[Federal Register Volume 74, Number 245 (Wednesday, December 23, 2009)]
[Notices]
[Pages 68314-68325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-30489]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


Agency Information Collection Activities: Submission for OMB 
Review; Joint Comment Request

AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); and Federal 
Deposit Insurance Corporation (FDIC).

ACTION: Notice of information collection to be submitted to OMB for 
review and approval under the Paperwork Reduction Act of 1995.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the FDIC 
(the ``agencies'') may not conduct or sponsor, and the respondent is 
not required to respond to, an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. On August 19, 2009, the agencies, under the auspices of 
the Federal Financial Institutions Examination Council (FFIEC), 
requested public comment for 60 days on a proposal to extend, with 
revision, the Consolidated Reports of Condition and Income (Call 
Report), which are currently approved collections of information. After 
considering the comments received on the proposal, the FFIEC and the 
agencies will proceed with most of the reporting changes with some 
limited modifications in response to the comments.

DATES: Comments must be submitted on or before January 22, 2010.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the agencies. All comments, which should refer to the OMB 
control number(s), will be shared among the agencies.
    OCC: You should direct all written comments to: Communications 
Division, Office of the Comptroller of the Currency, Public Information 
Room, Mailstop 2-3, Attention: 1557-0081, 250 E Street, SW., 
Washington, DC 20219. In addition, comments may be sent by fax to (202) 
874-5274, or by electronic mail to [email protected]. You may 
personally inspect and photocopy comments at the OCC, 250 E Street, 
SW., Washington, DC 20219. For security reasons, the OCC requires that 
visitors make an appointment to inspect comments. You may do so by 
calling (202) 874-4700. Upon arrival, visitors will be required to 
present valid government-issued photo identification and to submit to 
security screening in order to inspect and photocopy comments.
    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 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:
     Agency Web Site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow the instructions for submitting comments 
on the FDIC Web site.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include ``Consolidated Reports 
of Condition and Income, 3064-0052'' in the subject line of the 
message.
     Mail: Gary Kuiper (202-898-3877), Counsel, Attn: Comments, 
Room F-1072, Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7 a.m. and 5 p.m.
    Public Inspection: All comments received will be posted without 
change to http://www.fdic.gov/regulations/laws/federal/propose.html 
including any personal information provided. Comments may be inspected 
at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive, 
Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
    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 
revisions

[[Page 68315]]

discussed in this notice, please contact any of the agency clearance 
officers whose names appear below. In addition, copies of the Call 
Report forms can be obtained at the FFIEC's Web site (http://www.ffiec.gov/ffiec_report_forms.htm).
    OCC: Mary Gottlieb, OCC Clearance Officer, (202) 874-5090, 
Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Michelle 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: Gary Kuiper, Counsel, (202) 898-3877, Legal Division, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.

SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and 
extend for three years the Call Report, which is currently an approved 
collection of information for each agency.
    Report Title: Consolidated Reports of Condition and Income (Call 
Report).
    Form Number: Call Report: FFIEC 031 (for banks with domestic and 
foreign offices) and FFIEC 041 (for banks with domestic offices only).
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
    OCC:
    OMB Number: 1557-0081.
    Estimated Number of Respondents: 1,543 national banks.
    Estimated Time per Response: 48.90 burden hours.
    Estimated Total Annual Burden: 301,811 burden hours.
    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 861 state member banks.
    Estimated Time per Response: 54.84 burden hours.
    Estimated Total Annual Burden: 188,869 burden hours.
    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 4,955 insured state nonmember 
banks.
    Estimated Time per Response: 38.94 burden hours.
    Estimated Total Annual Burden: 771,791 burden hours.
    The estimated time per response for the Call Report is an average 
that varies by agency because of differences in the composition of the 
institutions under each agency's supervision (e.g., size distribution 
of institutions, types of activities in which they are engaged, and 
existence of foreign offices). The average reporting burden for the 
Call Report is estimated to range from 16 to 655 hours per quarter, 
depending on an individual institution's circumstances.

General Description of Reports

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

Abstract

    Institutions submit Call Report 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 data provide the most current statistical data available 
for evaluating institutions' corporate applications, identifying areas 
of focus for both on-site and off-site examinations, and considering 
monetary and other public policy issues. The agencies use Call Report 
data in evaluating interstate merger and acquisition applications to 
determine, as required by law, whether the resulting institution would 
control more than ten percent of the total amount of deposits of 
insured depository institutions in the United States. Call Report data 
are also used to calculate institutions' deposit insurance and 
Financing Corporation assessments and national banks' semiannual 
assessment fees.

Current Actions

I. Overview

    On August 19, 2009, the agencies requested comment on proposed 
revisions to the Call Report (74 FR 41973). The agencies proposed to 
implement certain changes to the Call Report requirements in 2010 to 
provide data needed for reasons of safety and soundness or other public 
purposes. The proposed revisions responded, for example, to a change in 
accounting standards, a temporary increase in the deposit insurance 
limit, and credit availability concerns. As proposed, the Call Report 
changes would take effect as of March 31, 2010, except for new data 
items pertaining to reverse mortgages, which would be collected 
annually beginning December 31, 2010.
    The agencies collectively received comments from seven respondents: 
four banks, one bankers' organization, one law firm, and a government 
agency. None of these commenters addressed every specific aspect of the 
proposal. Rather, individual respondents commented upon one or more of 
the proposed Call Report changes. Four of the commenters offered 
general views on the overall proposal. One bank expressed general 
support for the agencies' proposal and identified a few items that 
deserved further consideration. The bankers' organization commented 
that its members expressed no concerns with many of the proposed 
changes, but it urged the agencies to consider several suggested 
changes in the final revisions. The organization's suggested changes 
also included the proposed collection of data in one subject area that 
was not addressed in the agencies' proposal. The government agency 
supported the collection of the additional proposed Call Report data 
and noted that Call Report data are crucial to key components of the 
agency's economic analysis.
    However, one bank opposed the proposed revisions, stating they 
would not improve the safety and soundness of any bank, yet would add 
to banks' costs of operations. While an important use of Call Report 
data is to assist the agencies in fulfilling their supervisory 
responsibilities with respect to the safety and soundness of individual 
banks as well as the banking system as a whole, Call Report data are 
also used for a variety of other purposes, such as determining deposit 
insurance assessments, supporting the conduct of monetary policy, and 
assessing the availability of credit. In this regard, Congress has 
recognized that Call Report data serve multiple purposes as 
demonstrated by Section 307 of the Riegle Community Development and 
Regulatory Improvement Act of 1994, which directed each federal banking 
agency to review the information banks are required to report in the 
Call Report and ``eliminate requirements that are not warranted for 
reasons of safety and soundness or other public purposes.'' 
Furthermore, in developing the Call Report revisions for 2010, the 
agencies carefully considered the purposes for which the proposed 
additional data would be used, which are described in the agencies' 
August 19, 2009, Federal Register notice and, to the extent 
appropriate, in this Federal Register notice. The agencies also 
considered the estimated cost and burden to banks of reporting these 
additional data.
    The following section of this notice describes the proposed Call 
Report changes and discusses the agencies' evaluation of the comments 
received on

[[Page 68316]]

the proposed changes, including modifications that the FFIEC and the 
agencies have decided to implement in response to those comments. The 
following section also addresses the agencies' response to the 
recommendation from the bankers' organization's concerning the 
collection of certain additional data from banks that had not been 
included in the agencies' August 19, 2009, proposal.
    After considering the comments received on the proposal, the FFIEC 
and the agencies will move forward in 2010 with most of the proposed 
reporting changes after making certain modifications in response to the 
comments. The agencies will not implement the items for interest 
expense and quarterly averages for brokered time deposits in 2010 as 
had been proposed, but will instead reconsider their data needs with 
respect to deposit funding and related costs. In addition, the FFIEC 
and the agencies will add four items to the Call Report on assets 
covered by FDIC loss-sharing agreements in response to the 
recommendation from the bankers' organization.
    The agencies recognize institutions' need for lead time to prepare 
for reporting changes. Thus, consistent with longstanding practice, for 
the March 31, 2010, report date, banks may provide reasonable estimates 
for any new or revised Call Report item initially required to be 
reported as of that date for which the requested information is not 
readily available. This policy on the use of reasonable estimates will 
apply to the reporting of those new Call Report items that will be 
first implemented effective December 31, 2010. Furthermore, the 
specific wording of the captions for the new or revised Call Report 
data items discussed in this notice and the numbering of these data 
items should be regarded as preliminary.
    Type of Review: Revision and extension of currently approved 
collections.

II. Discussion of Proposed Call Report Revisions

    The agencies received either no comments on or comments expressing 
support for the following revisions, and therefore these revisions will 
be implemented effective March 31, 2010, as proposed:
     New Memorandum items in Schedule RI, Income Statement, 
identifying total other-than-temporary impairment losses on debt 
securities, the portion of the total recognized in other comprehensive 
income, and the net losses recognized in earnings, consistent with the 
presentation requirements of a recent accounting standard;
     A change in the reporting frequency for the number of 
certain deposit accounts from annually to quarterly, which is reported 
in Schedule RC-O, Other Data for Deposit Insurance and FICO 
Assessments; and
     The elimination of the item for internal allocations of 
income and expense from Schedule RI-D, Income from Foreign Offices, 
which is completed only by certain banks on the FFIEC 031 report form.
    The agencies received one or more comments addressing or otherwise 
relating to each of the following proposed revisions:
     Clarification of the instructions for reporting unused 
commitments in Schedule RC-L, Derivatives and Off-Balance Sheet Items;
     Breakdowns of the existing items in Schedule RC-L for 
unused credit card lines and other unused commitments, with the former 
breakdown required only for certain institutions, and a related 
breakdown of the existing item for other loans in Schedule RC-C, part 
I, Loans and Leases;
     New items pertaining to reverse mortgages that would be 
collected annually in Schedule RC-C, part I, and Schedule RC-L 
beginning December 31, 2010;
     A breakdown of the existing item for time deposits of 
$100,000 or more (in domestic offices) in Schedule RC-E, Deposit 
Liabilities;
     Revisions of existing items for brokered deposits in 
Schedule RC-E;
     New items for the interest expense and quarterly averages 
for fully insured brokered time deposits and other brokered time 
deposits in Schedule RI, Income Statement, and Schedule RC-K, Quarterly 
Averages; and
     A change in the reporting frequency for small business and 
small farm lending data from annually to quarterly in Schedule RC-C, 
part II, Loans to Small Businesses and Small Farms.
    The comments related to each of these proposed revisions are 
discussed in Sections II.A. through G. of this notice along with the 
agencies' response to these comments. The agencies also received one 
comment recommending the addition of data to the Call Report on assets 
covered by FDIC loss-sharing agreements, which the agencies had not 
proposed. This recommendation is discussed in Section II.H.
A. Clarification of the Instructions for Reporting Unused Commitments
    Banks report unused commitments in item 1 of Schedule RC-L, 
Derivatives and Off-Balance Sheet Items. The instructions for this item 
identify various arrangements that should be reported as unused 
commitments, including but not limited to commitments for which the 
bank has charged a commitment fee or other consideration, commitments 
that are legally binding, loan proceeds that the bank is obligated to 
advance, commitments to issue a commitment, and revolving underwriting 
facilities. However, the agencies have found that some banks have not 
reported commitments that they have entered into until they have signed 
the loan agreement for the financing that they have committed to 
provide. Although the agencies consider these arrangements to be 
commitments to issue a commitment and within the scope of the existing 
instructions for reporting commitments in Schedule RC-L, they believe 
that these instructions may not be sufficiently clear. Therefore, the 
agencies proposed to revise the instructions for Schedule RC-L, item 1, 
``Unused commitments,'' to clarify that commitments to issue a 
commitment at some point in the future are those where the bank has 
extended terms and the borrower has accepted the offered terms, even 
though the related loan agreement has not yet been signed.
    One bank and the bankers' organization commented on this proposed 
revision to the instructions for reporting commitments to issue a 
commitment. The bank recommended that these instructions ``should 
include only terms extended and accepted in writing to allow the banks 
to develop a reliable tracking system.'' Similarly, the bankers' 
organization recommended that the commitment be in writing, but also 
stated that banks should only be required to report when the commitment 
``has an expiration date of greater than 90 days.'' The bankers' 
organization further added that it ``would be exceedingly difficult to 
capture commitments that have an expiration date of 90 days or less and 
that are not in writing.'' The organization requested that the agencies 
delay the effective date of the revised instructions for reporting 
commitments to issue a commitment by at least six months ``to allow 
banks sufficient time to adjust their systems.''
    The agencies generally agree with the recommendation that the 
instructions for reporting commitments to issue a commitment should 
cover situations where the terms extended and accepted are in writing. 
However, in those circumstances where the extension and acceptance of 
the terms are not in writing but are legally binding on both

[[Page 68317]]

the bank and the borrower under applicable law, the agencies believe 
that such commitments should be reported. Furthermore, when the terms 
of a commitment to issue a commitment have been extended and accepted 
in writing or, if not in writing, are legally binding, the agencies 
believe that it is a sound banking practice and a sound internal 
control for the bank entering into such commitments to maintain an 
appropriate tracking system for the commitments whether or not there is 
a related regulatory reporting requirement.
    Accordingly, the agencies have revised the proposed instructional 
clarification pertaining to the reporting of commitments to issue a 
commitment in Schedule RC-L, item 1, ``Unused commitments,'' to state 
that commitments to issue a commitment at some point in the future are 
those where the bank has extended terms, the borrower has accepted the 
offered terms, and the terms extended and accepted are in writing or, 
if not in writing, are legally binding on the bank and the borrower, 
even though the related loan agreement has not yet been signed. 
Although the agencies have decided not to delay the effective date for 
this instructional clarification, banks are reminded that, because of 
the revision to the instructions for reporting commitments to issue a 
commitment in Schedule RC-L, item 1, they may provide a reasonable 
estimate of the amount of such commitments in their Call Reports for 
March 31, 2010.
    After modifying the proposed revised instructions for Schedule RC-
L, item 1, ``Unused commitments,'' in response to the comments 
received, the instructions for this item would read as follows, 
effective March 31, 2010:

    Report in the appropriate subitem the unused portions of 
commitments. Unused commitments are to be reported gross, i.e., 
include in the appropriate subitem the unused amount of commitments 
acquired from and conveyed or participated to others. However, 
exclude commitments conveyed or participated to others that the bank 
is not legally obligated to fund even if the party to whom the 
commitment has been conveyed or participated fails to perform in 
accordance with the terms of the commitment.
    For purposes of this item, commitments include:
    (1) Commitments to make or purchase extensions of credit in the 
form of loans or participations in loans, lease financing 
receivables, or similar transactions.
    (2) Commitments for which the bank has charged a commitment fee 
or other consideration.
    (3) Commitments that are legally binding.
    (4) Loan proceeds that the bank is obligated to advance, such 
as:
    (a) Loan draws;
    (b) Construction progress payments; and
    (c) Seasonal or living advances to farmers under prearranged 
lines of credit.
    (5) Rotating, revolving, and open-end credit arrangements, 
including, but not limited to, retail credit card lines and home 
equity lines of credit.
    (6) Commitments to issue a commitment at some point in the 
future, where the bank has extended terms, the borrower has accepted 
the offered terms, and the extension and acceptance of the terms are 
in writing or, if not in writing, are legally binding on the bank 
and the borrower, even though the related loan agreement has not yet 
been signed.
    (7) Overdraft protection on depositors' accounts offered under a 
program where the bank advises account holders of the available 
amount of overdraft protection, for example, when accounts are 
opened or on depositors' account statements or ATM receipts.
    (8) The bank's own takedown in securities underwriting 
transactions.
    (9) Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs), and other similar arrangements, which are 
facilities under which a borrower can issue on a revolving basis 
short-term paper in its own name, but for which the underwriting 
banks have a legally binding commitment either to purchase any notes 
the borrower is unable to sell by the rollover date or to advance 
funds to the borrower.
    Exclude forward contracts and other commitments that meet the 
definition of a derivative and must be accounted for in accordance 
with FASB Accounting Standards Codifications Subtopic 815-10, 
Derivatives and Hedging--Overall (formerly referred to as Statement 
No. 133), which should be reported in Schedule RC-L, item 12. 
Include the amount (not the fair value) of the unused portions of 
loan commitments that do not meet the definition of a derivative 
that the bank has elected to report at fair value under a fair value 
option. Also include forward contracts that do not meet the 
definition of a derivative.
    The unused portions of commitments are to be reported in the 
appropriate subitem regardless of whether they contain ``material 
adverse change'' clauses or other provisions that are intended to 
relieve the issuer of its funding obligations under certain 
conditions and regardless of whether they are unconditionally 
cancelable at any time.
    In the case of commitments for syndicated loans, report only the 
bank's proportional share of the commitment.
    For purposes of reporting the unused portions of revolving 
asset-based lending commitments, the commitment is defined as the 
amount a bank is obligated to fund--as of the report date--based on 
the contractually agreed upon terms. In the case of revolving asset-
based lending, the unused portions of such commitments should be 
measured as the difference between (a) the lesser of the contractual 
borrowing base (i.e., eligible collateral times the advance rate) or 
the note commitment limit, and (b) the sum of outstanding loans and 
letters of credit under the commitment. The note commitment limit is 
the overall maximum loan amount beyond which the bank will not 
advance funds regardless of the amount of collateral posted. This 
definition of ``commitment'' is applicable only to revolving asset-
based lending, which is a specialized form of secured lending in 
which a borrower uses current assets (e.g., accounts receivable and 
inventory) as collateral for a loan. The loan is structured so that 
the amount of credit is limited by the value of the collateral.
B. Additional Categories of Unused Commitments and Loans
    The extent to which banks are supplying credit during the current 
financial crisis has been of great interest to the Executive Branch, 
the Congress, and the banking agencies. Bank lending plays a central 
role in any economic recovery and the agencies need data to better 
determine when credit conditions have eased. One way to measure the 
supply of credit is to analyze the change in total lending commitments 
by banks, considering both the amount of loans outstanding and the 
volume of unused credit lines. These data are also needed for safety 
and soundness purposes because draws on commitments during periods when 
banks face significant funding pressures, such as during the fall of 
2008, can place significant and unexpected demands on the liquidity and 
capital positions of banks. Therefore, the agencies proposed breaking 
out in further detail two categories of unused commitments on Schedule 
RC-L, Derivatives and Off-Balance Sheet Items. The agencies also 
proposed to break out in further detail one new loan category on 
Schedule RC-C, part I, Loans and Leases. These new data items would 
improve the agencies' ability to obtain timely and accurate readings on 
the supply of credit available to households and businesses. These data 
would also be useful in determining the effectiveness of the 
government's economic stabilization programs.
    Unused commitments associated with credit card lines are reported 
in Schedule RC-L, item 1.b. This data item is not sufficiently 
meaningful for monitoring the supply of credit because it mixes 
consumer credit card lines with credit card lines for businesses and 
other entities. As a result of this aggregation, it is not possible to 
fully monitor credit available specifically to households. Furthermore, 
bank supervisors would benefit from splitting credit card lines into 
two data items, because the usage patterns, profitability, and 
evolution of credit quality through the business cycle are likely to 
differ for consumer credit cards and business credit cards. Therefore, 
the agencies proposed to split Schedule RC-L, item 1.b, into unused 
consumer credit card lines and other unused credit card lines.

[[Page 68318]]

This breakout would be reported by institutions with either $300 
million or more in total assets or $300 million or more in unused 
credit card commitments.
    Schedule RC-L, item 1.e, aggregates all other unused commitments, 
and includes unused commitments to fund commercial and industrial (C&I) 
loans (other than credit card lines to commercial and industrial 
enterprises, which are reported in item 1.b, and commitments to fund 
commercial real estate, construction, and land development loans not 
secured by real estate, which are reported in item 1.c.(2)). Separating 
these C&I lending commitments from the other commitments included in 
other unused commitments would considerably improve the agencies' 
ability to analyze business credit conditions. A very large percentage 
of banks responding to the Board's Senior Loan Officer Opinion Survey 
on Bank Lending Practices (FR 2018; OMB No. 7100-0058) reported having 
tightened lending policies for C&I loans and credit lines during 2008; 
however, C&I loans on banks' balance sheets actually expanded through 
the end of October 2008, reportedly as a result of substantial draws on 
existing credit lines. In contrast, other unused commitments reported 
on the Call Report contracted, but without the proposed breakouts of 
such commitments, it was not possible to know how total business 
borrowing capacity had changed. The FR 2018 data are qualitative rather 
than quantitative and are collected only from a sample of institutions 
up to six times per year. Having the additional unused commitment data 
reported separately on the Call Report, along with the proposed changes 
to Schedule RC-C described below, would have indicated more clearly 
whether there was a widespread restriction in new credit available to 
businesses.
    Therefore, the agencies proposed to split Schedule RC-L, item 1.e, 
into three categories: unused commitments to fund commercial and 
industrial loans (which would include only commitments not reported in 
Schedule RC-L, items 1.b and 1.c.(2), for loans that, when funded, 
would be reported in Schedule RC-C, item 4), unused commitments to fund 
loans to financial institutions (defined to include depository 
institutions and nondepository financial institutions, i.e., real 
estate investment trusts, mortgage companies, holding companies of 
other depository institutions, insurance companies, finance companies, 
mortgage finance companies, factors and other financial intermediaries, 
short-term business credit institutions, personal finance companies, 
investment banks, the bank's own trust department, other domestic and 
foreign financial intermediaries, and Small Business Investment 
Companies), and all other unused commitments. With respect to Schedule 
RC-C, part I, the agencies also proposed to revise item 9, ``Other 
loans,'' by breaking out a new category for loans to nondepository 
financial institutions (as defined above). Banks already report data on 
loans to depository institutions in Schedule RC-C, part I, item 2.
    Lending by nondepository financial institutions was a key 
characteristic of the recent credit cycle and many such institutions 
failed; however, little information existed on the exposure of the 
banking system to these firms as this information was obscured by the 
current structure of the Call Report's loan schedule. The proposed 
addition of separate items for unused commitments to financial 
institutions and loans to nondepository financial institutions, 
together with the existing data on loans to depository institutions, 
will allow supervisors and other interested parties to monitor more 
closely the exposure of individual banks to financial institutions and 
assess the impact of changes in credit availability to this sector on 
the larger economy.
    Two commenters addressed these proposed revisions to Schedules RC-L 
and RC-C. The bankers' organization indicated that the proposed 
revisions relating to additional categories of unused commitments were 
acceptable. One bank expressed support for the proposed reporting of 
unused commitments and loans to nondepository financial institutions, 
agreeing that this information would be useful to the agencies in their 
monitoring of lending activity. However, this bank also asserted that 
the instructions for categorizing loans in Schedule RC-C ``are complex, 
require considerable effort, and introduce the potential for 
inconsistency across reporting institutions.'' The bank asked the 
agencies to consider simplifying the loan categorization requirements 
by ``(1) Consolidating reporting categories, where feasible; (2) 
creating a decision tree matrix with prioritization for competing 
criteria; (3) recommending the use of more objective criteria (such as 
SIC classifications).'' The agencies periodically review the reporting 
categories used in Schedule RC-C and have limited the level of detail 
required from smaller banks, but in recent years the agencies have 
found that additional loan categories are needed to better monitor the 
credit risk profiles of individual institutions and the industry as a 
whole, to assess credit availability, and to conduct the agencies' 
other activities. When assigning loans to the loan categories in 
Schedule RC-C, the schedule already assigns priority to loans secured 
by real estate, regardless of borrower loan purpose. Loans that do not 
meet the definition of the term ``loan secured by real estate'' are 
then categorized by borrower or purpose. The agencies believe the 
remaining loan categories (e.g., loans to depository institutions; 
commercial and industrial loans; loans to individuals for household, 
family, and other personal expenditures; and loans to foreign 
governments and official institutions) are sufficiently distinct from 
one another. The instructions for Schedule RC-C provide detailed 
descriptions of the types of loans and borrowers that fall within the 
scope of each loan category.
C. Reverse Mortgage Data
    Reverse mortgages are complex loan products that leverage equity in 
homes to provide lump sum cash payments or lines of credit to 
borrowers. These products typically are marketed to senior citizens who 
own homes with accumulated equity. Access to data regarding loan 
volumes, dollar amounts outstanding, and the institutions offering 
reverse mortgages or participating in reverse mortgage activity is 
severely limited. As a consequence, the agencies currently are unable 
to effectively identify and monitor institutions that offer these 
products.
    The reverse mortgage market currently consists of two basic types 
of products: Proprietary products designed and originated by financial 
institutions and a federally-insured product known as a Home Equity 
Conversion Mortgage (HECM). Some reverse mortgages provide for a lump 
sum payment to the borrower at closing, with no ability for the 
borrower to receive additional funds under the mortgage at a later 
date. Other reverse mortgages are structured like home equity lines of 
credit in that they provide the borrower with additional funds after 
closing, either as fixed monthly payments, under a line of credit, or 
both. There are also reverse mortgages that provide a combination of a 
lump sum payment to the borrower at closing and additional payments to 
the borrower after the closing of the loan.
    The volume of reverse mortgage activity is expected to increase 
dramatically in the coming years as the U.S. population ages. A number 
of consumer protection related risks and safety and soundness related 
risks are

[[Page 68319]]

associated with these products and the agencies need to collect 
information from banks to monitor and mitigate those risks. For 
example, proprietary reverse mortgages structured as lines of credit, 
which are not insured by the federal government, expose borrowers to 
the risk that the lender will be unwilling or unable to meet its 
obligation to make payments due to the borrower. Additionally, in an 
economic environment in which housing prices are declining, there is 
the risk that the reverse mortgage loan balance may exceed the value of 
the underlying collateral value of the home.
    The agencies proposed that new items be added to the Call Report to 
collect reverse mortgage data on an annual basis beginning on December 
31, 2010. Collecting this information will provide the agencies with 
the necessary information for policy development and the management of 
risk exposures posed by institutions' involvement with reverse 
mortgages. First, a new Memorandum item would be added to Schedule RC-
C, part I, Loans and Leases, for ``Reverse mortgages outstanding that 
are held for investment.'' In this Memorandum item, banks would report 
separately the amount of HECM reverse mortgages and the amount of 
proprietary reverse mortgages that are held for investment and included 
in Schedule RC-C, part I, item 1.c, Loans ``Secured by 1-4 family 
residential properties.'' Additionally, new items would be added to 
Schedule RC-L, Derivatives and Off-Balance Sheet Items, to collect 
information on the amounts of ``Unused commitments for HECM reverse 
mortgages outstanding that are held for investment'' and ``Unused 
commitments for proprietary reverse mortgages outstanding that held for 
investment.'' Because these reverse mortgages have been structured in 
whole or in part like home equity lines of credit, the unused 
commitments associated with these mortgages are also reportable in 
existing item 1.a, ``Revolving, open-end lines secured by 1-4 family 
residential properties,'' of Schedule RC-L. The proposed new unused 
commitment items would be subsets of item 1.a.
    In many instances, institutions do not underwrite and fund reverse 
mortgages, but instead refer borrowers to other reverse mortgage 
lenders. These referring institutions may receive fees for performing 
actual services for the reverse mortgage lender in connection with the 
reverse mortgages of the customers who have been referred to the 
reverse mortgage lender. This model enables consumers to deal first 
with their local institutions without the institutions having to build 
an entirely new lending function. It also provides an economy of scale 
for a specialized lender by allowing it to build its business by 
partnering with existing institutions rather than establishing a large 
physical branch network. The banking agencies proposed to add a new 
Memorandum item to Schedule RC-C, part I, in which each bank making 
referrals to reverse mortgage lenders would annually report the 
estimated number of referrals made during the year for which the bank 
received a fee. Banks would report separately the estimated number of 
fee-paid referrals they made for HECM reverse mortgages and proprietary 
reverse mortgages beginning on December 31, 2010.
    Finally, many banks that originate reverse mortgages routinely sell 
their funded mortgages in the secondary market. As a result, these 
loans will not remain on the originating banks' balance sheets for long 
periods of time and, therefore, the proposed items for reverse 
mortgages outstanding that are held for investment will not capture the 
extent of banks' reverse mortgage activity when it involves the 
origination and sale of these loans. Thus, the agencies proposed to add 
Memorandum items to Schedule RC-C, part I, in which banks would report 
the principal amount of reverse mortgages originated for sale that have 
been sold during the year. HECM and proprietary reverse mortgages sold 
would be reported separately. These items are distinct and separate 
from the items described above for the estimated number of referrals 
because the referring bank does not fund the loan, but instead refers 
the borrower to another lender that ultimately funds the reverse 
mortgage. The information on loans sold during the year also would be 
collected annually beginning on December 31, 2010.
    The bankers' organization was the only respondent to comment on the 
proposed collection of reverse mortgage data. The organization stated 
that it generally has no concerns with the new reporting requirements, 
except for the items relating to the reporting of the estimated number 
of fee-paid referrals. The organization asked the agencies to 
reconsider this reporting requirement because it may require banks to 
report information that is inconsistent with the legal requirements of 
the Real Estate Settlement Procedures Act (RESPA). The agencies have 
reviewed the proposed reporting of data on reverse mortgage referrals 
and acknowledge that the description of this proposed reporting 
requirement could be viewed in such a manner. Under RESPA and its 
implementing regulations, a mortgage lender may pay fees or 
compensation to another party, such as a bank that has referred a 
customer to the mortgage lender, only for services actually performed 
by that party. Accordingly, to avoid possible misinterpretation or 
misunderstanding, the agencies are revising their proposed annual data 
items for the reporting of the estimated number of fee-paid referrals 
during the year. As revised, banks would annually report the estimated 
number of reverse mortgage loan referrals to other lenders during the 
year from whom they have received any compensation for services 
performed in connection with the origination of the reverse mortgages. 
The revised referral data items would be implemented beginning December 
31, 2010. The other proposed reverse mortgage data items would be 
implemented as proposed beginning on that same date.
D. Time Deposits of $100,000 or More
    On October 3, 2008, the Emergency Economic Stabilization Act of 
2008 temporarily raised the standard maximum deposit insurance amount 
(SMDIA) from $100,000 to $250,000 per depositor. Under this 
legislation, the SMDIA was to return to $100,000 after December 31, 
2009. However, on May 20, 2009, the Helping Families Save Their Homes 
Act extended this temporary increase in the SMDIA to $250,000 per 
depositor through December 31, 2013, after which the SMDIA is scheduled 
to return to $100,000.
    At present, banks report a two-way breakdown of their time deposits 
(in domestic offices) in Schedule RC-E, Deposit Liabilities, 
distinguishing between time deposits of less than $100,000 and time 
deposits of $100,000 or more. In response to the extension of the 
temporary increase in the limit on deposit insurance coverage, the 
agencies understand that time deposits with balances in excess of 
$100,000, but less than or equal to $250,000, have been growing and can 
be expected to increase further. However, given the existing Schedule 
RC-E reporting requirements, the agencies are unable to monitor growth 
in banks' time deposits with balances within the temporarily increased 
limit on deposit insurance coverage.
    Therefore, the agencies proposed to replace Schedule RC-E, 
Memorandum item 2.c, ``Total time deposits of $100,000 or more,'' with 
a revised Memorandum item 2.c, ``Total time deposits of $100,000 
through $250,000,'' and a new Memorandum item 2.d, ``Total time 
deposits of more than $250,000.'' Existing Memorandum item

[[Page 68320]]

2.c.(1), ``Individual Retirement Accounts (IRAs) and Keogh Plan 
accounts included in Memorandum item 2.c, `Total time deposits of 
$100,000 or more,' above,'' would be renumbered and recaptioned as 
Memorandum item 2.e, ``Individual Retirement Accounts (IRAs) and Keogh 
Plan accounts of $100,000 or more included in Memorandum items 2.c and 
2.d above,'' but the scope of this Memorandum item would not change.
    The only comment that the agencies received concerning this 
proposed change came from the bankers' organization, which recommended 
that the proposed three-way breakout of time deposits (i.e., below 
$100,000, between $100,000 and $250,000, and above $250,000) ``be 
replaced with references to the deposit insurance limit in effect at 
the time of the report, without specified dollar amounts'' in order to 
``remove what can be an impediment to a bank using the larger (but 
fully insured) deposits as a funding source.'' The bankers' 
organization further noted that deposits from a bank's ``core'' 
customers that have been increased up to the $250,000 deposit insurance 
limit are likely to be as stable as deposits below $100,000 because of 
the certainty of deposit insurance. As a consequence, the organization 
stated that the proposed collection of data on time deposits between 
$100,000 and $250,000 ``suggests that there is greater volatility in 
deposits'' in this size range and reinforces a perception ``that an 
institution should not rely on'' such deposits, which represent 
``stable and comparatively inexpensive funding.''
    Although time deposits of $100,000 through $250,000 currently fall 
within the limit of deposit insurance per depositor (for deposits 
maintained in the same right and capacity), the recent increase in 
deposit insurance coverage is temporary. Thus, the extent to which a 
bank's funding has been derived from time deposits between $100,000 and 
$250,000 and the bank's ability to retain or replace time deposits that 
will no longer be fully insured after the expiration date of the 
temporary increase in the SMDIA are key safety and soundness concerns 
for the agencies because there is no assurance that the temporary 
increase will be made permanent. Replacing the existing two-way 
breakout of time deposits between those of less than $100,000 and those 
of $100,000 or more with a two-way breakout based on the $250,000 
temporarily increased insurance limit, as recommended by the bankers' 
organization, would not enable the agencies to identify the amount of 
time deposits in the $100,000 to $250,000 range that are susceptible to 
the loss of deposit insurance coverage when the temporary increase is 
scheduled to expire. Therefore, the agencies will implement the change 
to the reporting of time deposits of $100,000 or more in Schedule RC-E 
as proposed.
E. Revisions of Brokered Deposit Items
    As mentioned in Section II.D. above, the SMDIA has been increased 
temporarily from $100,000 to $250,000 through year-end 2013. However, 
the data that banks currently report in the Call Report on fully 
insured brokered deposits in Schedule RC-E, Memorandum items 1.c.(1) 
and 1.c.(2), is based on the $100,000 insurance limit (except for 
brokered retirement deposit accounts for which the deposit insurance 
limit was already $250,000). Therefore, in response to the temporary 
increase in the SMDIA, the agencies proposed to revise the reporting of 
fully insured brokered deposits in Schedule RC-E. Furthermore, given 
the linkage between the deposit insurance limits and the Memorandum 
items on fully insured brokered deposits in Schedule RC-E, the scope of 
these items needs to be changed whenever deposit insurance limits 
change. To ensure that the scope of these Memorandum items, including 
the dollar amounts cited in the captions for these items, changes 
automatically as a function of the deposit insurance limit in effect on 
the report date, Memorandum item 1.c, ``Fully insured brokered 
deposits,'' would include a footnote stating that the specific dollar 
amounts used as the basis for reporting fully insured brokered deposits 
in Memorandum items 1.c.(1) and 1.c.(2) reflect the deposit insurance 
limits in effect on the report date. The instructions for Memorandum 
item 1.c would be similarly clarified.\1\
---------------------------------------------------------------------------

    \1\ The proposed linkage of the scope of the Memorandum items on 
fully insured brokered deposits in Schedule RC-E to the deposit 
insurance limits in effect on the report date is consistent with an 
existing linkage between the deposit insurance limits in effect on 
the report date and the Memorandum items in Schedule RC-O, Other 
Data for Deposit Insurance and FICO Assessments, on the amount and 
number of deposit accounts within the insurance limit and in excess 
of the insurance limit.
---------------------------------------------------------------------------

    In addition, consistent with the reporting of time deposits in 
other items of Schedule RC-E, brokered deposits would be reported based 
on their balances rather than the denominations in which they were 
issued.
    Accordingly, Memorandum items 1.c.(1) and 1.c.(2) of Schedule RC-E 
on fully insured brokered deposits and their instructions would be 
revised as follows:
     Memorandum item 1.c.(1), ``Brokered deposits of less than 
$100,000'': Report in this item brokered deposits with balances of less 
than $100,000. Also report in this item time deposits issued to deposit 
brokers in the form of large ($100,000 or more) certificates of deposit 
that have been participated out by the broker in shares with balances 
of less than $100,000. For brokered deposits that represent retirement 
deposit accounts (as defined in Schedule RC-O, Memorandum item 1) 
eligible for $250,000 in deposit insurance coverage, report such 
brokered deposits in this item only if their balances are less than 
$100,000.
     Memorandum item 1.c.(2), ``Brokered deposits of $100,000 
through $250,000 and certain brokered retirement deposit accounts'': 
Report in this item brokered deposits (including brokered retirement 
deposit accounts) with balances of $100,000 through $250,000. Also 
report in this item brokered deposits that represent retirement deposit 
accounts (as defined in Schedule RC-O, Memorandum item 1) eligible for 
$250,000 in deposit insurance coverage that have been issued by the 
bank in denominations of more than $250,000 that have been participated 
out by the broker in shares of $100,000 through exactly $250,000.
    The proposed revisions to Schedule RC-E, Memorandum items 1.c.(1) 
and 1.c.(2), that relate to the temporary increase in the SMDIA would 
remain in effect during this increase, after which the dollar amounts 
used as the basis for reporting fully insured brokered deposits in 
these items would revert to the amounts in effect prior to the 
temporary increase.
    Comments addressing the proposed changes to the existing Schedule 
RC-E Memorandum items on brokered deposits were submitted by one bank 
and the bankers' organization. The bank expressed concern about the 
ability of institutions to report at the level of detail required by 
the proposed revised items for fully insured brokered deposits. As the 
basis for this comment, the bank cited language contained in the 
existing instructions for Schedule RC-E, Memorandum item 1.c, which 
states that ``under current deposit insurance rules the deposit broker 
is not required to provide information routinely on these purchasers 
[of brokered deposits] and their account ownership capacity to the bank 
issuing the deposits.'' As a consequence, the existing instructions 
include a rebuttable presumption that, if such information on 
purchasers and their account ownership capacity is not readily 
available to the issuing bank, ``retail brokered deposits'' and certain

[[Page 68321]]

brokered transaction accounts or money market deposit accounts are 
fully insured brokered deposits and should be reported as brokered 
deposits of less than $100,000.
    The agencies are not aware of instances where this rebuttable 
presumption has impeded banks' ability to report their fully insured 
brokered deposits based on the $100,000 insurance limit. This 
rebuttable presumption would be retained along with the instructions 
stating that brokered deposits covered by this presumption should be 
reported as brokered deposits of less than $100,000.\2\ Therefore, the 
agencies believe that these instructions will continue to facilitate 
banks' ability to report their fully insured brokered deposits based on 
the temporary increase in the insurance limit of $250,000 in Memorandum 
items 1.c.(1) and (2) of Schedule RC-E as they have been proposed to be 
revised.
---------------------------------------------------------------------------

    \2\ See the ``Draft Instructions for the Proposed New and 
Revised Call Report Items for 2010''on the Web pages for the FFIEC 
031 and 041 Call Reports, which can be accessed at http://www.ffiec.gov/ffiec_report_forms.htm.
---------------------------------------------------------------------------

    As with the proposed revision to the reporting of time deposits of 
more than $100,000 discussed in Section II.D. above, the bankers' 
organization recommended that fully insured brokered deposits be 
reported solely based on the deposit insurance limit in effect on the 
report date rather than by distinguishing between those fully insured 
brokered deposits of less than $100,000 and those of $100,000 through 
$250,000. For the reasons cited in Section II.D. above, the agencies 
believe it is appropriate to distinguish between fully insured brokered 
deposits in these two size ranges as had been proposed.
    Finally, the bankers' organization separately indicated in its 
comment letter that it regarded as acceptable the proposed reporting of 
brokered deposits based on their balances rather than on the 
denominations in which they were issued.
    Therefore, after considering the comments from the bank and the 
bankers' organization about the revisions to the reporting of brokered 
deposits, the agencies have decided to proceed with the revisions as 
proposed.
F. Interest Expense on and Quarterly Averages for Brokered Deposits
    Under Section 29 of the Federal Deposit Insurance Act (12 U.S.C. 
1831f), an insured depository institution that is less than well 
capitalized generally may not pay a rate of interest that significantly 
exceeds the prevailing rate in the institution's ``normal market area'' 
and/or the prevailing rate in the ``market area'' from which the 
deposit is accepted. In the case of an adequately capitalized 
institution with a waiver to accept brokered deposits, the institution 
may not pay a rate of interest on brokered deposits accepted from 
outside the bank's ``normal market area'' that significantly exceeds 
the ``national rate'' as defined by the FDIC. On May 29, 2009, the 
FDIC's Board of Directors adopted a final rule making certain revisions 
to the interest rate restrictions under Section 337.6 of the FDIC's 
regulations. Under the final rule, the ``national rate'' is a simple 
average of rates paid by U.S. depository institutions as calculated by 
the FDIC.\3\ When evaluating compliance with the interest rate 
restrictions in Section 337.6 by an institution that is less than well 
capitalized, the FDIC generally will deem the national rate to be the 
prevailing rate in all market areas. The final rule is effective 
January 1, 2010.
---------------------------------------------------------------------------

    \3\ The FDIC publishes a weekly schedule of national rates and 
national interest-rate caps by maturity, which can be accessed at 
http://www.fdic.gov/regulations/resources/rates/.
---------------------------------------------------------------------------

    At present, the agencies are unable to evaluate the level and trend 
of the cost of brokered time deposits to institutions that have 
acquired such funds, nor can the agencies compare the cost of such 
deposits across institutions with brokered time deposits. Access to 
data on the cost of brokered deposits would also assist the agencies in 
evaluating the overall cost of institutions' time deposits, for which 
data have long been collected in the Call Report. Furthermore, many of 
the banks that have failed since the beginning of 2008 have relied 
extensively on brokered deposits to support their asset growth. 
Therefore, to enhance the agencies' ability to evaluate funding costs 
and the impact of brokered time deposits on these costs, the agencies 
proposed to add two Memorandum items to both Schedule RC-K, Quarterly 
Averages, and Schedule RI, Income Statement. In these Memorandum items, 
banks would report the interest expense and quarterly averages for 
``fully insured brokered time deposits'' and ``other brokered time 
deposits.'' The definition of ``fully insured brokered time deposits'' 
would be based on the definitions of ``fully insured brokered 
deposits'' and ``time deposits'' in Schedule RC-E, Deposit Liabilities. 
``Other brokered time deposits'' would consist of all brokered time 
deposits that are not ``fully insured brokered deposits.''
    Three banks, the law firm, and the bankers' organization commented 
upon the proposed reporting of the interest expense and quarterly 
averages for brokered time deposits with only the bankers' organization 
stating that the proposal would be acceptable. One bank that opposed 
the proposal questioned how the reporting of additional detail on 
interest expense would make it ``a safer institution.'' Another bank, 
which had also commented upon the proposed revisions to the reporting 
of brokered deposits discussed in Section II.E. above, again expressed 
concern about the ability of banks to distinguish between fully insured 
and other brokered time deposits in order to track interest expense and 
quarterly averages because deposit brokers are not required to provide 
information routinely on the purchasers of brokered deposits and their 
account ownership capacity to the issuing bank. The third bank observed 
that information on the cost of brokered time deposits, which would be 
derived from the interest expense and quarterly average, ``means little 
unless you know both the term of the CD [certificate of deposit] and 
the origination date.'' This bank expressed concern that if the 
agencies monitor the cost of brokered time deposits alone, it would 
``encourage banks to shorten terms on brokered CDs to lower their 
rates,'' thereby increasing both liquidity risk and interest rate risk. 
The bank suggested that bank examinations may be the best way to 
monitor the risks of brokered time deposits.
    Finally, the law firm stated that it did not believe the proposed 
reporting of interest expense and quarterly averages for brokered time 
deposits would ``provide meaningful data to the Agencies unless 
additional changes are made to the Call Report.'' The law firm noted 
that the Call Report ``does not require reporting of deposits obtained 
in the national deposit market'' other than brokered deposits and 
identified ``deposits obtained via the internet or through deposit 
`listing services' '' as two examples of ``alternative means for banks 
to access the national deposit market without using a deposit broker.'' 
As a result, ``data on the interest expenses related to brokered time 
deposits will be misleading if additional factors are not taken into 
account.'' The law firm recommended that the agencies ``reconsider the 
information that they require concerning the national deposit market 
and the cost of deposit funding to banks.''
    After considering these comments, the agencies continue to believe 
that meaningful information about the cost of brokered time deposits 
would assist the agencies in carrying out their supervisory and 
regulatory responsibilities. However, rather than

[[Page 68322]]

focusing solely on brokered time deposits, the agencies agree that it 
would be beneficial to reevaluate their information needs with respect 
to deposit funding, including the various sources of such funding and 
their related costs, particularly in relation to the national deposit 
market. Therefore, the agencies will not implement the proposed 
collection of data on the interest expense and quarterly averages for 
fully insured brokered time deposits and other brokered time deposits 
in 2010. Instead, as suggested above, the agencies will reconsider how 
best to meet their need for relevant data on deposit funding and 
related costs and they will then develop a new set of proposed Call 
Report revisions that would be issued for public comment in accordance 
with the requirements of the Paperwork Reduction Act of 1995 and would 
be implemented no earlier than in 2011.
G. Change in Reporting Frequency for Loans to Small Businesses and 
Small Farms
    Section 122 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (FDICIA) requires the banking agencies to 
collect from insured institutions annually the information the agencies 
``may need to assess the availability of credit to small businesses and 
small farms.'' To implement these requirements, the banking agencies 
added Schedule RC-C, Part II--Loans to Small Businesses and Small Farms 
to the Call Report effective June 30, 1993. This schedule requests 
information on the number and amount currently outstanding of ``loans 
to small businesses'' and ``loans to small farms,'' as defined in the 
Call Report instructions, which all banks must report annually as of 
June 30.
    The United States is now emerging from a recession, although 
unemployment has continued to rise. In this regard, the current 
administration stated earlier this year that it ``firmly believes that 
economic recovery will be driven in large part by America's small 
businesses,'' but ``small business owners are finding it harder to get 
the credit necessary to stay in business.'' \4\ Because ``[c]redit is 
essential to economic recovery,'' Treasury Secretary Geithner announced 
on March 16, 2009, that ``we need our nation's banks to go the extra 
mile in keeping credit lines in place on reasonable terms for viable 
businesses.'' \5\ Accordingly, Secretary Geithner asked the banking 
agencies ``to call for quarterly, as opposed to annual reporting of 
small business loans, so that we can carefully monitor the degree that 
credit is flowing to our nation's entrepreneurs and small business 
owners.'' \6\
---------------------------------------------------------------------------

    \4\ http://www.financialstability.gov/roadtostability/smallbusinesscommunity.html.
    \5\ http://www.financialstability.gov/latest/tg58-remarks.html.
    \6\ Ibid.
---------------------------------------------------------------------------

    In response to Secretary Geithner's request and to improve the 
agencies' own ability to assess the availability of credit to small 
businesses and small farms, the agencies proposed to change the 
frequency with which banks must submit Call Report Schedule RC-C, Part 
II, from annually to quarterly beginning March 31, 2010. The agencies 
did not propose to make any revisions to the information that banks are 
required to report on this schedule.
    Three banks and the bankers' organization submitted comments 
objecting to the proposed change in the frequency of reporting small 
business and small farm loan data in the Call Report. One bank cited 
the amount of time it takes to obtain these data for the June Call 
Report and questioned their usefulness. The bank also questioned how 
the reporting of these data, even on an annual basis, makes it ``a 
safer institution.'' A second bank stated that the change in reporting 
frequency ``will be quite burdensome at some banks,'' noting that 
``this information is easy to gather for some banks and very difficult 
to gather for other banks'' because their data ``processors do not 
readily report this information.'' The bank recommended a more 
streamlined data request in order to limit the burden on small banks. 
The third bank stated that the agencies ``have not demonstrated that 
this additional reporting burden would provide any useful 
information.'' The bank asserted that because banks gather the small 
business and small farm data solely to report it to the agencies and do 
not use the information for any other purpose, the proposed change in 
reporting frequency ``would only increase our regulatory burden.'' The 
bank also observed that the small business and small farm loan schedule 
in the Call Report ``does not collect information on the size of the 
business only the size of the loan.'' The bankers' organization also 
expressed concern with the burden related to the proposed change in 
reporting frequency. To better balance the provision of more frequent 
information and reporting burden, it recommended that banks with $1 
billion or more in total assets report semiannually and banks with less 
than $1 billion in total assets continue to report annually.
    When developing the small business and small farm loan reporting 
requirement in 1992, which was mandated by Section 122 of FDICIA, the 
FFIEC originally proposed to have institutions use the annual sales of 
their business and farm borrowers as the way to distinguish loans to 
small businesses and small farms from other business and farm loans. 
However, because commenters on the proposal indicated that such sales 
data are usually not contained in loan systems, the FFIEC considered 
other reporting alternatives that would be based on data already 
maintained in loan systems. Certain commenters on the FFIEC's 1992 
proposal suggested reporting ``by loan size since loan sizes are 
available in loan systems, thereby minimizing reporting burden, and 
loan size would tend to be indicative of borrower size.'' \7\ The FFIEC 
concluded that this suggestion had merit after noting that data 
reported in the 1989 National Survey of Small Business Finances showed 
a strong correlation between size of business and loan size.
---------------------------------------------------------------------------

    \7\ 57 FR 54237, November 17, 1992.
---------------------------------------------------------------------------

    Furthermore, the agencies note that Call Report small business and 
small farm lending data are an invaluable resource for understanding 
credit conditions facing small businesses. Quarterly rather than annual 
collection of these data would improve the agencies' and federal 
policymakers' ability to monitor credit conditions facing small 
businesses and small farms and would significantly contribute to their 
development of policies intended to address any problems that arise in 
credit markets. In recent months, the Department of the Treasury, the 
Small Business Administration, and the Department of Agriculture have 
identified a particular need for these data as they have worked to 
develop policies to ensure that more small businesses and small farms 
have access to credit. In addition, the Board would find more frequent 
collection of these data very valuable for monetary policymaking 
purposes.
    The bankers' organization has suggested that the burden associated 
with quarterly reporting of small business and small farm loans could 
be minimized by exempting banks with less than $1 billion in total 
assets from this reporting requirement. However, given the key role 
played by small banks in lending to small businesses and small farms, 
such an exemption would significantly reduce the value of the data to 
policymakers. For example, the small business and small farm loan data 
reported in the Call Report as of June 30,

[[Page 68323]]

2009, reveal that commercial banks with less than $1 billion in total 
assets held 34 percent of all small business loans and more than 75 
percent of all small farm loans.
    The fact that small business and small farm lending data are 
currently collected only once per year is especially problematic when 
stabilization policies are being contemplated or implemented. First, 
determining whether stabilization policies are needed requires an 
accurate diagnosis of the current situation in the financial system. An 
accurate diagnosis depends crucially on the availability of timely 
data. Second, successful stabilization policies need to be accurately 
targeted. Again, timely data is required to identify which parts of the 
financial system are in need of stabilization. While these needs are 
particularly acute during periods of economic contraction, the same 
need for timely and targeted information to inform policy making exists 
throughout the credit cycle.
    The bank-level Call Report data provide information that cannot be 
obtained from other indicators of small business credit conditions. The 
agencies' other indicators of small business credit conditions--
including the Board's Senior Loan Officer Opinion Survey and its Flow 
of Funds Accounts--do not provide the same level of detail that is 
available from bank Call Reports, and therefore cannot be used to 
answer many questions that naturally arise during the policy 
development process. For example, during a period of credit 
contraction, these other sources cannot be used to identify which types 
of banks are contracting loans. This is a significant constraint for 
agencies, as having detailed information about the characteristics of 
affected banks is crucial to designing well-targeted and effective 
policy responses. Moreover, there is evidence that small business 
lending by small banks does not correlate with lending by larger banks.
    Monetary policymaking also would benefit from more timely 
information on small business credit conditions and flows. To determine 
how best to adjust the federal funds rates over time, the Board must 
continuously assess the prospects for real activity and inflation in 
coming quarters. Credit conditions have an important bearing on the 
evolution of those prospects over time, and so the Board pays close 
attention to data from Call Reports and other sources. In trying to 
understand the implications of aggregate credit data for the 
macroeconomic outlook, it is helpful to be able to distinguish between 
conditions facing small firms and those affecting other businesses for 
several reasons. First, small businesses comprise a substantial portion 
of the nonfinancial business sector and their hiring and investment 
decisions have an important influence on overall real activity.\8\ 
Second, because small businesses tend to depend more heavily on banks 
and other institutions for external financing, they are more likely to 
experience material swings in their ability to obtain credit relative 
to larger firms. Third, the relative opacity of small businesses and 
their consequent need to provide collateral for loans is thought to 
create a ``credit'' channel for monetary policy to influence real 
activity. Specifically, changes in monetary policy may alter the value 
of assets used as collateral for loans, thereby affecting the ability 
of small businesses to obtain credit, abstracting from the effects of 
any changes in loan rates.
---------------------------------------------------------------------------

    \8\ Based on statistics tabulated early in the decade, roughly 
one quarter of all nonfinancial business assets were outside the 
corporate sector, and such firms tend to be partnerships and 
proprietorships, which tend to be small businesses.
---------------------------------------------------------------------------

    Finally, the credit conditions facing small businesses and small 
farms differ substantially from those facing large businesses, making 
it necessary to collect indicators that are specific to these 
borrowers. Large businesses may access credit from a number of 
different channels, including the corporate bond market and the 
commercial paper market. In contrast, small businesses and small farms 
rely almost exclusively on credit provided through the bank lending 
channel. The dependence of small businesses and small farms on bank 
lending--particularly from smaller banks--magnifies the importance of 
Call Report data, which provide the most comprehensive data on bank 
lending, and emphasizes the importance of collecting quarterly data 
from banks of all sizes.
    Therefore, although the agencies have considered the comments 
received and they recognize that changing the reporting frequency of 
the existing small business and small farm loan reporting requirement 
from annually to quarterly will increase reporting burden for all 
institutions, the FFIEC and the agencies believe that collecting these 
data more frequently will serve an important public purpose to assist 
in the economic recovery and, therefore, have decided to proceed with 
the proposed change from annual to quarterly reporting for Call Report 
Schedule RC-C, part II, effective March 31, 2010.
H. Assets Covered by FDIC Loss-Sharing Agreements
    The bankers' organization requested that the agencies revise the 
Call Report to collect information on loss-sharing agreements with the 
FDIC even though this had not been proposed by the agencies. The 
organization noted that there is currently no guidance on how a bank 
that acquires a failed bank should report any loss-sharing agreement in 
the Call Report. It also stated that the Call Report does not provide 
users with a ``readily accessible summary of the bank's net exposures 
on assets that are subject to loss-share agreements. The organization 
observed that ``[t]his will become an increasingly important long-term 
and more common reporting issue as additional failed banks are acquired 
from the FDIC under a loss-share agreement.''
    Under loss sharing, the FDIC agrees to absorb a portion of the loss 
on a specified pool of a failed institution's assets in order to 
maximize asset recoveries and minimize the FDIC's losses. In general, 
the FDIC will reimburse 80 percent of losses incurred by an acquiring 
institution on covered assets over a specified period of time up to a 
stated threshold amount, with the acquirer absorbing 20 percent. Any 
losses above the stated threshold amount will be reimbursed by the FDIC 
at 95 percent of the losses booked by the acquirer. Over the past year, 
the FDIC has entered into loss-sharing agreements with acquiring 
institutions in connection with approximately 80 failed bank and thrift 
acquisitions. Some acquiring institutions have been involved in 
multiple failed institution acquisitions. The continued use of loss-
sharing agreements is expected in connection with the resolution of 
failures of insured institutions by the FDIC. Assets covered by loss-
sharing agreements include, but are not limited to, loans, other real 
estate, and debt securities.
    As the bankers' organization indicated, the Call Report does not 
include a ``readily accessible summary'' of assets that reporting banks 
have acquired from failed institutions that are covered by FDIC loss-
sharing agreements. Any covered loans and leases that are past due 30 
days or more or are in nonaccrual status are reportable in items 10 and 
10.a of Schedule RC-N, Past Due and Nonaccrual Loans, Leases, and Other 
Assets, as loans and leases that are wholly or partially guaranteed by 
the U.S. Government. However, these items would also include loans and 
leases guaranteed by other U.S. Government

[[Page 68324]]

agencies (such as the Small Business Administration and the Federal 
Housing Administration) that are past due 30 days or more or are in 
nonaccrual status and they would exclude loans and leases covered by 
FDIC loss-sharing agreements that do not meet these past due or 
nonaccrual reporting conditions as of the report date. Thus, the amount 
of covered loans and leases is not readily identifiable from the Call 
Report and the amount of other covered assets cannot be determined at 
all from the Call Report.
    The agencies agree with the bankers' organization that the 
reporting of summary data on covered assets would be beneficial to Call 
Report users and to the banks holding covered assets. Therefore, the 
agencies will add such a summary to Call Report Schedule RC-M, 
Memoranda, effective March 31, 2010. In this summary, banks that have 
entered into loss-sharing agreements with the FDIC would separately 
report the carrying amounts of (1) Loans and leases, (2) other real 
estate owned, (3) debt securities, and (4) other assets covered by such 
agreements. The agencies will also consider whether the collection of 
additional information concerning covered assets would be warranted 
and, if so, it would be incorporated into a formal proposal that the 
agencies would publish with a request for comment in accordance with 
the requirements of the Paperwork Reduction Act of 1995.

III. Effect of New Accounting Standards on Schedule RC-S, Servicing, 
Securitization, and Asset Sale Activities

    On June 12, 2009, the Financial Accounting Standards Board (FASB) 
issued Statements of Financial Accounting Standards Nos. 166 and 167, 
which revise the existing standards governing the accounting for 
financial asset transfers and the consolidation of variable interest 
entities.\9\ Statement No. 166 eliminates the concept of a ``qualifying 
special-purpose entity,'' changes the requirements for derecognizing 
financial assets, and requires additional disclosures. Statement No. 
167 changes how a company determines when an entity that is 
insufficiently capitalized or is not controlled through voting (or 
similar rights) should be consolidated. This consolidation 
determination is based on, among other things, an entity's purpose and 
design and a company's ability to direct the activities of the entity 
that most significantly impact the entity's economic performance.\10\ 
In general, the revised standards take effect January 1, 2010. The 
standards are expected to cause a substantial volume of assets in bank-
sponsored entities associated with securitization and structured 
finance activities to be brought onto bank balance sheets.
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    \9\ Statement of Financial Accounting Standards No. 166, 
Accounting for Transfers of Financial Assets, amends Statement No. 
140, Accounting for Transfers and Servicing of Financial Assets and 
Extinguishments of Liabilities. Statement of Financial Accounting 
Standards No. 167, Amendments to FASB Interpretation No. 46(R), 
amends FASB Interpretation No. 46(R), Consolidation of Variable 
Interest Entities. In general, under the FASB Accounting Standards 
CodificationTM, see Topics 860, Transfers and Servicing, 
and 810, Consolidation.
    \10\ FASB News Release, June 12, 2009, http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB/FASBContent_C/NewsPage&cid=1176156240834&pf=true.
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    The agencies currently collect data on banks' securitization and 
structured finance activities in Schedule RC-S, Servicing, 
Securitization, and Asset Sale Activities. The agencies will continue 
to collect Schedule RC-S after the effective date of Statements Nos. 
166 and 167 and banks should continue to complete this schedule in 
accordance with its existing instructions, taking into account the 
changes in accounting brought about by these two FASB statements. In 
this regard, items 1 through 8 of Schedule RC-S involve the reporting 
of information for securitizations that the reporting bank has 
accounted for as sales. Therefore, after the effective date of 
Statements Nos. 166 and 167, a bank should report information in items 
1 through 8 only for those securitizations for which the transferred 
assets qualify for sale accounting or are otherwise not carried as 
assets on the bank's consolidated balance sheet. Thus, if a 
securitization transaction that qualified for sale accounting prior to 
the effective date of Statements Nos. 166 and 167 must be brought back 
onto the reporting bank's consolidated balance sheet upon adoption of 
these statements, the bank would no longer report information about the 
securitization in items 1 through 8 of Schedule RC-S.
    Items 11 and 12 of Schedule RC-S are applicable to assets that the 
reporting bank has sold with recourse or other seller-provided credit 
enhancements, but has not securitized. In Memorandum item 1 of Schedule 
RC-S, a bank reports certain transfers of small business obligations 
with recourse that qualify for sale accounting. The scope of these 
items will continue to be limited to such sold financial assets after 
the effective date of Statements Nos. 166 and 167. In Memorandum item 2 
of Schedule RC-S, a bank currently reports the outstanding principal 
balance of loans and other financial assets that it services for others 
when the servicing has been purchased or when the assets have been 
originated or purchased and subsequently sold with servicing retained. 
Thus, after the effective date of Statements Nos. 166 and 167, a bank 
should continue to report retained servicing for those assets or 
portions of assets reported as sold as well as purchased servicing in 
Memorandum item 2. Finally, Memorandum item 3 of Schedule RC-S collects 
data on asset-backed commercial paper conduits regardless of whether 
the reporting bank must consolidate the conduit in accordance with FASB 
Interpretation No. 46(R). This will continue to be the case after the 
effective date of Statement No. 167, which amended this FASB 
interpretation.
    The agencies plan to evaluate the disclosure requirements in 
Statements Nos. 166 and 167 and the disclosure practices that develop 
in response to these requirements. This evaluation will assist the 
agencies in determining the need for revisions to Schedule RC-S that 
will improve their ability to assess the nature and scope of banks' 
involvement with securitization and structured finance activities, 
including those accounted for as sales and those accounted for as 
secured borrowings. Such revisions, which would not be implemented 
before March 2011, would be incorporated into a formal proposal that 
the agencies would publish with a request for comment in accordance 
with the requirements of the Paperwork Reduction Act of 1995.
    The bankers' organization addressed the reporting of information 
associated with securitization and structured finance activities, 
recommending that information be required in Schedule RC-S for assets 
that must be consolidated under Statements Nos. 166 and 167 that are 
held as securities by third parties as well as any applicable loan loss 
allowances and related deferred tax assets. The agencies will consider 
these recommendations as they evaluate their data needs with respect to 
on-balance sheet securitizations and structured finance transactions. 
Any resulting potential new reporting requirements would be 
incorporated into the formal proposal mentioned above.

IV. Request for Comment

    Public comment is requested on all aspects of this joint notice. 
Comments are invited specifically on:
    (a) Whether the proposed revisions to the Call Report collections 
of information are necessary for the proper performance of the 
agencies' functions,

[[Page 68325]]

including whether the information has practical utility;
    (b) The accuracy of the agencies' estimates of the burden of the 
information collections as they are proposed to be revised, including 
the validity of the methodology and assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments submitted in response to this joint notice will be shared 
among the agencies and will be summarized or included in the agencies' 
requests for OMB approval. All comments will become a matter of public 
record.

    Dated: December 16, 2009.
Michele Meyer,
Assistant Director, Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency.
    Board of Governors of the Federal Reserve System, December 17, 
2009.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 16th day of December, 2009.
    Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9-30489 Filed 12-22-09; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P