[Federal Register Volume 70, Number 211 (Wednesday, November 2, 2005)]
[Notices]
[Pages 66423-66433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-6057]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Proposed Collection; 
Comment Request

AGENCY: Board of Governors of the Federal Reserve System
SUMMARY: Background
    On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board of Governors of the Federal Reserve System 
(Board) its approval authority under the Paperwork Reduction Act, as 
per 5 CFR 1320.16, to approve of and assign OMB control numbers to 
collection of information requests and requirements conducted or 
sponsored by the Board under conditions set forth in 5 CFR 1320 
Appendix A.1. 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 instruments 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.

Request for comment on information collection proposals

    The following information collections, which are being handled 
under this delegated authority, have received initial Board approval 
and are hereby published for comment. At the end of the comment period, 
the proposed information collections, along with an analysis of 
comments and recommendations received, will be submitted to the Board 
for final approval under OMB delegated authority. Comments are invited 
on the following:
    a. Whether the proposed collection of information is necessary for 
the proper performance of the Federal Reserve's functions; including 
whether the information has practical utility;
    b. The accuracy of the Federal Reserve's estimate of the burden of 
the proposed information collection, including the validity of the 
methodology and assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    d. Ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.

DATES: Comments must be submitted on or before January 3, 2006.

ADDRESSES: You may submit comments, identified by FR Y-9, FR Y-11, or 
FR 2314 by any of the following methods:

[[Page 66424]]

     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at 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, 
N.W., 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, N.W.) between 
9:00a.m. and 5:00p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: A copy of the proposed form and 
instructions, the Paperwork Reduction Act Submission (OMB 83-I), 
supporting statement, and other documents that will be placed into 
OMB's public docket files once approved may be requested from the 
agency clearance officer, whose name appears below.
    Michelle Long, Federal Reserve Board Clearance Officer (202-452-
3829), Division of Research and Statistics, Board of Governors of the 
Federal Reserve System, Washington, DC 20551. Telecommunications Device 
for the Deaf (TDD) users may contact (202-263-4869), Board of Governors 
of the Federal Reserve System, Washington, DC 20551.

Proposal to approve under OMB delegated authority the revision, without 
extension, of the following reports:

1. Report title: Financial Statements for Bank Holding Companies.
Agency form number: FR Y-9C, FR Y-9LP, and FR Y-9SP
OMB control number: 7100-0128
Frequency: Quarterly and semiannually.
Reporters: Bank holding companies.
Annual reporting hours: FR Y-9C: 116,279; FR Y-9LP: 18,639; FR Y-9SP: 
47,379.
Estimated average hours per response: FR Y-9C: 37.95; FR Y-9LP: 4.75; 
FR Y-9SP: 5.10.
Number of respondents: FR Y-9C: 766; FR Y-9LP: 981; FR Y-9SP: 4,645.
General description of report: This information collection is mandatory 
(12 U.S.C. 1844(c)). Confidential treatment is not routinely given to 
the data in these reports. However, confidential treatment for the 
reporting information, in whole or in part, can be requested in 
accordance with the instructions to the form, pursuant to sections 
(b)(4), (b)(6)and (b)(8) of the Freedom of Information Act (5 U.S.C. 
Sec. Sec. 522(b)(4), (b)(6) and (b)(8)).
Abstract: The FR Y-9C, FR Y-9LP, and FR Y-9SP are standardized 
financial statements for the consolidated bank holding company (BHC) 
and its parent. The FR Y-9 family of reports historically has been, and 
continues to be, the primary source of financial information on BHCs 
between on-site inspections. Financial information from these reports 
is used to detect emerging financial problems, to review performance 
and conduct pre-inspection analysis, to monitor and evaluate capital 
adequacy, to evaluate BHC mergers and acquisitions, and to analyze a 
BHC's overall financial condition to ensure safe and sound operations.
    The FR Y-9C consists of standardized financial statements similar 
to the Consolidated Reports of Condition and Income (Call Reports) 
(FFIEC 031 & 041; OMB No. 7100-0036) filed by commercial banks. The FR 
Y-9C collects consolidated data from the BHC. The FR Y-9C is filed by 
top-tier BHCs with total consolidated assets of $150 million or more 
and lower-tier BHCs that have total consolidated assets of $1 billion 
or more. (Under certain circumstances defined in the General 
Instructions, BHCs under $150 million may be required to file the FR Y-
9C.) In addition, multibank holding companies with total consolidated 
assets of less than $150 million with debt outstanding to the general 
public or engaged in certain nonbank activities must file the FR Y-9C.
    The FR Y-9LP includes standardized financial statements filed 
quarterly on a parent company only basis from each BHC that files the 
FR Y-9C. In addition, for tiered BHCs, a separate FR Y-9LP must be 
filed for each lower tier BHC.
    The FR Y-9SP is a parent company only financial statement filed by 
smaller BHCs. Respondents include one-bank holding companies with total 
consolidated assets of less than $150 million and multibank holding 
companies with total consolidated assets of less than $150 million that 
meet certain other criteria. This form is a simplified or abbreviated 
version of the more extensive parent company only financial statement 
for large BHCs (FR Y-9LP). This report is designed to obtain basic 
balance sheet and income information for the parent company, 
information on intangible assets, and information on intercompany 
transactions.
    Current actions: The Federal Reserve proposes to modify information 
collected on the FR Y-9C, FR Y-9LP and FR Y-9SP to (1) increase the 
asset-size threshold for filing the FR Y-9C and FR Y-9LP from $150 
million to $500 million; (2) increase the asset-size threshold for 
filing the FR Y-9SP from under $150 million to under $500 million; (3) 
revise other current filing criteria affecting the reporting of the FR 
Y-9C, FR Y-9LP and FR Y-9SP; and (4) revise the text of the attestation 
requirement on the cover page of each report and require signatures 
specifically from the chief executive officer and chief financial 
officer. The Federal Reserve proposes the following revisions to the FR 
Y-9C: (1) add item on loans for purchasing and carrying securities; (2) 
add item for additional regulatory capital detail; (3) add items for 
further detail on construction, land development, and land loans; (4) 
add items for further detail on loans secured by nonfarm nonresidential 
properties; (5) redefine breakouts for lease financing receivables; (6) 
add items for further information on credit derivatives; (7) add items 
for further detail on mortgage banking activities; (8) reclassify 
reporting of annuity sales revenue; (9) add items for further detail on 
investment banking, advisory, brokerage, and underwriting income; (10) 
add items to identify certain secured borrowings; (11) remove threshold 
for reporting of life insurance assets; (12) revise scope of 
securitizations to be included in Schedule HC-S; (13) remove the FR Y-
9C filing requirement for lower-tier BHCs with total assets of $1 
billion or more; (14) delete or impose a reporting threshold on a 
number of items; and (15) make revisions to the reporting instructions. 
Finally, the Federal Reserve proposes to revise the FR Y-9SP by 
collecting two new items on Schedule SC-M, Memoranda, to identify total 
off-balance-sheet activities conducted either directly or through a 
nonbank subsidiary and to identify total debt and equity securities 
(other than trust preferred securities) outstanding that are registered 
with the Securities and Exchange Commission (SEC).
    The Federal Reserve recognizes that several comments were received 
by the banking agencies on proposed Call

[[Page 66425]]

Report revisions that parallel some of these proposed revisions. The 
comments received on the Call Report proposal will also be taken into 
consideration for this proposal.

Proposed Revisions Not Related to Call Report Revisions

    The Federal Reserve proposes to make the following revisions to the 
FR Y-9C effective as of March 31, 2006. The following proposed 
revisions are not related to the revisions proposed to the Call Report.

Filing Criteria: Asset-Size Threshold

    The Federal Reserve proposes to increase the asset-size threshold 
of the FR Y-9C from $150 million to $500 million. BHCs with 
consolidated assets of less than $500 million generally would file the 
parent-only FR Y-9SP. The Federal Reserve further proposes to revise 
the other criteria used in determining whether a BHC is subject to 
consolidated FR Y-9C reporting requirements. The revised criteria would 
more accurately reflect current supervisory views of factors that would 
warrant consolidated financial reporting and compliance with the 
capital guidelines. However, the Federal Reserve would retain the 
current policy that allows a Reserve Bank to require a BHC to file 
consolidated financial reports if the Reserve Bank determines that such 
action is warranted for supervisory reasons.
    The current reporting requirements that govern the frequency and 
the level of detail of financial reports filed by BHCs have been in 
place since 1986 and are principally driven by the asset size of the 
BHC. Generally, BHCs with consolidated assets of less than $150 million 
submit summary parent company financial data semi-annually (FR- Y)9SP). 
BHCs with consolidated assets of $150 million or more submit detailed 
consolidated (FR Y-9C) and parent company (FR Y-9LP) financial data 
quarterly. When these reporting thresholds were established, $150 
million in consolidated assets represented a reasonable threshold for 
identifying those BHCs whose operations warranted more extensive 
consolidated reporting for monitoring risks to safety and soundness.
    However, over the last two decades, inflation, industry 
consolidation, and normal asset growth of BHCs have caused the $150 
million threshold to lose much of its relevance. While the number of 
BHCs with less than $500 million in consolidated assets has increased 
over this time frame, these BHCs hold a smaller percentage of total 
assets for all BHCs filing the FR Y-9C. The number of non-complex FR Y-
9C respondents with consolidated assets of less than $500 million has 
increased by about 560, while their share of total assets of all FR Y-
9C respondents has decreased from about 7 percent to about 4 percent. 
In addition, raising the threshold to $500 million goes well beyond the 
level (approximately $255 million) necessary to adjust the current 
threshold for inflation. The Federal Reserve believes that raising the 
threshold to $500 million achieves an appropriate balance between the 
goals of reducing regulatory burden and ensuring access to supervisory 
data necessary for the safety and soundness of BHCs.
    One consideration in proposing to increase the threshold for filing 
the FR Y-9C is that the loss of data could potentially be an issue for 
BHC management. The Federal Reserve currently produces Bank Holding 
Company Performance Reports (BHCPRs) that compare a BHC's financial 
data to those of its peers. BHCs may use the BHCPRs to evaluate and 
monitor their financial performance. However, most of the BHCs that 
would be affected are shell, one-bank holding companies; therefore, the 
Uniform Bank Performance Report\1\ should provide most of the 
information. Nevertheless, the Federal Reserve seeks public comment on 
any consolidated information BHC management may want to continue 
reporting and see from BHCs with between $150 million and $500 million 
in total assets for peer review or other internal management purposes.
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    \1\ The Uniform Bank Performance Report is similar to the BHCPR 
and compares bank financial data to those of its peers.
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Other Filing Criteria

    The Federal Reserve's current risk-based and leverage-capital 
standards do not apply to BHCs with consolidated assets of less than 
$150 million if the parent holding company is not engaged in nonbank 
activity involving significant leverage and the parent holding company 
does not have a significant amount of debt held by the general public. 
If either of these additional criteria is met, the BHC would be deemed 
subject to the Federal Reserve's capital guidelines. The FR Y-9C 
reporting instructions use slightly different criteria and currently 
exempt BHCs with one bank subsidiary and less than $150 million in 
consolidated assets from filing consolidated statements and risk-based 
capital schedules even if they have public debt or engage in nonbanking 
activities involving significant leverage. The Federal Reserve 
separately has proposed to revise and expand the other criteria under 
which a BHC would be required to comply with the Federal Reserve's 
capital guidelines.\2\ The Federal Reserve believes that for BHCs under 
$500 million in total consolidated assets, other than those BHCs that 
meet the additional criteria noted below, bank-level compliance with 
risk-based and leverage capital requirements would be sufficient for 
supervisory purposes. The Federal Reserve proposes to modify the FR Y-
9C reporting criteria to conform directly with criteria proposed for 
applicability of these guidelines.
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    \2\ Refer to Federal Reserve Board press release of September 7, 
2005. http://www.federalreserve.gov/boarddocs/press/bcreg/2005/20050907/default.htm
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    Specifically, the Federal Reserve proposes to require BHCs with 
consolidated assets of less than $500 million to comply with the 
Federal Reserve's capital guidelines and to continue to comply with the 
FR Y-9C and FR Y-9LP reporting requirements, if the holding company (1) 
is engaged in significant nonbanking activities either directly or 
through a nonbank subsidiary; (2) conducts significant off-balance-
sheet activities, including securitizations or managing or 
administering assets for third parties, either directly or through a 
nonbank subsidiary; or (3) has a material amount of debt or equity 
securities (other than trust preferred securities) outstanding that are 
registered with the SEC.\3\ While the incidence of BHCs with 
consolidated assets of less than $500 million meeting any of these 
criteria is expected to be infrequent, any such holding companies would 
be notified and given a reasonable timetable for meeting the 
consolidated capital and reporting requirements.
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    \3\ As noted above, these proposed criteria would conform 
directly with proposed criteria for applicability of capital 
adequacy guidelines. Responsibility for determination whether such 
activities are significant or material for any given BHC would rest 
with the supervisory function at each Federal Reserve district bank. 
If a Reserve Bank finds that a BHC meet any of these criteria, the 
Reserve Bank would be responsible for notifying the BHC and 
establishing the time frame for meeting the capital adequacy 
guidelines and FR Y-9C reporting requirements.
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    In addition, the Federal Reserve separately has proposed to amend 
its capital guidelines to make explicit the Federal Reserve's authority 
to subject a small BHC to the guidelines if the Federal Reserve 
determines that such action is warranted for supervisory purposes 
(comparable to existing to current instructions for FR Y-9C reporting 
requirements). Furthermore, the proposed amendments to the

[[Page 66426]]

guidelines would explicitly provide that a small BHC may voluntarily 
comply with the guidelines. The Federal Reserve proposes that a BHC 
electing to comply with the guidelines would be required to file the 
consolidated FR Y-9C. Any BHC that volunteers to file the FR Y-9C would 
be required to file a complete report and generally would not be 
permitted to revert back to filing the FR Y-9SP report in any 
subsequent periods.
    Lower-tier Reporting Requirements--The Federal Reserve also 
proposes to eliminate the reporting exception requiring top-tier BHCs 
to submit an FR Y-9C for each lower-tier BHC with total consolidated 
assets of $1 billion or more. The Federal Reserve has determined that 
information from such lower-tier institutions is no longer needed for 
supervisory or safety and soundness reasons.

Schedule HC-C--Loans and Lease Financing Receivables

    The Federal Reserve proposes to revise Schedule HC-C, item 9, All 
other loans, to break out a new item 9.a, Loans for purchasing or 
carrying securities (secured and unsecured). Current item 9 would be 
renumbered as 9.b. This item would be defined the same as a comparable 
item currently reported by banks on the Call Report and is 
predominantly composed of margin loans with broker-dealers. Margin 
loans have been growing at the BHC level, particularly due to 
significant growth in lending to hedge funds. The Federal Reserve 
proposes collecting this item in order to measure and monitor BHCs 
involvement in this higher risk activity.

Schedule HC-M--Memoranda

    The Federal Reserve proposes to delete Schedule HC-M, item 7, Total 
assets of unconsolidated subsidiaries and associated companies. This 
item is no longer needed for supervisory and safety and soundness 
purposes.

Schedule HC-R--Regulatory Capital

    The Federal Reserve proposes to add a new memorandum item 6, Market 
risk equivalent assets attributable to specific risk (included in 
Schedule HC-R, item 58). The Federal Reserve's risk-based capital 
standards require all BHCs with significant market risk to measure 
their market risk exposure and hold sufficient capital to mitigate this 
exposure. In general, a BHC is subject to the market risk capital 
guidelines if its consolidated trading activity, defined as the sum of 
trading assets and liabilities reported in its FR Y-9C for the previous 
quarter, equals: (1) 10 percent or more of the BHC's total assets as 
reported in its FR Y-C for the previous quarter or (2) $1 billion or 
more.
    A BHC that is subject to the market risk guidelines must hold 
capital to support its exposure to general market risk and specific 
risk. General market risk means changes in the market value of covered 
positions resulting from broad market movements, such as changes in the 
general level of interest rates, equity prices, foreign exchange rates, 
or commodity prices. Covered positions include all positions in a BHCs 
trading account and foreign exchange and commodity positions, whether 
or not in the trading account. Specific risk means changes in the 
market value of specific positions due to factors other than broad 
market movements and includes event and default risk.
    The specific risk exposure of specific positions is significantly 
higher than the general market risk of covered positions. The Federal 
Reserve proposes to break out market risk equivalent assets\4\ 
attributable to specific risk to better measure and monitor the BHCs 
market risk position and to better compare such risk positions taken 
across BHCs subject to the market risk guidelines.
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    \4\ A BHC's market risk equivalent assets is equal to its 
measure for market risk multiplied by 12.5 (the reciprocal of the 
minimum 8.0 percent capital ratio). For further information, see the 
Federal Reserve's risk-based capital standards.
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Instructions

    In addition to modifying instructions to incorporate the proposed 
reporting changes, the Federal Reserve proposes to revise the following 
reporting instructions.
    General Instructions--The Federal Reserve proposes to modify the 
reporting instructions under ``Who Must Report,'' section C, Shifts in 
Reporting Status: A top-tier BHC that reaches $500 million or more in 
total consolidated assets as of June 30 of the preceding year should 
begin reporting on the FR Y-9C in March of the current year. If a BHC 
reaches $500 million or more in total consolidated assets due to a 
business combination, then the BHC would be instructed to begin 
reporting the FR Y-9C beginning with the first quarterly report date 
following the effective date of the business combination. In general, 
once a BHC reaches or exceeds $500 million in total assets and begins 
filing the FR Y-9C, it should file a complete FR Y-9C going forward. If 
a BHC's total assets should subsequently fall to less than $500 million 
for four consecutive quarters, then the BHC may revert to filing the FR 
Y-9SP.
    Schedule HC-B--Securities - The Federal Reserve proposes to modify 
the reporting instructions for Schedule HC-B, memorandum item 2, 
Remaining maturity of debt securities, to instruct BHCs to report the 
remaining maturity of holdings of floating rate debt securities 
according to the amount of time remaining until the next repricing 
date. This instruction would be consistent with the current reporting 
treatment for a comparable item in the Call Report. The instructions 
for this item would also be expanded to define the terms fixed interest 
rate, floating rate, and next repricing date to make them consistent 
with the Call Report instructions.
    Schedule HC-K--Quarterly Averages--The Federal Reserve proposes to 
modify Schedule HC-K, item 11, Equity capital, to no longer exclude net 
unrealized losses on marketable equity securities, other net unrealized 
gains and losses on available-for-sale securities, and accumulated net 
gains (losses) on cash flow hedges when calculating average equity 
capital. This revision would ensure a more accurate calculation of 
return on equity.

Proposed Revisions Related to Call Report Revisions

    The Federal Reserve proposes to make the following revisions to the 
FR Y-9C to parallel proposed changes to the Call Report.

Attestation

    The Federal Reserve proposes to revise the current attestation by 
one director of the BHC that he or she has reviewed the data filed and 
has transmitted a copy to the Board of Directors for their information. 
Given the importance placed upon the quality of the information 
reported, the Federal Reserve believes that the chief executive officer 
(or person performing similar functions) and chief financial officer 
(or person performing similar functions) are the most appropriate 
officers within a BHC to sign a declaration concerning the preparation 
of the data. The Federal Reserve recognizes that at some BHCs the same 
individual may perform the functions of both chief executive officer 
and chief financial officer. The note on the cover page would be 
replaced with the following text:
    ``We, the undersigned officers of this bank holding company, are 
responsible for establishing and maintaining adequate internal controls 
over financial reporting, including controls over regulatory reports. 
We attest that the Consolidated Financial Statements for Bank Holding 
Companies (including the

[[Page 66427]]

supporting schedules) for this report date have been prepared in 
accordance with the instructions issued by the Federal Reserve and to 
the best of our knowledge and belief are true and correct.''
    This statement would be followed with the signatures and printed 
names of the chief executive officer (or person performing similar 
functions) and chief financial officer (or person performing similar 
functions) of the BHC and the date of these signatures.

Holdings of Asset-Backed Securities

    Schedule HC-B, Securities collects a six-way breakdown of BHCs' 
holdings of asset-backed securities (not held for trading purposes) in 
items 5.a through 5.f.\5\ Because BHCs 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 Federal 
Reserve has determined that continuing to request a breakdown by 
category of these institutions' limited holdings of asset-backed 
securities is no longer warranted. Instead, these BHCs would report 
only their total holdings of asset-backed securities in Schedule HC-B. 
However, all BHCs with foreign offices and other BHCs 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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    \5\ In Schedule HC-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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Impact of Derivatives on Income

    BHCs 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 HI) 
memoranda items 10.a through 10.c. The amounts reported in these 
memoranda 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 proposed new data on credit 
derivatives (below), the Federal Reserve proposes to delete the three 
income statement memoranda items since they are of lesser utility.

Bankers Acceptances

    The FR Y-9C balance sheet (Schedule HC) has long required BHCs to 
separately disclose the amount of their Customers' liability on 
acceptances outstanding (item 9) and their BHC's Liability on 
acceptances executed and outstanding (item 18) and provide an 
indication of whether the BHC has reduced the liabilities on 
acceptances executed and outstanding by the amount of any 
participations in bankers acceptances (Schedule HC-M, item 10). In 
addition, BHCs also report the amount of Participations in acceptances 
conveyed to others by the reporting bank holding company (Schedule HC-
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 BHCs 
reporting these items. The Federal Reserve proposes to delete these 
four items and instruct BHCs to include any acceptance assets and 
liabilities in Other assets and Other liabilities, respectively, on the 
balance sheet and to include in the ``Other'' category of Schedule HC-
F, Other Assets, and Schedule HC-G, Other Liabilities.

Construction, Land Development, and Other Land Loans

    Construction, land development, and other land (CLD&OL) lending is 
a highly specialized set of 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 Federal Reserve's 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 Federal Reserve has seen substantial growth in the volume of 
CLD&OL loans in recent years. To improve the Federal Reserve's ability 
to monitor the construction lending activities of individual BHCs and 
the industry as a whole, the Federal Reserve proposes to obtain 
separate data on 1-4 family residential CLD&OL loans and all other 
CLD&OL loans. Such information would also enable the Federal Reserve to 
identify institutions that significantly shift between 1-4 family 
residential construction lending and other construction lending and to 
identify when institutions that had been solely 1-4 family residential 
construction lenders move into other types of construction lending.
    Specifically, the Federal Reserve proposes to split the existing 
item for Construction, land development, and other land loans in the 
loan schedule (Schedule HC-C, item 1.a), the past due and nonaccrual 
schedule (Schedule HC-N, item 1.a), and the charge-offs and recoveries 
schedule (Schedule HI-B, 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 Federal Reserve proposes to 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 HC-L, item 1.c.(1)) into two items.

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 a commercial and industrial loan 
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.
    Because of the significant and growing level of BHC 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 
Federal Reserve's monitoring and risk-scoping capabilities. The Federal 
Reserve proposes to split the existing item for loans Secured by 
nonfarm nonresidential properties in the loan schedule (Schedule HC-C, 
item 1.e), the past due and nonaccrual schedule (Schedule HC-N, item 
1.e), and the charge-offs and recoveries schedule (Schedule HI-B, part 
I, item 1.e) into separate items for owner-occupied nonfarm 
nonresidential properties and other nonfarm nonresidential properties.
    When a commercial property that is partially occupied by the owner 
and partially occupied (or available to be

[[Page 66428]]

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 Federal Reserve requests 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.

Retail and Commercial Leases

    BHCs currently report a breakdown of their lease financing 
receivables between those from U.S. and non-U.S. addressees in Schedule 
HC-C, items 10.a and 10.b, and certain related schedules. BHCs lease 
various types of property to various types of customers, and the 
current addressee breakdown, in which only a limited number of BHCs 
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 loan schedule and related schedules, BHCs 
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.
    The Federal Reserve believes 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 schedules for loans and leases (Schedule HC-C, 
items 10.a and 10.b), past due and nonaccrual assets (Schedule HC-N, 
items 8.a and 8.b), and charge-offs and recoveries (Schedule HI-B, Part 
I, items 8.a and 8.b). Retail (consumer) leases would be defined in a 
manner similar to consumer loans (that is, as leases to individuals for 
household, family, and other personal expenditures). Commercial leases 
would encompass all other lease financing receivables.

Information on Credit Derivatives

    The volume of credit derivatives, as measured by their notional 
amount, has increased significantly at BHCs over the past several 
years. A limited number of BHCs, almost all of which have in excess of 
$1 billion in assets, currently participate in the credit derivatives 
market. To gain a better understanding of the nature and trends of the 
credit derivative activities that are concentrated in a small number of 
large BHCs, the Federal Reserve proposes to expand the information 
collected in several schedules.
    First, in Schedule HC-L, item 7, where BHCs currently report the 
notional amounts of the credit derivatives on which they are the 
guarantor and on which they are the beneficiary, BHCs participating in 
this activity 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. BHCs 
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 HC-R, memorandum item 2, where BHCs 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 HI, memorandum item 9, BHCs 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 BHCs that must complete 
memorandum item 9 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 Federal Reserve 
proposes 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 Federal 
Reserve to begin to identify the extent to which credit derivatives 
held for trading purposes contribute to a BHC's trading revenue each 
period and over time.
    Finally, the Federal Reserve proposes to replace memorandum item 10 
to Schedule HI, Income Statement, with an item to collect the changes 
in fair value recognized in earnings on credit derivatives that are 
held for purposes other than trading (for example, to economically 
hedge credit exposures arising from nontrading assets, such as 
available-for-sale securities or loans held for investment,\6\ or 
unused lines of credit). In this regard, the Federal Reserve reiterates 
that credit derivatives held for purposes other than trading should not 
be reported as trading assets or liabilities 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 FR Y-9C instructions, credit 
derivatives held for purposes other than trading with positive and 
negative fair values should be reported in Other assets and Other 
liabilities on the balance sheet (Schedule HC). 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 
income statement.
---------------------------------------------------------------------------

    \6\ Loans held for investment are loans that that the bank has 
the intent and ability to hold for the foreseeable future or until 
maturity or payoff.
---------------------------------------------------------------------------

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 BHCs. 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 BHC'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 Office of Thrift Supervision 
(OTS) has collected a large set of cash flow data on mortgage loan 
disbursements, purchases, and sales in the Thrift Financial Report 
(TFR) (Form 1313, OMB No. 1550-0023) for more than a decade.
    After considering the OTS's reporting requirements as well as the 
types of information commonly disclosed by

[[Page 66429]]

banking organizations with large mortgage banking operations, the 
Federal Reserve proposes to add a new Schedule HC-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-end 1-4 family 
residential mortgage banking activities. This income would consist of 
the portion of a BHC's Net servicing fees, Net securitization income, 
and Net gains (losses) on sales of loans and leases (Schedule HI, 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 any BHC with $1 billion 
or more in total assets or by any BHC that has a bank subsidiary that 
is required to report this information by the bank subsidiary's primary 
regulator. For loans originated, purchased, and sold during the 
quarter, BHCs would report the principal amount of these loans. 
Originations would include those loans for which the origination and 
underwriting process was handled by the BHC or a consolidated 
subsidiary of the BHC, 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 BHC or a consolidated subsidiary of the BHC. 
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 (that is, where the loans 
are no longer included in the BHC's consolidated total assets). Loans 
held for sale at quarter-end would be reported at the lower of cost or 
fair value, consistent with their presentation in the FR Y-9C balance 
sheet. The Federal Reserve requests comment on the reporting approach 
discussed in this paragraph.

Income from Annuity Sales

    In the income statement (Schedule HI), BHCs 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.\7\ Because 
annuities are deemed to be financial investment products rather than 
insurance, the Federal Reserve proposes 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.
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    \7\ However, commissions and fees from sales of annuities by a 
BHCs 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 HI, item 5.a, and 
income from sales of annuities to BHC customers by the BHC's 
securities brokerage subsidiary are reported in Investment banking, 
advisory, brokerage, and underwriting fees and commissions in 
Schedule HI, item 5.d.
---------------------------------------------------------------------------

Investment Banking, Advisory, Brokerage, and Underwriting Income

    As the caption for Schedule HI, 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. In order to better understand the sources of BHCs' 
noninterest income, the Federal Reserve proposes 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 financial 
institutions) where the BHC is acting as agent.

Certain Secured Borrowings

    When BHCs 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 HC, item 14.b) always represent 
secured borrowings, whereas Subordinated notes and debentures (Schedule 
HC, item 19.a) must be unsecured. However, amounts included in Federal 
funds purchased in domestic offices (Schedule HC, item 14.a) and Other 
borrowed money (Schedule HC-M, item 14) can be secured or unsecured, 
but this cannot be determined at present from the FR Y-9C. This 
uncertainty adversely affects the assessment of BHCs' liquidity 
positions. Moreover, as a BHC's condition deteriorates, it usually 
encounters increasing difficulty in rolling over existing unsecured 
debt or borrowing additional funds on an unsecured basis.
    Thus, to better understand the structure of BHCs' nondeposit 
liabilities and the effect of these liabilities on liquidity, the 
Federal Reserve proposes to add two items to Schedule HC-M (items 23.a 
and 23.b) in which banks would report the secured portion of their 
Federal funds purchased and their Other borrowed money.

Life Insurance Assets

    BHCs include their holdings of life insurance assets (that is, the 
cash surrender value reported to the BHC by the insurance carrier, less 
any applicable surrender charges not reflected by the carrier in this 
reported value) in Schedule HC-F, item 5, Other assets. If the carrying 
amount of a BHC's life insurance assets included in item 5 exceed 25 
percent of its Other assets, the BHC must disclose this carrying amount 
in item 5.a.
    In December 2004, the Office of the Controller of the Currency, the 
Board of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, and the OTS 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 BHCs 
report the amount of their life insurance assets in item 5.a under the 
current disclosure threshold of 25 percent of Other assets, this 
reporting mechanism does not ensure that the Federal Reserve is able to 
monitor whether all BHCs holding life insurance assets are approaching 
or have exceeded the concentration threshold of 25 percent of capital. 
As a consequence, the Federal Reserve proposes to revise Schedule HC-F, 
item 5.a, by removing the disclosure threshold of 25 percent of Other 
assets. The Federal Reserve notes that all savings associations are 
currently required to report the amount

[[Page 66430]]

of their life insurance assets in the TFR on Schedule SC, lines SC615 
and SC625.

Scope of Securitizations to be Included in Schedule HC-S

    In column G of Schedule HC-S, Servicing, Securitization, and Asset 
Sale Activities, BHCs 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 HC-S was intended to cover 
all of a BHC'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 HC-S. Therefore, the Federal Reserve proposes 
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 BHCs' involvement in and credit exposure to 
securitizations and asset sales. The proposed change in the scope of 
column G is expected to affect only a nominal number of BHCs.

Instructional Clarification

    BHCs report the outstanding principal balance of assets serviced 
for others in Schedule HC-S, memorandum item 2. In memoranda 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 
BHCs are required to report the amount of such servicing only if the 
servicing volume is more than $10 million. The instructions for 
memoranda 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 HC-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 HC-
C, items 1.c.(2)(a) and (b).
    Some institutions have asked whether memoranda 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 securtizations and asset sales involving home equity 
lines is reported in column B of the body of Schedule HC-S. To resolve 
the questions about the scope of memoranda items 2.a and 2.b, the 
Federal Reserve proposes 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.
    FR Y-9LP
    The Federal Reserve proposes to make the following revisions to the 
FR Y-9LP effective as of March 31, 2006.

Filing Criteria

    The Federal Reserve proposes to increase the asset-size threshold 
of the FR Y-9LP from $150 million to $500 million. The Federal Reserve 
further proposes to modify the other criteria and include additional 
criteria that would be used in determining whether a BHC is subject to 
FR Y-9LP filing requirements.
    Specifically, the Federal Reserve proposes to require BHCs with 
consolidated assets of less than $500 million to comply with the 
Federal Reserve's capital guidelines, and to continue to comply with 
the FR Y-9C and FR Y-9LP reporting requirements, if the holding company 
(1) is engaged in significant nonbanking activities either directly or 
through a nonbank subsidiary; (2) conducts significant off-balance-
sheet activities, including securitizations or managing or 
administering assets for third party, either directly or through a 
nonbank subsidiary; or (3) has a material amount debt or equity 
securities (other than trust preferred securities) outstanding that are 
registered with the SEC. While the incidence of BHCs with consolidated 
assets of less than $500 million meeting any of these criteria is 
expected to be infrequent, any such BHCs would be notified and given a 
reasonable timetable for meeting the consolidated capital and reporting 
requirements.
    The proposed changes are consistent with the proposed revisions to 
filing criteria to the FR Y-9C, as fully described above. These filing 
requirements would apply to all BHCs in multi-tiered organizations.

Attestation

    The Federal Reserve proposes to revise the current attestation of 
one director of the BHC that he or she has reviewed the data filed and 
has transmitted a copy of the data to the Board of Directors for their 
information. Given the importance placed upon the quality of the 
information reported, the Federal Reserve believes that the chief 
executive officer (or person performing similar functions) and chief 
financial officer (or person performing similar functions) are the most 
appropriate officers within a BHC to sign a declaration concerning the 
preparation of the report. The Federal Reserve recognizes that at some 
BHCs the same individual may perform the functions of both chief 
executive officer and chief financial officer. The note on the cover 
page would be replaced with the following text:
    ``We, the undersigned officers of this bank holding company, are 
responsible for establishing and maintaining adequate internal controls 
over financial reporting, including controls over regulatory reports. 
We attest that the Parent Company Only Financial Statements for Large 
Bank Holding Companies (including the supporting schedules) for this 
report date have been prepared in accordance with the instructions 
issued by the Federal Reserve and to the best of our knowledge and 
belief are true and correct.''
    This statement would be followed with the signatures and printed 
names of the chief executive officer (or person performing similar 
functions) and chief financial officer (or person performing similar 
functions) of the BHC and the date of these signatures.

Instructions

    Instructions would be clarified in an attempt to achieve greater 
consistency in reporting by respondents.
    FR Y-9SP
    The Federal Reserve proposes to make the following changes to the 
FR Y-9SP effective as of June 30, 2006.

Filing Criteria

    The Federal Reserve proposes to increase the asset-size threshold 
of the FR Y-9SP from companies with total consolidated assets of less 
than $150 million to companies with total consolidated assets of less 
than $500 million. The Federal Reserve further proposes to modify the 
other criteria and include additional criteria that would be used in 
determining whether a BHC is subject to FR Y-9SP filing requirements.
    Specifically, the Federal Reserve proposes to require BHCs with 
consolidated assets of less than $500 million to comply with the 
Federal Reserve's capital guidelines, and to continue to comply with 
the FR Y-9C and FR Y-9LP reporting requirements, if the holding company 
(1) is engaged in significant nonbanking activities either directly or 
through a nonbank subsidiary; (2) conducts significant off-balance-
sheet activities, including securitizations or managing or

[[Page 66431]]

administering assets for third party, either directly or through a 
nonbank subsidiary; or (3) has a material amount debt or equity 
securities (other than trust preferred securities) outstanding that are 
registered with the SEC.
    Although the incidence of BHCs with consolidated assets of less 
than $500 million meeting any of these criteria is not expected to be 
frequent, information is not currently available to identify BHCs 
meeting the second and third criteria. Therefore the Federal Reserve 
proposes to collect two new items on Schedule SC-M, Memoranda, to 
identify total off-balance-sheet activities conducted either directly 
or through a nonbank subsidiary and to identify total debt and equity 
securities (other than trust preferred securities) outstanding that are 
registered with the SEC. BHCs meeting any of the criteria would be 
notified and given a reasonable timetable for meeting the consolidated 
capital and reporting requirements.

Attestation

    The Federal Reserve proposes to revise the current attestation of 
one director of the BHC that he or she has reviewed the data filed and 
has transmitted a copy of the data to the Board of Directors for their 
information. Given the importance placed upon the quality of the 
information reported, the Federal Reserve believes that the chief 
executive officer (or the person performing similar functions) and 
chief financial officer (or the person performing similar functions) 
are the most appropriate officers within a BHC to sign a declaration 
concerning the preparation of the report. The Federal Reserve 
recognizes that at some BHCs the same individual may perform the 
functions of both chief executive officer and chief financial officer. 
The note on the cover page would be replaced with the following text:
    ``We, the undersigned officers of this bank holding company, are 
responsible for establishing and maintaining adequate internal controls 
over financial reporting, including controls over regulatory reports. 
We attest that the Parent Company Only Financial Statements for Small 
Bank Holding Companies (including the supporting schedules) for this 
report date have been prepared in accordance with the instructions 
issued by the Federal Reserve and to the best of our knowledge and 
belief are true and correct.''
    This statement would be followed with the signatures and printed 
names of the chief executive officer (or person performing similar 
functions) and chief financial officer (or person performing similar 
functions) of the BHC and the date of these signatures.

Instructions

    In addition to modifying instructions to incorporate the proposed 
reporting changes, instructions would be revised and clarified in an 
attempt to achieve greater consistency in reporting by respondents.
2. Report title: Financial Statements of U.S. Nonbank Subsidiaries of 
U.S. Bank Holding Companies.
Agency form number: FR Y-11 and FR Y-11S.
OMB control number: 7100-0244.
Frequency: Quarterly and annually.
Reporters: Bank holding companies
Annual reporting hours: FR Y-11 (quarterly): 24,725; FR Y-11 (annual): 
1,769; FR Y-11S (annual): 1,195
Estimated average hours per response: FR Y-11 (quarterly): 6.25; FR Y-
11 (annual): 6.25; FR Y-11S (annual): 1.0
Number of respondents: FR Y-11 (quarterly): 989; FR Y-11 (annual): 283; 
FR Y-11S (annual): 1,195
General description of report: This information collection is mandatory 
(12 U.S.C. Sec. Sec.  1844(c)). Confidential treatment is not routinely 
given to the data in these reports. However, confidential treatment for 
the reporting information, in whole or in part, can be requested in 
accordance with the instructions to the form, pursuant to sections 
(b)(4), (b)(6)and (b)(8) of the Freedom of Information Act [5 U.S.C. 
Sec. Sec.  522(b)(4), (b)(6) and (b)(8)].
Abstract: The FR Y-11 reports collect financial information for 
individual U.S. nonbank subsidiaries of domestic bank holding companies 
(BHCs). BHCs file the FR Y-11 on a quarterly or annual basis according 
to filing criteria or file the FR Y-11S annually. The FR Y-11 data are 
used with other BHC data to assess the condition of BHCs that are 
heavily engaged in nonbanking activities and to monitor the volume, 
nature, and condition of their nonbanking operations.
Current Actions: The Federal Reserve proposes to raise the asset-size 
threshold for filing the quarterly FR Y-11 to make it consistent with 
the proposed filing threshold for reporting the Consolidated Financial 
Statements for Bank Holding Companies (FR Y-9C; OMB No. 7100-0128) and 
to further reduce reporting burden. The Federal Reserve also proposes 
to (1) add one new equity capital component on the balance sheet for 
reporting partnership interests and (2) reclassify reporting of certain 
annuity sales revenue on the income statement. The Federal Reserve also 
proposes to revise several balance sheet memoranda items to capture 
securitization information on transactions involving assets other than 
loans. No revisions are proposed to the content of the FR Y-11S; 
however, several respondents would shift to filing the FR Y-11S because 
of the proposed threshold revisions.

Revisions to Filing Criteria

    The Federal Reserve proposes to revise the reporting criteria for 
the quarterly FR Y-11 to be consistent with the proposed threshold for 
the FR Y-9C and reduce reporting burden. Specifically, the Federal 
Reserve proposes that a BHC must file the FR Y-11 quarterly for its 
subsidiary if the subsidiary is owned or controlled by a top-tier BHC 
that files the FR Y-9C\8\ and the subsidiary has (a) total assets of $1 
billion or more, or (b) total off-balance-sheet activities of at least 
$5 billion, or (c) equity capital of at least 5 percent of the top-tier 
BHC's consolidated equity capital; or (d) operating revenue of at least 
5 percent of the top-tier BHC's consolidated operating revenue.
---------------------------------------------------------------------------

    \8\ The Federal Reserve is proposing to raise the asset-size 
threshold for purposes of consolidated FR Y-9C reporting, the Small 
Bank Holding Company Policy Statement and the Capital Guidelines 
from $150 million to $500 million. In addition, a limited number of 
holding companies with assets less than $500 million may be required 
to file the FR Y-9C because they meet certain conditions.
---------------------------------------------------------------------------

    Currently the primary criterion for determining quarterly reporting 
for the FR Y-11 is linked to the asset-size threshold for FR Y-9C 
reporting. Retaining the current asset-size threshold of $150 million 
may cause an inconsistency by requiring a BHC to file quarterly nonbank 
subsidiary reports for certain nonbank subsidiaries even when the BHC 
is not required to file the FR Y-9C quarterly. Revising the threshold 
for nonbank subsidiary reporting as described above would maintain 
consistency. Linking the primary nonbank reporting criterion to whether 
the BHC files a FR Y-9C would trigger the quarterly filing of the 
nonbank reports by nonbank subsidiaries meeting the filing 
requirements. If the BHC has assets less than $500 million but is 
engaged in significant activities that warrant filing of the FR Y-9C 
and meets one or more of the additional FR Y-11 quarterly reporting 
criteria, the Federal Reserve believes that it is also necessary for 
supervisory purposes to collect nonbank subsidiary reports on a 
quarterly basis.
    As currently required, a BHC must file the FR Y-11 for any nonbank 
subsidiary that satisfies the quarterly filing criteria

[[Page 66432]]

for any quarter during the calendar year and must continue to report 
quarterly for the remainder of the calendar year even if the nonbank 
subsidiary no longer satisfies the requirements for quarterly 
reporting. The Federal Reserve proposes to modify this reporting 
requirement to be more consistent with the FR Y-9C. The Federal Reserve 
proposes to revise the reporting instructions for quarterly filers 
under ``Who Must Report'' to indicate that if a nonbank subsidiary 
meets the criteria for quarterly filing as of June 30 of the preceding 
year, its BHC should begin reporting the FR Y-11 quarterly for the 
nonbank subsidiary beginning in March of the current year and continue 
to report for the entire calendar year. In addition, if a nonbank 
subsidiary meets the quarterly filing criteria due to a business 
combination, then the BHC would report the FR Y-11 quarterly beginning 
with the first quarterly report date following the effective date of 
the business combination. If a nonbank subsidiary subsequently does not 
meet the quarterly filing criteria for four consecutive quarters, then 
the BHC would revert to annual filing.

Schedule IS-Income Statement

    The Federal Reserve proposes to change the category of noninterest 
income in which nonbank subsidiaries report income from certain sales 
of annuities from item 5.a.(8), Insurance commissions and fees, to item 
5.a.(4), Investment banking, advisory, brokerage, and underwriting fees 
and commissions, to be consistent with the proposed revision to the FR 
Y-9C. Currently, nonbank subsidiaries report income from the sales of 
annuities and related commissions and fees in item 5.a.(8). Since 
annuities are deemed to be financial investment products rather than 
insurance, the Federal Reserve proposes to revise the instructions for 
item 5.a.(8) and item 5.a.(4) by moving the reference to annuities in 
the former item to the latter item.

Schedule BS-M-Memoranda

    The Federal Reserve proposes to expand the scope of item 2.a. 
Number of loans in servicing portfolio, item 2.b, Dollar amount of 
loans in servicing portfolio, and item 3, Loans that have been 
securitized and sold without recourse with servicing rights retained, 
to include assets other than loans. The captions and instructions for 
these items would be revised to include other assets. The proposed 
change would ensure that the Federal Reserve can monitor the full range 
of the nonbank subsidiaries' involvement in securitization.

Schedule BS-Balance Sheet

    The Federal Reserve proposes to add a new item, 18.e, General and 
limited partnership shares and interests, renumber current item, 18.e, 
Other equity capital components, as item 18.f., and renumber current 
item 18.f, Total equity capital, as item 18.g. Currently, the 
instructions for item 18, Equity capital, directs subsidiaries that are 
not corporate in form (that is, those that do not have capital 
structures consisting of capital stock and the other components of 
equity capital currently listed under item 18) to report their entire 
net worth in item 18.f, Total equity. The reporting form and the 
instructions for item 18.f, Total equity, state that item 18.f must 
equal the sum of the components of item 18. However, equity capital of 
those entities not in corporate form cannot appropriately be reported 
in any of the components of item 18. The proposed item and 
clarifications to the instructions for item 18 would remove this 
inconsistency and improve the accuracy of the information reported. In 
addition, the Federal Reserve proposes to clarify that Schedule IS-A, 
Changes in Equity Capital, item 6, Other adjustments to equity capital, 
should include contributions and distributions to and from partners or 
limited liability company (LLC) shareholders when the company is a 
partnership or a LLC. Schedule IS-A, item 6 is a component of Schedule 
IS-A, item 7, Total equity at end of current period. Schedule IS-A, 
item 7 must equal Schedule BS, item 18.f, Total equity.
3. Report title: Financial Statements of Foreign Subsidiaries of U.S. 
Banking Organizations.
Agency form number: FR 2314 and FR 2314S.
OMB control number: 7100-0073.
Frequency: Quarterly and annually.
Reporters: Foreign subsidiaries of U.S. state member banks, bank 
holding companies, and Edge or agreement corporations.
Annual reporting hours: FR 2314 (quarterly): 4,800; FR 2314 (annual): 
950; FR 2314S (annual): 255
Estimated average hours per response: FR 2314 (quarterly): 6.25; FR 
2314 (annual): 6.25; FR 2314S (annual): 1.0
Number of respondents: FR 2314 (quarterly): 192; FR 2314 (annual): 152; 
FR 2314S (annual): 255
General description of report: This information collection is mandatory 
(12 U.S.C. Sec. Sec.  324, 602, 625, and 1844). Confidential treatment 
is not routinely given to the data in these reports. However, 
confidential treatment for the reporting information, in whole or in 
part, can be requested in accordance with the instructions to the form, 
pursuant to sections (b)(4), (b)(6) and (b)(8) of the Freedom of 
Information Act [5 U.S.C. Sec. Sec.  522(b)(4) (b)(6) and (b)(8)].
Abstract: The FR 2314 reports collect financial information for direct 
or indirect foreign subsidiaries of U.S. state member banks (SMBs), 
Edge and agreement corporations, and BHCs. Parent organizations (SMBs, 
Edge and agreement corporations, or BHCs) file the FR 2314 on a 
quarterly or annual basis according to filing criteria or file the FR 
2314S annually. The FR 2314 data are used to identify current and 
potential problems at the foreign subsidiaries of U.S. parent 
companies, to monitor the activities of U.S. banking organizations in 
specific countries, and to develop a better understanding of activities 
within the industry, in general, and of individual institutions, in 
particular.
Current Actions: The Federal Reserve proposes to raise the asset-size 
threshold for filing the quarterly FR 2314 to make it consistent with 
the proposed filing threshold for reporting the Consolidated Financial 
Statements for Bank Holding Companies (FR Y-9C; OMB No. 7100-0128) and 
to further reduce reporting burden. The Federal Reserve also proposes 
to (1) add one new equity capital component on the balance sheet for 
reporting partnership interests and (2) reclassify reporting of certain 
annuity sales revenue on the income statement. The changes in the 
reporting thresholds would have no immediate effect on the FR 2314 
panel because there are currently no quarterly filers owned by parent 
organizations with assets less than $500 million.

Revisions to Filing Criteria

    The Federal Reserve proposes to revise the reporting criteria for 
the quarterly FR 2314 to be consistent with the proposed threshold for 
the FR Y-9C and reduce reporting burden. Specifically, the Federal 
Reserve proposes that a BHC must file the FR 2314 quarterly for its 
subsidiary if the subsidiary is owned or controlled by a parent U.S. 
BHC that files the FR Y-9C or a state member bank or an Edge or 
agreement cooperation that has total consolidated assets equal to or 
greater than $500 million and the subsidiary has (a) total assets of $1 
billion or more, or (b) total off-balance-sheet activities of at least 
$5 billion, or (c) equity capital of at least 5 percent of the top-tier 
organization's consolidated equity capital, or (d) operating revenue of 
at least 5 percent of the top-tier organization's consolidated 
operating revenue.

[[Page 66433]]

    Currently the primary criterion for determining quarterly reporting 
for the FR 2314 is linked to the asset-size threshold for FR Y-9C 
reporting. Retaining the current asset-size threshold of $150 million 
may cause an inconsistency by requiring a BHC to file quarterly nonbank 
subsidiary reports for certain nonbank subsidiaries even when the BHC 
is not required to file the FR Y-9C quarterly. Revising the threshold 
for nonbank subsidiary reporting as described above would maintain 
consistency. Linking the primary nonbank reporting criterion to whether 
the BHC files a FR Y-9C would trigger the quarterly filing of the 
nonbank reports by nonbank subsidiaries meeting the filing 
requirements. If the BHC has assets less than $500 million but is 
engaged in significant activities that warrant filing of the FR Y-9C 
and meets one or more of the additional FR 2314 quarterly reporting 
criteria, the Federal Reserve believes that it is also necessary for 
supervisory purposes to collect nonbank subsidiary reports on a 
quarterly basis.
    The criteria for filing the FR 2314 would be revised to maintain 
the consistency in the reporting criteria for nonbank subsidiary 
reports. Revising the quarterly reporting threshold for the FR 2314 
filers would have no immediate effect on the panel because currently 
there are no quarterly filers owned by parent organizations with assets 
less than $500 million. However, the Federal Reserve believes that 
there may be a small number of additional FR 2314 reports filed for 
subsidiaries owned by a BHC that has assets under $500 million and that 
files the FR Y-9C because they meet certain conditions.
    As currently required, a parent organization must file the FR 2314 
for any nonbank subsidiary that satisfies the quarterly filing criteria 
for any quarter during the calendar year and must continue to report 
quarterly for the remainder of the calendar year even if the nonbank 
subsidiary no longer satisfies the requirements for quarterly 
reporting. The Federal Reserve proposes to modify this reporting 
requirement to be more consistent with the FR Y-9C. The Federal Reserve 
proposes to revise the reporting instructions for quarterly filers 
under ``Who Must Report'' to indicate that if a nonbank subsidiary 
meets the criteria for quarterly filing as of June 30 of the preceding 
year, its parent organization should begin reporting the FR 2314 
quarterly for the nonbank subsidiary beginning in March of the current 
year and continue to report for the entire calendar year. In addition, 
if a nonbank subsidiary meets the quarterly filing criteria due to a 
business combination, then the parent organization would report the FR 
2314 quarterly beginning with the first quarterly report date following 
the effective date of the business combination. If a nonbank subsidiary 
subsequently does not meet the quarterly filing criteria for four 
consecutive quarters, then the parent organization would revert to 
annual filing.

Schedule IS-Income Statement

    The Federal Reserve proposes to change the category of noninterest 
income in which nonbank subsidiaries report income from certain sales 
of annuities from item 5.a.(8), Insurance commissions and fees, to item 
5.a.(4), Investment banking, advisory, brokerage, and underwriting fees 
and commissions, to be consistent with the proposed revision to the FR 
Y-9C. Currently, nonbank subsidiaries report income from the sales of 
annuities and related commissions and fees in item 5.a.(8). Since 
annuities are deemed to be financial investment products rather than 
insurance, the Federal Reserve proposes to revise the instructions for 
item 5.a.(8) and item 5.a.(4) by moving the reference to annuities in 
the former item to the latter item.

Schedule BS-Balance Sheet

    The Federal Reserve proposes to add a new item, 18.e, General and 
limited partnership shares and interests, renumber current item, 18.e, 
Other equity capital components, as item 18.f., and renumber current 
item 18.f, Total equity capital, as item 18.g. Currently, the 
instructions for item 18, Equity capital, directs subsidiaries that are 
not corporate in form (that is, those that do not have capital 
structures consisting of capital stock and the other components of 
equity capital currently listed under item 18) to report their entire 
net worth in item 18.f, Total equity. The reporting form and the 
instructions for item 18.f, Total equity, state that item 18.f must 
equal the sum of the components of item 18. However, equity capital of 
those entities not in corporate form cannot appropriately be reported 
in any of the components of item 18. The proposed item and 
clarifications to the instructions for item 18 would remove this 
inconsistency and improve the accuracy of the information reported. In 
addition, the Federal Reserve proposes to clarify that Schedule IS-A, 
Changes in Equity Capital, item 6, Other adjustments to equity capital, 
should include contributions and distributions to and from partners or 
limited liability company (LLC) shareholders when the company is a 
partnership or a LLC. Schedule IS-A, item 6 is a component of Schedule 
IS-A, item 7, Total equity at end of current period. Schedule IS-A, 
item 7 must equal Schedule BS, item 18.f, Total equity.

    Board of Governors of the Federal Reserve System, October 25, 
2005.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. E5-6057 Filed 11-1-05; 8:45 am]
BILLING CODE 6210-01-S