[Federal Register Volume 72, Number 30 (Wednesday, February 14, 2007)]
[Notices]
[Pages 7115-7121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-639]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
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); Federal
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision
(OTS), Treasury.
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.
[[Page 7116]]
chapter 35), the OCC, the Board, the FDIC, and the OTS (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 a proposal to revise the reporting of risk-based
capital information in the Consolidated Reports of Condition and Income
(Call Report) for banks and the Thrift Financial Report (TFR) for
savings associations, which are currently approved collections of
information for the agencies. These proposed reporting revisions are
based on the agencies' joint notice of proposed rulemaking (NPR) on
proposed revisions to their existing risk-based capital framework, an
approach known as Basel IA (71 FR 77445, December 26, 2006), the
comment period for which ends on March 26, 2007. At the end of the
comment periods for the Basel IA NPR and this reporting proposal, the
agencies will review all comments and recommendations they receive on
both proposals, which may result in modifications of the proposed Basel
IA risk-based capital rules and these related proposed reporting
revisions. Before any proposed Basel IA reporting revisions are
implemented, the agencies will submit them to OMB for review and
approval.
DATES: Comments must be submitted on or before April 16, 2007.
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: Communications Division, Office of the Comptroller of the
Currency, Public Information Room, Mailstop 1-5, Attention: 1557-0081,
250 E Street, SW., Washington, DC 20219. In addition, comments may be
sent by fax to (202) 874-4448, or by electronic mail to
[email protected]. You can inspect and photocopy comments at
the OCC's Public Information Room, 250 E Street, SW., Washington, DC
20219. You can make an appointment to inspect 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 the OMB
control number for this information collection 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 http://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/notices.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), Clearance Officer,
Attn: Comments, Room MB-2088, 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/notices.html
including any personal information provided. Comments may be inspected
at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive,
Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
OTS: You may submit comments, identified by ``1550-0023 (TFR:
Schedule CCR),'' by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail address: [email protected].
Please include ``1550-0023 (TFR: Schedule CCR)'' in the subject line of
the message and include your name and telephone number in the message.
Fax: (202) 906-6518.
Mail: Information Collection Comments, Chief Counsel's
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552, Attention: ``1550-0023 (TFR: Schedule CCR).''
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Information Collection Comments, Chief Counsel's Office, Attention:
``1550-0023 (TFR: Schedule CCR).''
Instructions: All submissions received must include the agency name
and OMB Control Number for this information collection. All comments
received will be posted without change to the OTS Internet Site at
http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any
personal information provided.
Docket: For access to the docket to read background documents or
comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1.
In addition, you may inspect comments at the Public Reading Room,
1700 G Street, NW., by appointment. To make an appointment for access,
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov">public.info@ots.treas.gov, or
send a facsimile transmission to (202) 906-7755. (Prior notice
identifying the materials you will be requesting will assist us in
serving you.) We schedule appointments on business days between 10 a.m.
and 4 p.m. In most cases, appointments will be available the next
business day following the date we receive a request.
Additionally, commenters may send a copy of their comments to the
OMB desk officer for the Agencies by mail to the Office of Information
and Regulatory Affairs, U.S. Office of Management and Budget, New
Executive Office Building, Room 10235, 725 17th Street, NW.,
Washington, DC 20503, or by fax to (202) 395-6974.
FOR FURTHER INFORMATION CONTACT: For further information about the
proposed revisions discussed in this notice, please contact any of the
agency clearance officers whose names appear below.
OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dickerson,
(202) 874-5090, Legislative and Regulatory Activities Division, Office
of the
[[Page 7117]]
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
Board: Michelle E. Shore, Federal Reserve Board 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.
OTS: Marilyn K. Burton, OTS Clearance Officer, at
[email protected], (202) 906-6467, or facsimile number (202)
906-6518, Litigation Division, Chief Counsel's Office, Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION: The agencies are proposing to revise the
reporting of risk-based capital information in the Call Report and the
TFR, which are currently approved collections of information for the
agencies. These proposed reporting revisions are based on the agencies'
joint notice of proposed rulemaking (NPR) on proposed revisions to
their existing risk-based capital framework, an approach known as Basel
IA (71 FR 77445, December 26, 2006). At the end of the comment periods
for the Basel IA NPR and this notice, the agencies will review the
comments on both proposals and, as a result, may modify the proposed
Basel IA risk-based capital rules and the proposed reporting
requirements described in this notice. Before implementing any proposed
changes to the Call Report or the TFR, the agencies will submit any
such changes to OMB for review and approval.
1. Report Title: Consolidated Reports of Condition and Income (Call
Report).\1\
Form Number: FFIEC 031 (for banks with domestic and foreign
offices) and FFIEC 041 (for banks with domestic offices only).
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\1\ The estimated times per response for the Call Report that
are presented for the OCC, the Board, and the FDIC are averages that
vary by agency because of differences in the composition of the
banks under each agency's supervision (e.g., size distribution of
banks, types of activities in which they are engaged, existence of
foreign offices, and risk-based capital rules used by banks). The
average reporting burden for the Call Report on an ongoing basis is
estimated to range from 16 to 645 hours per quarter, depending on an
individual bank's circumstances.
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Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OCC:
OMB Number: 1557-0081.
Estimated Number of Respondents: 1,900 national banks.
Estimated Time per Response: 44.57 burden hours.
Estimated Total Annual Burden: 338,732 burden hours.
Board:
OMB Number: 7100-0036.
Estimated Number of Respondents: 905 state member banks.
Estimated Time per Response: 51.32 burden hours.
Estimated Total Annual Burden: 185,778 burden hours.
FDIC:
OMB Number: 3064-0052.
Estimated Number of Respondents: 5,234 insured state nonmember
banks.
Estimated Time per Response: 35.73 burden hours.
Estimated Total Annual Burden: 748,043 burden hours.
2. Report Title: Thrift Financial Report (TFR: Schedule CCR).
Form Number: OTS 1313 (for savings associations).
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OTS:
OMB Number: 1550-0023.
Estimated Number of Respondents: 854 savings associations.
Estimated Time per Response: 58.5 burden hours.
Estimated Total Annual Burden: 197,598 burden hours.
The estimated times per response shown above represent estimates of
the ongoing average reporting burden per bank or savings association
(institution) per response after those institutions that are expected
to opt in to the proposed Basel IA risk-based capital rules have made
the one-time systems and other recordkeeping changes needed to support
their ability to measure their risk-based capital ratios under the
proposed Basel IA approach and report the results of this measurement
process in the proposed revised Call Report Schedule RC-R and TFR
Schedule CCR. The agencies estimate that 428 institutions will choose
to adopt the proposed Basel IA risk-based capital rules. The agencies
also estimate that, on average, these institutions will incur an
incremental ongoing burden of between 5 and 15 hours per quarter, which
is reflected in the estimated time per response and estimated total
annual burden shown above for each agency. Across all institutions
supervised by the agencies, this represents an average estimated
increase in reporting burden of 0.5 hours per institution.
In addition, the institutions that are expected to opt in to Basel
IA will incur capital and start-up costs associated with implementing
the one-time systems and other recordkeeping changes needed to support
their reporting of Basel IA risk-based capital information in the Call
Report and TFR. These costs will vary in amount from institution to
institution depending upon an institution's individual circumstances
and the extent of its involvement, if any, with the particular assets,
derivatives, and off-balance-sheet items whose risk-based capital
treatment under the Basel IA proposal differs from their treatment
under the existing risk-based capital rules. For those institutions
that opt in to the proposed Basel IA capital rules, the agencies
estimate that the one-time capital and start-up costs that would be
incurred to enable them to report risk-based capital information in the
Call Report and TFR for those assets, derivatives, and off-balance-
sheet items accorded a different treatment under the proposed Basel IA
reporting revisions would range from $10,000 to $300,000 per
institution.
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), 12 U.S.C. 1817
(for insured state nonmember commercial and savings banks), and 12
U.S.C. 1464(v) (for savings associations). Except for selected data
items, these information collections are not given confidential
treatment.
Abstract
Institutions submit Call Report and TFR data to 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. Call Report and TFR data provide the most current statistical
data available for evaluating institutions' corporate applications, for
identifying areas of focus for both on-site and off-site examinations,
and for monetary and other public policy purposes. The agencies use
Call Report and TFR data in evaluating interstate merger and
acquisition applications to determine, as required by law, whether the
resulting institution would control more than 10 percent of the total
amount of deposits of insured depository institutions in the United
States. Call Report and TFR data are also used to calculate all
institutions' deposit insurance and Financing Corporation assessments,
national banks' semiannual assessment fees, and the OTS's assessments
on savings associations.
[[Page 7118]]
Current Actions
I. Overview
On December 26, 2006, the agencies issued a joint notice of
proposed rulemaking (NPR) requesting comment on an alternative approach
for computing risk-weighted assets and credit equivalent amounts of
off-balance-sheet items for purposes of calculating the risk-based
capital ratios of banks, bank holding companies, and savings
associations (banking organizations), an approach known as Basel IA (71
FR 77445). In general, the agencies proposed in the Basel IA NPR to:
(1) Expand the number of risk weight categories;
(2) Allow the use of external credit ratings to risk weight certain
exposures;
(3) Expand the range of recognized collateral and eligible
guarantors;
(4) Use loan-to-value ratios to risk weight most residential
mortgages;
(5) Increase the credit conversion factor for certain commitments
with an original maturity of one year or less;
(6) Assess a capital charge for securitizations of revolving
exposures with early-amortization features; and
(7) Remove the 50 percent limit on the risk weight for certain
derivative transactions.
As proposed in the Basel IA NPR, the application of the Basel IA
risk-based capital rules would be optional. According to the Basel IA
NPR, a banking organization would have to apply all of the proposed
Basel IA changes to its risk-based capital calculations if it chose to
use the Basel IA risk-based capital approach, which would affect the
denominator of the organization's risk-based capital ratios. The
agencies did not propose any changes to the numerator used in these
ratios in the Basel IA NPR.
The agencies currently collect data pertaining to the composition
of an institution's risk-based capital ratios under the current risk-
based capital framework in Call Report Schedule RC-R, Regulatory
Capital, and TFR Schedule CCR, Consolidated Capital Requirement. These
schedules also collect data pertaining to a banking organization's
leverage ratio. In their present forms, Schedule RC-R and Schedule CCR
consist of sections in which banking organizations report the
components of Tier 1 capital, Tier 2 capital, and total risk-based
capital; the calculation of total assets for the leverage ratio;
various adjustments to regulatory capital measures; leverage and risk-
based capital ratios; the risk-weighting of on-balance-sheet assets;
the credit conversion and risk-weighting of derivatives and off-
balance-sheet items; the calculation of total risk-weighted assets; and
the current credit exposure and remaining maturities of derivative
contracts covered by the risk-based capital standards.
As proposed in the Basel IA NPR, unless a banking organization uses
the risk-based capital framework proposed in the agencies' separate
Basel II NPR (71 FR 55380, September 25, 2006), a banking organization
could elect to adopt the proposed Basel IA capital rules or it could
continue to calculate its risk-based capital ratios under the existing
risk-based capital rules. Therefore, because the Basel IA proposal
would affect the calculation of a banking organization's total risk-
weighted assets, the agencies are proposing only to revise Call Report
Schedule RC-R and TFR Schedule CCR. These proposed revisions would add
a second set of sections in which institutions that opt to apply the
Basel IA capital rules would report the risk-weighting of on-balance-
sheet assets, the credit conversion and risk-weighting of derivatives
and off-balance-sheet items, and the calculation of total risk-weighted
assets. Basel IA institutions would complete this alternative set of
risk-weighting sections in lieu of the comparable risk-weighting
sections currently contained in Schedule RC-R and Schedule CCR that
pertain to the existing risk-based capital rules. Institutions that
continue to calculate their risk-based capital ratios under the
existing risk-based capital rules would continue to complete the
current set of risk-weighting sections in Schedule RC-R and Schedule
CCR; they would not complete the proposed Basel IA alternative risk-
weighting sections of these schedules.
In addition, the agencies would add a question to Schedule RC-R and
Schedule CCR in which each institution would indicate whether it
calculates its risk-based capital ratios under the existing risk-based
capital rules or the Basel IA capital rules. Existing items within
Schedule RC-R and Schedule CCR that cross-reference that schedule's
item for ``total risk-weighted assets'' would be revised to refer to
the ``total risk-weighted assets'' item determined under the existing
risk-based capital rules or the Basel IA approach, as appropriate.
These proposed revisions to Call Report Schedule RC-R and TFR
Schedule CCR, which have been approved for publication by the FFIEC,
would take effect as of the first quarter-end Call Report and TFR date
following the effective date of the agencies' final rule amending their
risk-based capital standards to implement the Basel IA alternative
risk-based capital framework.\2\
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\2\ The Board currently collects data pertaining to the
composition of a bank holding company's risk-based capital ratios
under the existing risk-based capital rules in Schedule HC-R,
Regulatory Capital, of the Consolidated Financial Statements for
Bank Holding Companies (FR Y-9C; OMB No. 7100-0128). Revisions
comparable to those proposed to Call Report Schedule RC-R would be
considered for the FR Y-9C, Schedule HC-R, and a separate notice and
request for comment would be published in the Federal Register in
the future. Comments received in response to the proposed Call
Report revisions would be taken into consideration for the
comparable proposed revisions to the FR Y-9C.
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II. Proposed Basel IA Alternative Risk-Weighting Sections in Schedule
RC-R and Schedule CCR
The current on-balance-sheet asset risk-weighting section of
Schedule RC-R and Schedule CCR includes separate line items for the
major asset categories along with columns (Schedule RC-R) and rows
(Schedule CCR) for four of the five risk-weight categories in the
agencies' existing risk-based capital framework: zero percent, 20
percent, 50 percent, and 100 percent. Assets subject to the 200 percent
risk weight are handled through an adjustment that, in general, doubles
the balance sheet amount of the asset.
The current section of Schedule RC-R for derivatives and off-
balance-sheet items contains separate data items for the categories of
these exposures that are covered by the existing risk-based capital
framework. This section also includes columns for the credit equivalent
amounts of these exposures and for the four risk-weight categories
mentioned above. The current Schedule CCR does not include a separate
section for off-balance-sheet items. Instead, these items are subject
to a credit conversion factor and the credit equivalent amounts of the
converted items are included in the appropriate risk weight category on
Schedule CCR. The credit equivalent amounts of derivatives are included
in a risk weight category no higher than 50 percent.
For each category of assets, derivatives, and off-balance-sheet
items, an institution allocates the individual asset amounts or credit
equivalent amounts within that exposure category across the risk-weight
columns (Schedule RC-R) or into the risk-weight rows (Schedule CCR)
based on the risk weight or weights appropriate to the individual asset
or credit equivalent amount. In the current risk-weighted assets
section of Schedule RC-R and Schedule CCR, the asset amounts and credit
equivalent amounts in each risk weight category are totaled and then
[[Page 7119]]
multiplied by the applicable risk weight to produce the institution's
risk-weighted assets by risk weight category. The risk-weighted assets
in each category, together with the institution's market risk
equivalent assets (if the institution is subject to the market risk
rule within the risk-based capital standards \3\), are summed to arrive
at the institution's risk-weighted assets before any deductions for
excess allowance for loan and lease losses and allocated transfer risk
reserve. Following these deductions, the institution reports its total
risk-weighted assets, which generally serves as the denominator for the
institution's risk-based capital ratios.
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\3\ The OTS has not yet implemented a market risk rule for
savings associations, but has proposed such a rule in a separate
notice of proposed rulemaking. See 71 FR 55958 (September 25, 2006).
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The structure of the sections of existing Schedule RC-R and
Schedule CCR that institutions use to report the risk-weighting of on-
balance-sheet assets, the credit conversion and risk-weighting of
derivatives and off-balance-sheet items, and the calculation of total
risk-weighted assets, which have been described above, provides a
suitable starting point for the Basel IA alternative version of these
sections. Therefore, the agencies are proposing to add modified
versions of these sections to Schedule RC-R and Schedule CCR and to
designate them as the Basel IA alternative, which only those
institutions that have opted in to Basel IA would complete. The
proposed modifications are discussed in the following paragraphs.
The Basel IA proposal would increase the number of risk-weight
categories to which on- and off-balance-sheet credit exposures may be
assigned, specifically by adding risk weights of 35 percent, 75
percent, and 150 percent. Therefore, in the proposed Basel IA
alternative risk-weighting sections of these revised schedules, the
agencies would add columns (Schedule RC-R) and rows (Schedule CCR) for
these three additional risk-weight categories. The agencies would also
include in the proposed Basel IA alternative risk-weighting sections a
specific column in Schedule RC-R and a specific row in Schedule CCR for
the existing 200 percent risk-weight category that the current
schedules provide for indirectly.\4\
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\4\ The FDIC, the Board, and the OCC (the banking agencies) are
also proposing to add a 200 percent risk-weight column to the
existing Basel I risk-weighting sections of Schedule RC-R, thereby
replacing the current indirect method of applying the 200 percent
risk weight with a direct method. The OTS is proposing to add a row
to Schedule CCR to also replace the current indirect method.
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The Basel IA proposal increases the credit conversion factor for
various commitments with an original maturity of one year or less.
Under this proposal, short-term commitments, to which the current risk-
based capital standards generally apply a zero percent credit
conversion factor, would be assigned a 10 percent credit conversion
factor. The resulting credit equivalent amount would then be risk
weighted according to the underlying asset(s) or the obligor after
considering any applicable collateral, guarantees, or the external
rating of the facility. Under the Basel IA proposal, commitments that
are unconditionally cancelable would retain their existing zero percent
credit conversion factor.
The current section of Schedule RC-R for risk-weighting the credit
equivalent amount of derivatives and off-balance-sheet items includes
data items for unused commitments that cover commitments with an
original maturity exceeding one year and eligible liquidity facilities
for asset-backed commercial paper programs with an original maturity of
one year or less. Because other short-term commitments are generally
subject to a zero percent credit conversion factor under the agencies'
existing risk-based capital rules, they are not reported in the current
Schedule RC-R. In order to implement the proposed Basel IA 10 percent
credit conversion factor for these other short-term commitments
(excluding commitments that are unconditionally cancelable), the
banking agencies propose to add new data items for such commitments to
the Basel IA alternative risk-weighting section in the revised Schedule
RC-R. No additional data items are required for Schedule CCR.
Under the Basel IA proposal, loan-to-value (LTV) ratios would be
used to determine the risk weight to which first lien and junior lien
one-to-four family residential mortgage loans, including those held for
sale and those held in portfolio,\5\ would be assigned. The agencies
have proposed this LTV approach for one-to-four family residential
mortgages to increase the risk sensitivity of their risk-based capital
standards while minimizing the overall burden to banks. To aid in
minimizing burden, the Basel IA NPR includes a transitional rule that
would provide an option for banking organizations opting in to the
proposed Basel IA approach to continue to risk weight existing
residential mortgages using the existing risk-based capital standard.
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\5\ Loans ``held in portfolio'' are those loans that the bank
has the intent and ability to hold for the foreseeable future or
until maturity or payoff.
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Given the significant change in approach to the risk-weighting of
one-to-four family residential mortgages under the Basel IA proposal,
the banking agencies are seeking the ability to monitor the effect of
this LTV-based approach at individual banks under their supervision
that opt in to Basel IA and across all such banks that opt in.
Therefore, the banking agencies are proposing to add new data items to
the Basel IA alternative risk-weighting section of Schedule RC-R for
assets to enable them to track the allocation across the risk-weighting
categories of residential mortgages to which the proposed Basel IA LTV-
based risk-weighting approach has been applied. In these new data
items, banks supervised by the banking agencies would report breakdowns
by risk-weight category of (a) Their one-to-four family residential
mortgages held for sale that are risk-weighted using the LTV-based
approach separately from their other loans and all leases held for sale
and (b) their one-to-four family residential mortgages held in
portfolio that are risk-weighted using the LTV-based approach
separately from their other loans and all leases held in portfolio.\6\
The OTS believes that the current Schedule CCR captures sufficient
information to meet this monitoring purpose. Therefore, OTS is not
proposing any changes to Schedule CCR to address this allocation
tracking function.
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\6\ Banks that exercise the option to continue to risk weight
existing residential mortgages using the existing risk-based capital
standard would report these mortgages in the data items for their
other loans and leases held for sale or held in portfolio.
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In the Basel IA NPR, the agencies proposed to risk weight mortgage
loans with negative amortization features consistent with the risk-
based capital treatment for other unfunded commitments (for example,
lines of credit). Under the proposed approach, the unfunded portion of
the maximum negative amortization amount would be handled separately
from the funded portion of the loan. The unfunded portion would be
treated as a commitment (based on the original maturity of the
commitment, i.e., the original time period the negative amortization
feature would be available), converted to a credit equivalent amount,
and then risk weighted based on the LTV for the maximum contractual
loan amount (i.e., the sum of the drawn amount of the loan and the
unfunded portion of the maximum negative amortization amount). For
banks, the unfunded portion of the maximum negative
[[Page 7120]]
amortization amount would be reported in the appropriate data item for
unused commitments in the Basel IA alternative risk-weighting section
for off-balance-sheet items in revised Schedule RC-R. The funded
portion of a mortgage loan with negative amortization features would be
risk-weighted based on the LTV of the funded portion and reported in
the asset data item on revised Schedule RC-R for either (a) The one-to-
four family residential mortgages held for sale that are risk-weighted
using the LTV-based approach or (b) the one-to-four family residential
mortgages held in portfolio that are risk-weighted using the LTV-based
approach, as appropriate. Savings associations would compute the risk-
weighted amount by applying the appropriate credit conversion factor to
the amount of the unfunded commitment and including this amount in the
appropriate risk weight category for the LTV of the loan on the
Schedule CCR. As with other off-balance-sheet credit equivalent amounts
under the Basel IA proposal, no additional data items are required for
Schedule CCR.
Another feature of the Basel IA NPR is the proposed assessment of a
risk-based capital charge for securitizations of revolving exposures
with early-amortization features. The early-amortization capital charge
would be levied against the credit equivalent amount of the off-
balance-sheet investors' interest (that is, the total amount of
securities or other interests issued by a trust or special purpose
entity to investors that is not on the securitizing banking
organization's balance sheet) and would be imposed only in the event
that the excess spread on the securitization has declined to a
predetermined percentage of the excess spread trapping point.\7\ As the
level of excess spread approaches the early amortization trigger, the
credit conversion factor to be applied to the amount of investors'
interest would increase from zero percent to 100 percent, thereby
producing an increase in the capital charge.
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\7\ The excess spread trapping point is the point at which a
banking organization is required by the documentation governing a
securitization to divert and hold excess spread in a spread or
reserve account, expressed as a percentage.
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Because no capital charge is imposed on investors' interests in
revolving securitizations with early-amortization features under the
existing risk-based capital framework, the banking agencies are
proposing to add new data items for these investors' interests to the
off-balance-sheet items section of revised Schedule RC-R for the
purpose of reporting the credit equivalent amount of these interests
and then risk-weighting this off-balance-sheet exposure. As with other
off-balance-sheet credit equivalent amounts, no additional data items
are required for Schedule CCR. However, when reporting on its revolving
securitizations with early-amortization features on Schedule RC-R or
Schedule CCR, an institution will need to determine the credit
equivalent amount for each individual securitization based on the
credit conversion factor specific to that securitization rather than
applying a single credit conversion factor to the total of all
investors' interests. The credit equivalent amount for each
securitization would then be assigned to the risk weight category
appropriate to the securitized assets.
The Basel IA proposed rule would remove the 50 percent risk-weight
limit that applies to certain derivative contracts. The risk weight
assigned to the credit equivalent amount of a derivative contract would
instead be the risk weight assigned to the derivative counterparty
after consideration of any collateral or guarantees. The data items for
derivative contracts in the current section of Schedule RC-R for risk-
weighting derivatives and off-balance-sheet items do not permit the
credit equivalent amount of a derivative contract to be assigned a risk
weight greater than 50 percent. As a consequence, the data items for
derivatives in the Basel IA alternative risk-weighting section for
derivatives and off-balance-sheet items in revised Schedule RC-R will
permit these credit equivalent amounts to be assigned to the full range
of risk-weight categories. No modification will be necessary on
Schedule CCR to address this change in Basel IA.
The Basel IA proposed rule would expand the use of external credit
ratings to risk-weight most categories of externally-rated exposures,
including sovereign and corporate debt securities and rated loans. At
present, external credit ratings can be used to risk-weight only asset-
backed and mortgage-backed securities and other positions in
securitization transactions (except credit-enhancing interest-only
strips). The Basel IA proposal would also expand the range of
recognized collateral to include a broader array of externally-rated,
liquid, and readily marketable financial instruments. The agencies'
existing risk-based capital standards recognize limited types of
collateral, including cash on deposit and securities issued or
guaranteed by the U.S. government, U.S. government agencies, and U.S.
government-sponsored agencies. Finally, the Basel IA proposal would
expand the range of eligible guarantors by recognizing entities that
have long-term senior debt that, in general, is rated at least
investment grade, provided the guarantee meets certain additional
criteria. The agencies' existing risk-based capital standards limit the
recognition of third party guarantees. Currently recognized guarantees
include those provided by the U.S. government and U.S. government-
sponsored agencies, U.S. depository institutions, and qualifying U.S.
securities firms.
When risk-weighting on-balance-sheet assets and the credit
equivalent amounts of derivatives and off-balance-sheet items in
existing Schedule RC-R and Schedule CCR, institutions take currently
recognized external credit ratings, collateral, and guarantees into
account when they allocate assets and credit equivalent amounts to
risk-weight categories. Institutions are not required to separately
identify or report on their use of the ratings-based approach or
eligible collateral or guarantees in existing Schedule RC-R and
Schedule CCR. The agencies would maintain this same reporting approach
for the expanded recognized external credit ratings, collateral, and
guarantees in the Basel IA alternative risk-weighting sections for on-
balance-sheet assets and for the credit equivalent amount of
derivatives and off-balance-sheet items in revised Schedule RC-R and
Schedule CCR.
III. Request for Comment
Public comment is requested on all aspects of this joint notice.
Comments are invited on:
(a) Whether the proposed revisions to the Call Report and TFR
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
[[Page 7121]]
the agencies and will be summarized or included in the agencies'
requests for OMB approval. All comments will become a matter of public
record.
Dated: February 8, 2007.
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, February 6,
2007.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 8th day of February, 2007.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
Dated: February 6, 2007.
Deborah Dakin,
Senior Deputy Chief Counsel, Regulations and Legislation Division,
Office of Thrift Supervision.
[FR Doc. 07-639 Filed 2-13-07; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P