, ``Other Assets,'' for the 
carrying value of the bank's life insurance assets, which would replace 
the item in this schedule for reporting such assets if they exceed 25 
percent of ``All other assets'';
     Revising Schedule RI-D, ``Income from International 
Operations,'' on the FFIEC 031 to focus on activity conducted in 
foreign offices; and
     Revising the scope of Schedule RC-S, column G, ``All Other 
Loans and All Leases,'' to cover securitizations and credit-enhanced 
asset sales involving assets other than loans and leases.
    (3) Other matters:
     Clarifying the instructions to Schedule RC-S, Memorandum 
item 2, to indicate that the servicing of home equity lines should be 
included in the servicing of ``Other financial assets'' rather than 1-4 
family residential mortgages; and
     Revising the officer declaration and director attestation 
requirements and signatures that apply to the Call Report.
    These proposed revisions to the Call Report, which have been 
approved for publication by the FFIEC for the purpose of soliciting 
comments from banks and other interested parties, are discussed in more 
detail below.
    Type of Review: Revision and extension of currently approved 
collections.
    As mentioned above, the agencies plan to implement the proposed 
changes as of the March 31, 2006, report date. Nonetheless, as is 
customary for Call Report changes, institutions are advised that they 
may report reasonable estimates for any new or revised item in their 
reports for March 31, 2006, if the information to be reported is not 
readily available. In addition, the specific wording of the captions 
for the new and revised Call Report items discussed in this proposal 
and the numbering of these items in the report should be regarded as 
preliminary.

II. Discussion of Proposed Revisions

A. Burden-Reducing Revisions

1. Uninsured Deposits
    All banks have been required to report the ``Estimated amount of 
uninsured deposits'' in Schedule RC-O, Memorandum item 2, since March 
2002. To limit reporting burden, the FFIEC and the agencies advised 
banks that they were not expected to modify their information systems 
or acquire new systems solely for purposes of making this estimate. 
Rather, banks were instructed to base their estimates of the uninsured 
portion of their deposits on data that are readily available from the 
information systems and other records the bank has in place. 
Nonetheless, smaller banks continue to indicate that they find this 
Memorandum item burdensome and, as a consequence, many resort to 
reporting a simple estimate based on the number and amount of their 
deposit accounts of more than $100,000, the current limit of deposit 
insurance.
    Because banks already report the number and amount of such deposit 
accounts in Schedule RC-O, Memorandum item 1, the agencies are able to 
calculate the same simple estimate of uninsured deposits as these banks 
have done. A comparison of the amounts banks have reported for their 
estimated uninsured deposits in Memorandum item 2 with a simple 
estimate calculated by the agencies from the information reported in 
Memorandum item 1 revealed insignificant differences between the two 
figures for banks with less than $1 billion in assets, which currently 
hold only about 20 percent of banks' total domestic deposits. Only at 
larger institutions were the differences between banks' reported 
estimates and the calculated simple estimate significant enough to have 
a potential effect on the estimate of insured deposits used by the FDIC 
in the determination of deposit insurance assessment premiums. 
Accordingly, the agencies are proposing that banks with less than $1 
billion in total assets would no longer be required to complete 
Schedule RC-O, Memorandum item 2. Banks with $1 billion or more in 
total assets would continue to report the ``Estimated amount of 
uninsured deposits'' in this Memorandum item.
2. Holdings of Asset-Backed Securities
    In Schedule RC-B, ``Securities,'' the agencies collect a six-way 
breakdown of banks' holdings of asset-backed securities (not held for 
trading purposes) in items 5.a through 5.f.\2\ Because banks with 
domestic offices only and less than $1 billion in total assets hold 
only a nominal percentage of the industry's investments in asset-backed 
securities, the agencies have determined that continuing to request a 
breakdown by category of these institutions' limited holdings is no 
longer warranted. Instead, these banks would report only their total 
holdings of asset-backed securities in Schedule RC-B. However, all 
banks with foreign offices and other banks with $1 billion or more in 
total assets would continue to report the existing breakdown of their 
asset-backed securities in this schedule.
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    \2\ In Schedule RC-B, the asset-backed securities reported in 
items 5.a through 5.f exclude mortgage-backed securities, which are 
reported separately in items 4.a(1) through 4.b(3) of the schedule.
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3. Impact of Derivatives on Income
    Banks with foreign offices or with $100 million or more in total 
assets report the effect that their use of derivatives outside the 
trading account has had on their year-to-date interest income, interest 
expense, and net noninterest income in income statement (Schedule RI) 
Memorandum items 9.a through 9.c. The amounts reported in these 
Memorandum items are aggregates of all nontrading derivative positions 
and combine derivatives that may have substantially different 
underlying risk exposures, e.g., interest rate risk, foreign exchange 
risk, and credit risk. In recognition of the new data on credit 
derivatives that the agencies are proposing to collect (see Section 
II.B.6. below), the agencies have identified the three income statement 
Memorandum items as being of lesser utility and propose to delete them.
4. Bankers Acceptances
    The Call Report balance sheet (Schedule RC) has long required banks 
to separately disclose the amount of their ``Customers'' liability to 
this bank on acceptances outstanding'' (item 9) and their ``Bank's 
liability on acceptances executed and outstanding'' (item 18). For 
banks with foreign offices, corresponding amounts are disclosed for 
acceptance assets and liabilities in domestic offices (Schedule RC-H, 
items 1 and 2). In addition, banks with foreign offices or $100 million 
or more in total assets also report the amount of ``Participations in 
acceptances conveyed to others by the reporting bank'' (Schedule RC-L, 
item 5). Over time, the volume of acceptance assets and liabilities as 
a percentage of industry assets and liabilities has declined 
substantially to a nominal amount, with only a small number of banks 
reporting these items. The agencies are proposing to delete these five 
items and banks would be instructed to include any acceptance assets 
and liabilities in ``Other assets'' and ``Other liabilities,'' 
respectively, on the Call Report balance sheet.

[[Page 49367]]

B. Revisions of Existing Items and New Items

1. Construction Land Development, and Other Land Loans
    Construction, land development, and other land lending are highly 
specialized activities with inherent risks that must be managed and 
controlled to ensure that these activities remain profitable. 
Management's ability to identify, measure, monitor, and control the 
risks from these types of loans through effective underwriting 
policies, systems, and internal controls is crucial to a sound lending 
program. In areas of the country that experience high levels of 
construction activity and an extremely competitive lending environment, 
these factors often lead to thinner profit margins on CLD&OL loans and 
looser underwriting standards. Moreover, the risk profiles, including 
loss rates, of CLD&OL loans vary across loan types because of 
differences in such factors as underwriting and repayment source. The 
agencies' real estate lending standards recognize these differences in 
risk, for example, by setting higher supervisory loan-to-value limits 
for 1-4 family residential construction loans than for other 
construction loans.
    The agencies have seen substantial growth in the volume of CLD&OL 
loans in recent years. At commercial banks and state-chartered savings 
banks, these loans grew more rapidly than loan portfolios as a whole 
during 2003 and 2004. The faster growth in CLD&OL lending than overall 
lending occurred each year not only for institutions as a whole, but 
also for banks with less than $100 million in assets, banks with $100 
million to $1 billion in assets, and for banks with more than $1 
billion in assets. At year-end 2004, banks' CLD&OL loans totaled more 
than $300 billion, up nearly 40 percent from their level of $217 
billion two years earlier. In addition, at banks with less than $100 
million in assets, CLD&OL loans were a higher percentage of total loans 
and leases at year-end 2004 (7 percent) than at banks with more than $1 
billion in assets (less than 5 percent). Nearly 88 percent of all banks 
reported holding CLD&OL loans at year-end 2004, including almost 79 
percent of banks with less than $100 million in assets and more than 91 
percent of banks with more than $1 billion in assets.
    In the Thrift Financial Report (TFR) (Form 1313, OMB No. 1550-0023) 
that the Office of Thrift Supervision (OTS) collects from the savings 
associations under its supervision, these institutions are required to 
report the amount of construction loans for 1-4 family residential 
properties separately from other construction loans. Charge-offs and 
recoveries on 1-4 family residential property construction loans are 
also reported separately from other construction loan charge-offs and 
recoveries in the TFR. The National Association of Home Builders 
(NAHB), in letters submitted to the agencies in January 2003 and May 
2005 in response to the agencies' requests for comment on past proposed 
revisions to the Call Report, has requested that the agencies 
``consider itemizing the construction and land development lending data 
that are currently aggregated'' to distinguish between different types 
of construction loans. The NAHB noted that their analysis of TFR data 
on construction loans revealed that residential construction loans 
``perform much better than most other real estate loans'' and expressed 
concern that the ``current lack of credible activity and performance 
data'' on construction lending in the Call Report ``impedes the 
Agencies'' ability to accurately evaluate the level of risk associated 
with such activities.''
    The agencies agree with the NAHB that it would be beneficial to 
improve their ability to monitor the construction lending activities of 
individual banks and the industry as a whole by obtaining separate data 
on 1-4 family residential CLD&OL loans and all other CLD&OL loans, 
particularly in light of the substantial growth in this type of lending 
by banks. Such information would also enable the agencies to identify 
institutions that significantly shift from 1-4 family residential 
construction lending to other construction lending, and vice versa, and 
to identify when institutions that had been solely 1-4 family 
residential construction lenders move into other types of construction 
lending.
    Therefore, the agencies are proposing to split the existing item 
for ``Construction, land development, and other land loans'' in the 
loan schedule (Schedule RC-C, part I, item 1.a), the past due and 
nonaccrual schedule (Schedule RC-N, item 1.a), and the charge-offs and 
recoveries schedule (Schedule RI-B, part I, item 1.a) into separate 
items for ``1-4 family residential construction, land development, and 
other land loans'' and ``Other construction, land development, and 
other land loans.'' In addition, the agencies would similarly split the 
item for ``Commitments to fund commercial real estate, construction, 
and land development loans secured by real estate'' in the off-balance 
sheet items schedule (Schedule RC-L, item 1.c.(1)) into two items.
2. Loans Secured by Nonfarm Nonresidential Properties
    Loans secured by nonfarm nonresidential properties (commercial real 
estate loans) include loans made to the occupants of such properties 
and loans to non-occupant investors. These two types of commercial real 
estate loans present different risk profiles. Loans secured by owner-
occupied properties perform more like commercial and industrial loans 
because the success of the occupant's business is the primary source of 
repayment. To ensure repayment of loans to non-occupant investors, the 
property must generate sufficient cash flow from the parties who are 
the occupants.
    The volume of commercial real estate loans at banks has also 
increased significantly in recent years. As with CLD&OL loans, 
commercial real estate loans grew more rapidly than loan portfolios as 
a whole at commercial banks and state-chartered savings banks during 
2003 and 2004, both for the industry as a whole and for small, medium, 
and large banks. At year-end 2004, banks' commercial real estate loans 
stood at nearly $700 billion, a jump of 20 percent from the $584 
billion in such loans at year-end 2002. The $700 billion in commercial 
real estate loans represented almost 14 percent of loans at all 
commercial banks and state-chartered savings banks at year-end 2004, 
but such loans were 19 percent of loans at banks with less than $100 
million in assets versus 11 percent of loans at banks with more than $1 
billion in assets. Almost all banks hold commercial real estate loans, 
including 96 percent of banks with less than $100 million in assets and 
93 percent of banks with more than $1 billion in assets.
    Because of the significant and growing level of bank involvement in 
commercial real estate lending and the different risk characteristics 
of owner-occupied and other commercial properties, separate reporting 
of these two categories of commercial real estate would enhance the 
agencies' monitoring and risk-scoping capabilities. The agencies 
propose to split the existing item for loans ``Secured by nonfarm 
nonresidential properties'' in the loan schedule (Schedule RC-C, part 
I, item 1.e), the past due and nonaccrual schedule (Schedule RC-N, item 
1.e), and the charge-offs and recoveries schedule (Schedule RI-B, part 
I, item 1.e) into separate items for loans secured by owner-occupied 
nonfarm nonresidential properties and loans

[[Page 49368]]

secured by other nonfarm nonresidential properties.
    When a commercial property that is partially occupied by the owner 
and partially occupied (or available to be occupied) by other parties, 
the property would be considered owner-occupied when the owner occupies 
more than half of the property's usable space. Properties such as 
hotels and motels would not be considered owner-occupied. The agencies 
request comment on the reporting of partially owner-occupied properties 
and on any other definitional issues that may arise when determining 
whether to report a loan as secured by owner-occupied property.
3. Retail and Commercial Leases
    Banks with foreign offices or with $300 million or more in total 
assets currently report a breakdown of their lease financing 
receivables between those from U.S. and non-U.S. addressees in Schedule 
RC-C, part I, items 10.a and 10.b, and certain related schedules.\3\ 
Because banks lease various types of property to various types of 
customers, the current addressee breakdown, in which only a limited 
number of banks report having leases to non-U.S. addressees, does not 
provide satisfactory risk-related information about this type of 
financing activity. When reporting information on their loans that are 
not secured by real estate in the Call Report loan schedule and related 
schedules, banks distinguish, for example, between consumer (retail) 
loans and commercial loans. As with retail and commercial loans, there 
are differences between the underwriting of and repayment sources for 
retail and commercial leases.
---------------------------------------------------------------------------

    \3\ Banks with domestic offices only and less than $300 million 
in total assets are not required to provide this breakdown.
---------------------------------------------------------------------------

    The agencies believe that the different risk characteristics of 
these two types of leases warrant replacing the existing addressee 
breakdown of leases with a retail versus commercial lease breakdown in 
the Call Report schedules for loans and leases, past due and nonaccrual 
assets, and charge-offs and recoveries. Retail (consumer) leases would 
be defined in a manner similar to consumer loans, i.e., as leases to 
individuals for household, family, and other personal expenditures. 
Commercial leases would encompass all other lease financing 
receivables. This proposed reporting change would affect only the 
approximately 500 banks with foreign offices or with $300 million or 
more in total assets that have lease financing receivables as assets.
4. Federal Home Loan Bank Advances
    The Federal Home Loan Bank (FHLB) System is an increasingly 
important funding source for banks, particularly community banks, with 
over 57 percent of all banks reporting borrowings from FHLBs as of 
December 31, 2004. From year-end 2001 to year-end 2004, the volume of 
FHLB advances to commercial banks grew more than 25 percent to $250 
billion. At the same time, the array of advances offered by the 12 
FHLBs has expanded in recent years, with many of the newer advance 
products containing features that can significantly alter an 
institution's interest rate risk profile.
    The agencies currently collect aggregate information on FHLB 
advances that is stratified by remaining maturity (Schedule RC-M, items 
5.a (1) through 5.a.(3)). This information does not differentiate among 
types of advance products, which means that the agencies cannot 
distinguish products with lower repricing risk (putable advances where 
the bank has the right, but not the obligation, to prepay the FHLB) 
from products with higher repricing risk (callable advances where the 
FHLB has the right, but not the obligation, to require the bank to 
prepay the advance or establish a new advance). Furthermore, the 
current reporting by remaining maturity is based on the contractual 
terms of the advances, but this approach does not capture the potential 
volatility associated with more complex products that have various 
embedded options.
    To address these informational deficiencies, the agencies are 
proposing to add two additional breakdowns of FHLB advances. The first 
would collect data on four categories of advances: Fixed rate, variable 
rate (where the interest rate is tied to an index), callable structured 
advances (where the FHLB has the option to call the advance), and other 
structured advances (putable, convertible, or with caps, floors, or 
other embedded derivatives). In the second breakdown, banks would 
report their advances based on the amount of time until the next 
repricing date (one year or less, over one year through three years, 
over three years through five years, and over five years). The existing 
data reported on the remaining maturity of FHLB advances would be 
modified by adding a new remaining maturity period of over five years, 
with a corresponding modification to the remaining maturity periods 
used for ``Other borrowings'' in Schedule RC-M, item 5.b. This 
additional information would help the agencies' assessments of interest 
rate risk, liquidity, and funds management and, in particular, would 
assist examiners with their risk-scoping of examinations, which can be 
performed off-site and thereby reduce on-site examination hours.
    Banks currently report standby letters of credit issued by a 
Federal Home Loan Bank on their behalf in Schedule RC-L, item 9, ``All 
other off-balance sheet liabilities,'' when these letters of credit 
exceed 10 percent of the bank's total equity capital. When these 
letters of credit exceed 25 percent of total equity capital, the amount 
must also be separately identified and disclosed in Schedule RC-L. 
Because of the growth in this activity, the agencies would add a 
preprinted caption to Schedule RC-L, item 9.c, to facilitate the 
reporting and identification of standby letters of credit issued by a 
Federal Home Loan Bank when the amount exceeds 25 percent of total 
equity capital.
5. Nonaccrual Assets
    Information on nonaccrual assets is a key indicator of the credit 
quality of a bank's assets. Effective December 31, 2003, bank holding 
companies that file the Consolidated Financial Statements for Bank 
Holding Companies (FR Y-9C) (OMB No. 7100-0128) with the Board began to 
complete two new items in the report's Schedule HC-N, ``Past Due and 
Nonaccrual Loans, Leases, and Other Assets': Memorandum item 7, 
``Additions to nonaccrual assets during the quarter,'' and Memorandum 
item 8, ``Nonaccrual assets sold during the quarter.'' The agencies 
propose to add these same items to the comparable Call Report schedule 
(Schedule RC-N).
    Although the overall quarter-to-quarter change in a bank's 
nonaccrual assets can be calculated based on the quarter-end totals 
reported for such assets in Schedule RC-N, the reasons for the change 
cannot be determined from the information currently reported in 
Schedule RC-N. Information relating to inflows and outflows of 
nonaccrual assets would enhance the agencies' ability to track shifts 
in the credit quality of a bank's assets. Information on additions to 
nonaccrual assets during the quarter would indicate the extent of 
erosion or improvement in the quality of a bank's assets. Data on the 
outflow of nonaccrual assets, such as sale activity, would also provide 
insight into the approaches taken by a bank's management to the 
resolution of problem assets. Thus, the proposed new items would assist 
the agencies in assessing a bank's ability to manage credit risk and 
deal with credit problems.
    For the industry as a whole, information on inflows and outflows

[[Page 49369]]

would aid in the evaluation of credit cycle trends. For example, a 
slowdown in inflows of nonaccrual assets may indicate an approaching 
peak level of nonperforming assets after the end of a recession. The 
information on nonaccrual asset sales would increase the agencies' 
understanding of the evolution of the secondary market for sales of 
distressed assets, which has only come into existence in recent years.
    Because bank holding companies that file the FR Y-9C report (i.e., 
bank holding companies with total consolidated assets of $150 million 
or more and certain multibank holding companies) have reported the 
volume of additions to nonaccrual assets and sales of such assets for 
the past two years, banks that are subsidiaries of these holding 
companies should have systems in place for compiling these data. Other 
banks, however, may not currently track these data, although the 
agencies believe that sales of nonaccrual assets by small banks are 
infrequent at present. Thus, the agencies are particularly interested 
in receiving comments from banks that do not fall within the scope of 
an FR Y-9C report about their ability to report the amounts of 
quarterly additions to, and sales of, nonaccrual assets beginning March 
31, 2006.
6. Information on Credit Derivatives
    The volume of credit derivatives, as measured by their notional 
amount, has increased significantly at banks over the past several 
years, rising from an aggregate notional amount of $395 billion at 
year-end 2001 to $3.1 trillion at March 31, 2005. From the end of the 
fourth quarter of 2004 to the end of the first quarter of 2005 alone, 
the notional amount of credit derivatives reported by banks increased 
by $778 billion or 33 percent. However, despite this volume, the number 
of banks currently participating in the credit derivatives market, 
almost all of which have in excess of $1 billion in assets, is 
extremely small: 19 banks act as a guarantor by selling credit 
protection to other parties (i.e., they are assuming credit risk), 
while 26 banks are buying credit protection from other parties (i.e., 
they are hedging credit risk). A number of these banks enter into some 
credit derivatives as guarantor and other credit derivatives as 
beneficiaries.
    To gain a better understanding of the nature and trends of the 
credit derivative activities that are concentrated in a small number of 
large banks, the agencies are proposing to expand the information they 
collect in several Call Report schedules. First, in Schedule RC-L, item 
7, where banks currently report the notional amounts of the credit 
derivatives on which they are the guarantor and on which they are the 
beneficiary, these banks would be required to provide a breakdown of 
these notional amounts by type of credit derivative: credit default 
swaps, total return swaps, credit options, and other credit 
derivatives. Banks would also report the maximum amounts they would pay 
and receive on credit derivatives on which they are the guarantor and 
on which they are the beneficiary, respectively.
    Second, in Schedule RC-R, Memorandum item 2, where banks currently 
present a maturity distribution of their derivative contracts that are 
subject to the risk-based capital requirements, credit derivatives 
would be added as a new category of derivatives with their remaining 
maturities reported separately for those that are investment grade and 
those that are subinvestment grade.
    Third, in Schedule RI, Memorandum item 8, banks that reported 
average trading assets of $2 million or more for any quarter of the 
preceding calendar year currently provide a four-way breakdown of 
trading revenue by type of risk exposure. When banks that must complete 
Memorandum item 8 hold credit derivatives for trading purposes, they 
have to report the revenue from these derivatives in one of the four 
existing risk exposure categories, none of which is particularly 
suitable for reporting such revenue. Accordingly, the agencies propose 
to add a new risk exposure category for credit derivatives. This 
information would address the current weakness in the reporting of 
trading revenue, but, more importantly, it would enable the agencies to 
begin to identify the extent to which credit derivatives held for 
trading purposes contribute to a bank's trading revenue each period and 
over time.
    Finally, the agencies propose to add a new Memorandum item to 
Schedule RI, ``Income Statement,'' for the changes in fair value 
recognized in earnings on credit derivatives that are held for purposes 
other than trading, e.g., to economically hedge credit exposures 
arising from nontrading assets (such as available-for-sale securities 
or loans held for investment \4\) or unused lines of credit. In this 
regard, the agencies reiterate that credit derivatives held for 
purposes other than trading should not be reported as trading assets or 
liabilities in the Call Report and the changes in fair value of such 
credit derivatives should not be reported as trading revenue. 
Consistent with the existing guidance in the Glossary entry for 
``Derivative contracts'' in the Call Report instructions, credit 
derivatives held for purposes other than trading with positive and 
negative fair values should be reported in ``Other assets'' and ``Other 
liabilities,'' respectively, on the Call Report balance sheet. Changes 
in fair value of derivatives held for purposes other than trading that 
are not designated as hedging instruments should be reported 
consistently as either ``Other noninterest income'' or ``Other 
noninterest expense'' in the Call Report income statement.
---------------------------------------------------------------------------

    \4\ Loans held for investment are loans that the bank has the 
intent and ability to hold for the foreseeable future or until 
maturity or payoff.
---------------------------------------------------------------------------

7. 1-4 Family Residential Mortgage Banking Activities
    Mortgage banking activities, particularly those involving closed-
end 1-4 family residential mortgages, have become an increasingly 
important line of business for many banks. Mortgage banking revenues 
are a significant component of earnings for these institutions and have 
been critical to the recent record earnings achieved by the banking 
industry as a whole. The growth of the industry's mortgage banking 
activities also reflects the central role that securitization 
mechanisms now play in the mortgage market.
    However, these activities and the revenues they generate can be 
quite volatile over the business and interest rate cycle. Furthermore, 
a bank's mortgage banking operations can raise significant management 
and supervisory concerns related to credit, liquidity, interest rate, 
and operational risk. Understanding the importance of mortgage banking 
activities to an institution's financial condition and risk profile 
requires information about the transactional flows associated with 
residential mortgages. In this regard, the OTS has collected a large 
set of cash flow data on mortgage loan disbursements, purchases, and 
sales in the TFR for more than a decade.
    After considering the OTS's reporting requirements as well as the 
types of information commonly disclosed by banking organizations with 
large mortgage banking operations, the agencies are proposing to add a 
new Schedule RC-P that would contain a series of items that are focused 
on closed-end 1-4 family residential mortgage loans, with data reported 
separately for first liens and junior liens. The new items would cover 
loans originated, purchased, and sold during the quarter, loans held 
for sale at quarter-end, and the year-to-date noninterest income earned 
from closed-

[[Page 49370]]

end 1-4 family residential mortgage banking activities. This income 
would consist of the portion of a bank's ``Net servicing fees,'' ``Net 
securitization income,'' and ``Net gains (losses) on sales of loans and 
leases'' (Schedule RI, items 5.f, 5.g, and 5.i) attributable to closed-
end 1-4 family residential mortgage loans.
    The proposed new items would be reported by all banks with $1 
billion or more in total assets. In addition, banks with less than $1 
billion in assets that are significantly involved in mortgage banking 
activities, as determined by their primary Federal regulator, could be 
directed by their regulator to report this mortgage banking 
information.
    For loans originated, purchased, and sold during the quarter, banks 
would report the principal amount of these loans. Originations would 
include those loans for which the origination and underwriting process 
was handled by the bank or a consolidated subsidiary of the bank, but 
would exclude those loans for which the origination and underwriting 
process was handled by another party, including a correspondent or 
mortgage broker, even if the loan was closed in the name of the bank or 
a consolidated subsidiary of the bank. Such loans would be treated as 
purchases, as would acquisitions of loans closed in the name of another 
party. Sales of loans would include those transfers of loans that have 
been accounted for as sales in accordance with generally accepted 
accounting principles, i.e., where the loans are no longer included in 
the bank's consolidated total assets. Loans held for sale at quarter-
end would be reported at the lower of cost or fair value, consisent 
with their presentation in the Call Report balance sheet. The agencies 
request comment on the reporting approach discussed in this paragraph.
8. Income Statement Reclassification of Income From Annuity Sales
    In the Call Report income statement (Schedule RI), banks currently 
report commissions and fees from sales of annuities (fixed, variable, 
and deferred) and related referral and management fees as a component 
of item 5.h.(2), ``Income from other insurance activities.'' \5\ 
Because annuities are deemed to be financial investment products rather 
than insurance, the agencies propose to revise the instructions for 
item 5.h.(2) and item 5.d, ``Investment banking, advisory, brokerage, 
and underwriting fees and commissions,'' by moving the references to 
annuities in the former item to the latter item. This change in the 
income statement classification for commissions and fees from annuity 
sales and related income should affect no more than 25 percent of all 
banks based on the number of banks that currently report ``Income from 
the sale and servicing of mutual funds and annuities'' in Schedule RI, 
Memorandum item 2.
---------------------------------------------------------------------------

    \5\ However, commissions and fees from sales of annuities by a 
bank's trust department (or a consolidated trust company subsidiary) 
that are executed in a fiduciary capacity are to be reported in 
``Income from fiduciary activities'' in Schedule RI, item 5.a, and 
income from sales of annuities to bank customers by a bank's 
securities brokerage subsidiary are reported in ``Investment 
banking, advisory, brokerage, and underwriting fees and 
commissions'' in Schedule RI, item 5.d.
---------------------------------------------------------------------------

9. Investment Banking, Advisory, Brokerage, and Underwriting Income
    As the caption for Schedule RI, item 5.d, ``Investment banking, 
advisory, brokerage, and underwriting fees and commissions,'' 
indicates, this income statement item commingles noninterest income 
from a variety of activities. At present, approximately 25 percent of 
all banks report that they earn income from these activities. However, 
the percentage of institutions reporting such income varies 
significantly as a function of bank size, ranging from less than 12 
percent of banks with less than $100 million in assets to more than 60 
percent of banks with $1 billion or more in assets. The smaller banks 
that report income in Schedule RI, item 5.d, generally are not involved 
in investment banking and securities underwriting activities, but 
generate fees and commissions from sales of one or more types of 
investment products to customers. (In addition, as discussed in the 
preceding section, some banks generate commissions and fees from sales 
of annuities and the agencies are proposing to include such income in 
Schedule RI, item 5.d.)
    In order to better understand the sources of banks' noninterest 
income, the agencies are proposing to distinguish between banks' 
investment banking (dealer) activities and their sales (brokerage) 
activities by splitting item 5.d (after moving commissions and fees 
from annuity sales and related income into this income statement 
category from item 5.h.(2) as discussed in the preceding section) into 
three separate items. As revised, item 5.d would be subdivided into 
items for ``Fees and commissions from securities brokerage,'' ``Fees 
and commissions from annuity sales,'' and ``Investment banking, 
advisory, and underwriting fees and commissions.'' Securities brokerage 
income would include fees and commissions from sales of mutual funds 
and from purchases and sales of other securities and money market 
instruments for customers (including other banks) where the bank is 
acting as agent.
10. Certain Secured Borrowings
    When banks raise funds from sources other than deposit liabilities, 
they may do so on a secured or unsecured basis. ``Securities sold under 
agreements to repurchase'' (Schedule RC, item 14.b) and ``Federal Home 
Loan Bank advances'' (Schedule RC-M, item 5.a) always represent secured 
borrowings, whereas ``Subordinated notes and debentures'' (Schedule RC, 
item 19) must be unsecured. However, amounts included in ``Federal 
funds purchased (in domestic offices)'' (Schedule RC, item 14.a) and 
``Other borrowings'' (Schedule RC-M, item 5.b) can be secured or 
unsecured, but this cannot be determined at present from the Call 
Report. This uncertainty adversely affects the agencies' assessment of 
banks' liquidity positions. Moreover, as a bank's condition 
deteriorates, it usually encounters increasing difficulty in rolling 
over existing unsecured debt or borrowing additional funds on an 
unsecured basis. When an institution fails, the relative volume of 
secured and unsecured borrowings directly influences the loss to the 
FDIC-administered deposit insurance fund.
    Thus, to better understand the structure of banks' nondeposit 
liabilities and the effect of these liabilities on liquidity, the 
agencies are proposing to add two items to Schedule RC-M in which banks 
would report the secured portion of their ``Federal funds purchased'' 
and their ``Other borrowings.'' At present, only about one fifth of all 
banks have purchased federal funds and the same percentage of 
institutions have other borrowings. The use of these funding sources 
increases in relation to bank size, with 15 percent of banks with less 
than $100 million in assets reporting federal funds purchased and about 
11 percent of such banks reporting other borrowings. The respective 
percentages for these two types of liabilities increase to nearly 53 
and 64 percent for banks with $1 billion or more in assets.
11. Life Insurance Assets
    Banks include their holdings of life insurance assets (i.e., the 
cash surrender value reported to the bank by the insurance carrier, 
less any applicable surrender charges not reflected by the carrier in 
this reported value) in Schedule RC-F, item 5, ``All other assets.'' If 
the carrying amount of a bank's life insurance assets included in item 
5 is greater than $25,000 and exceeds 25 percent of its ``All other

[[Page 49371]]

assets,'' the bank must disclose this carrying amount in item 5.b.
    In December 2004, the agencies issued an Interagency Statement on 
the Purchase and Risk Management of Life Insurance to provide guidance 
to institutions to help ensure that their risk management processes for 
bank-owned life insurance (BOLI) are consistent with safe and sound 
banking practices. Given the risks associated with BOLI, the 
Interagency Statement advises institutions that it is generally not 
prudent for an institution to hold BOLI with an aggregate cash 
surrender value that exceeds 25 percent of the institution's capital as 
measured in accordance with its primary Federal regulator's 
concentration guidelines. Although more than 40 percent of all banks 
report the amount of their life insurance assets in item 5.b under the 
current 25 percent of ``All other assets'' disclosure threshold, this 
reporting mechanism does not ensure that the agencies are able to 
monitor whether all banks holding life insurance assets are approaching 
or have exceeded the 25 percent of capital concentration threshold. As 
a consequence, the agencies are proposing to revise Call Report 
Schedule RC-F by adding a new item 5 in which all banks would report 
their holdings of life insurance assets and by renumbering existing 
item 5, ``All other assets,'' as item 6. The agencies note that all 
savings associations are currently required to report the amount of 
their life insurance assets in the TFR (Schedule SC, lines SC615 and 
SC625).
12. Income From International Operations
    In the FFIEC 031 version of the Call Report, banks with foreign 
offices whose international operations account for more than 10 percent 
of total revenues, total assets, or net income must complete Schedule 
RI-D, ``Income from International Operations.'' Banks that must 
complete this schedule, of which there are less than 40, are directed 
to report estimates of the amounts of their income and expense 
attributable to international operations after eliminating intrabank 
accounts. These estimates should reflect all appropriate internal 
allocations of income and expense, whether or not recorded in that 
manner in the bank's formal accounting records. The agencies have found 
that the term ``international operations'' is subject to varying 
interpretations and has led to differences between what some banks 
report as international income in their internal management reports 
compared to the income reported in Schedule RI-D.
    In order to obtain better income data about banks' foreign 
operations in a less burdensome manner, the agencies are proposing to 
revise the approach taken in Schedule RI-D. Instead of collecting 
income from ``international operations,'' the agencies would begin to 
capture income from foreign offices as that term is currently defined 
for Call Report purposes. This revised approach should improve the 
usefulness of the Schedule RI-D data in assessing the significance of 
foreign office net income to banks' overall net income. The threshold 
for completing revised Schedule RI-D would continue to be based on a 10 
percent test, but the total revenues, total assets, and net income used 
for this test would be based on foreign office revenues, assets, and 
net income, which should present a clearer standard than at present.
    The data items in proposed revised Schedule RI-D, ``Income from 
Foreign Offices,'' would for the most part mirror categories of income 
and expense reported in Schedule RI. The categories that would be used 
for foreign offices would include total interest income; total interest 
expense; provision for loan and lease losses; trading revenue; 
investment banking, advisory, brokerage, and underwriting fees and 
commissions; net securitization income; all other noninterest income; 
realized gains (losses) on held-to-maturity and available-for-sale 
securities; total noninterest expense; applicable income taxes; and 
extraordinary items and other adjustments, net of income taxes. The 
amounts reported in the preceding income and expense categories would 
be reported gross, i.e., before eliminating the effects of transactions 
with domestic offices, which would be a change from the current 
Schedule RI-D approach under which amounts are reported net of 
intrabank transactions. Banks would also report the amount of any 
adjustments to pretax income for internal allocations to foreign 
offices for the effects of equity capital on overall bank funding costs 
before arriving at net income attributable to foreign offices before 
internal allocations of income and expense. To complete the remainder 
of revised Schedule RI-D, banks would next report the amount of 
internal allocations of income and expense applicable to foreign 
offices, followed by the amount of eliminations arising from the 
consolidation of foreign offices with domestic offices. Finally, banks 
would then report their consolidated net income attributable to foreign 
offices.
13. Scope of Securitizations To Be Included in Schedule RC-S
    In column G of Schedule RC-S, ``Servicing, Securitization, and 
Asset Sale Activities,'' banks report information on securitizations 
and on asset sales with recourse or other seller-provided credit 
enhancements involving loans and leases other than those covered in 
columns A through F. Although the scope of Schedule RC-S was intended 
to cover all of a bank's securitizations and credit-enhanced asset 
sales, as currently structured column G does not capture transactions 
involving assets other than loans and leases. As a result, 
securitization transactions involving such assets as securities, for 
example, have not been reported in Schedule RC-S. Therefore, the 
agencies propose to revise the scope of column G to encompass ``All 
Other Loans, All Leases, and All Other Assets'' to ensure that they can 
identify and monitor the full range of banks' involvement in and credit 
exposure to securitizations and asset sales. With fewer than 30 banks 
reporting data on securitizations in column G of Schedule RC-S at 
present, the proposed change in the scope of column G is expected to 
affect only a nominal number of banks.

C. Other Matters

1. Instructional Clarification for Servicing of Home Equity Lines
    Banks report the outstanding principal balance of assets serviced 
for others in Schedule RC-S, Memorandum item 2. In Memorandum items 2.a 
and 2.b, the amounts of 1-4 family residential mortgages serviced with 
recourse and without recourse, respectively, are reported. Memorandum 
item 2.c covers all other financial assets serviced for others, but 
banks are required to report the amount of such servicing only if the 
servicing volume is more than $10 million. The instructions for 
Memorandum items 2.a and 2.b do not explicitly define ``1-4 family 
residential mortgages.'' However, the caption for column A of the body 
of Schedule RC-S is ``1-4 family residential loans,'' which the 
instructions for column A describe as closed-end loans secured by first 
or junior liens on 1-4 family residential properties as defined for 
Schedule RC-C, part I, items 1.c.(2)(a) and (b).
    Some banks have asked whether Memorandum items 2.a and 2.b should 
include servicing of home equity lines of credit because such lines are 
also secured by 1-4 family residential properties. Information on 
securitizations and asset sales involving home equity lines is reported 
in column

[[Page 49372]]

B of the body of Schedule RC-S. To resolve the questions about the 
scope of Memorandum items 2.a and 2.b, the agencies are proposing to 
clarify the instructions by stating that these two items should include 
servicing of closed-end loans secured by first or junior liens on 1-4 
family residential properties only. Servicing of home equity lines 
would be included in Memorandum item 2.c.
2. Officer Declaration and Director Attestation Requirements and 
Signatures
    The Call Report must be signed by an authorized officer of the bank 
and attested to by not less than two directors (trustees) for state 
nonmember banks and three directors for national and State member 
banks. As required by statute, the officer declaration and director 
attestation address the correctness of the information reported in the 
Call Report. The statute also recognizes that banks are responsible for 
maintaining procedures to ensure the accuracy of this information.
    Given the importance placed upon the quality of the information 
reported in the Call Report, the agencies believe that the chief 
executive officer and chief financial officer are the most appropriate 
officers within a bank to sign a declaration concerning the preparation 
of the report. Similarly, because of the duties normally carried out by 
the audit committee of the board of directors, audit committee members 
are the most appropriate directors to attest to the correctness of the 
report. The agencies recognize, however, that some banks may not have 
audit committees and that, at some banks, the same individual may 
perform the functions of both the chief executive officer and the chief 
financial officer.
    The agencies plan to revise the existing officer declaration to 
require that the Call Report be signed by each bank's chief executive 
officer (or the person performing similar functions) and chief 
financial officer (or the person performing similar functions), who may 
be the same person. The revised declaration would also state that these 
officers are responsible for establishing and maintaining adequate 
internal control over financial reporting, including controls over 
regulatory reports. The director attestation would be revised to 
require that the directors who sign be members of the bank's audit 
committee. If the bank has no audit committee or if the committee has 
less than the two or three directors required to attest to the Call 
Report, other directors would sign the attestation. The revised 
director attestation would also indicate that the directors signing the 
attestation have reviewed the bank's Call Report.

III. Request for Comment

    Public comment is requested on all aspects of this joint notice. As 
previously mentioned, the agencies particularly 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 or revised data. In addition, comments are invited on:
    (a) Whether the proposed revisions to the Call Report 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 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;
    (d) Ways to 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.
    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. 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 request.

    Dated: August 16, 2005.
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, August 18, 
2005.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 17th day of August, 2005.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05-16680 Filed 8-22-05; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P