[Federal Register Volume 76, Number 144 (Wednesday, July 27, 2011)]
[Notices]
[Pages 44987-45004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19021]


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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 (PRA) of 1995 (44 U.S.C. 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. On June 17, 2011, OMB approved the agencies' 
emergency clearance requests to implement assessment-related reporting 
revisions to the Consolidated Reports of Condition and Income (Call 
Report) for banks, the Thrift Financial Report (TFR) for savings 
associations, the Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks (FFIEC 002), and the Report of Assets and 
Liabilities of a Non-U.S. Branch that is Managed or Controlled by a 
U.S. Branch or Agency of a Foreign (Non-U.S.) Bank (FFIEC 002S), all of 
which currently are approved collections of information, effective as 
of the June 30, 2011, report date. Because the assessment-related 
reporting revisions will need to remain in effect beyond the limited 
approval period associated with an emergency clearance request, the 
agencies, under the auspices of the Federal Financial Institutions 
Examination Council (FFIEC), are requesting public comment on a 
proposal to extend, with revision, the collections of information 
identified above. At the end of the comment period, the comments and 
recommendations received will be analyzed to determine the extent to

[[Page 44988]]

which the FFIEC and the agencies should modify the proposed revisions 
prior to giving final approval. The agencies will then submit the 
revisions to OMB for review and approval.

DATES: Comments must be submitted on or before September 26, 2011.

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. However, Title II 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
Dodd-Frank Act), which was signed into law on July 21, 2010,\1\ 
abolishes the OTS, provides for its integration with the OCC effective 
as of July 21, 2011, and transfers the OTS's functions to the OCC, the 
Board, and the FDIC. Hence, comments submitted in response to this 
proposal on or after July 21, 2011, should be addressed to any or all 
of the agencies other than the OTS.
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    \1\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
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    OCC: You should direct all written comments to: Communications 
Division, Office of the Comptroller of the Currency, 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 (FFIEC 031 and 041)'' or 
``Report of Assets and Liabilities of U.S. Branches and Agencies of 
Foreign Banks (FFIEC 002) and Report of Assets and Liabilities of a 
Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or 
Agency of a Foreign (Non-U.S.) Bank (FFIEC 002S),'' by any of the 
following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at: http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include 
reporting form 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 A. Kuiper, (202) 898-3877, Counsel, Attn: 
Comments, Room F-1086, 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.
    OTS: You may submit comments, identified by ``1550-0023 (TFR: 
Schedule DI Revisions),'' 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 DI Revisions)'' in the 
subject line of the message and include your name and telephone number 
in the message.
     Mail: Information Collection Comments, Chief Counsel's 
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552, Attention: ``1550-0023 (TFR: Schedule DI Revisions).''
     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 DI Revisions).''
    Instructions: All submissions received must include the agency name 
and OMB Control Number for this information collection.
    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 discussed in this notice, please contact any of the agency 
clearance officers whose names appear below. In addition, copies of the 
Call Report, FFIEC 002, and FFIEC 002S forms can be obtained at the 
FFIEC's Web site (http://www.ffiec.gov/ffiec_report_forms.htm). 
Copies of the TFR can be obtained from the OTS's Web site (http://www.ots.treas.gov/main.cfm?catNumber=2&catParent=0).
    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: Cynthia Ayouch, Acting 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 A. Kuiper, Counsel, (202) 898-3877, Legal Division, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: Ira L. Mills, OTS Clearance Officer, at 
[email protected], (202) 906-6531, Regulations and Legislation 
Division, Chief Counsel's Office, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552.

[[Page 44989]]


SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and 
extend for three years the Call Report, the TFR, the FFIEC 002, and the 
FFIEC 002S, which currently are approved collections of information.\2\
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    \2\ The proposed changes to the Call Report, the TFR, and the 
FFIEC 002/002S that are the subject of this notice have been 
approved by OMB on an emergency clearance basis and took effect June 
30, 2011. OMB's emergency approval for these reports expires 
December 31, 2011. The agencies have also proposed to require 
savings associations currently filing the TFR to convert to filing 
the Call Report beginning as of the March 31, 2012, report date (76 
FR 39981, July 7, 2011).
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    1. 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: 1,427 national banks.
    Estimated Time per Response: 53.38 burden hours.
    Estimated Total Annual Burden: 304,693 burden hours.
    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 826 state member banks.
    Estimated Time per Response: 55.47 burden hours.
    Estimated Total Annual Burden: 183,273 burden hours.
    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 4,687 insured state nonmember 
banks.
    Estimated Time per Response: 40.47 burden hours.
    Estimated Total Annual Burden: 758,732 burden hours.
    The estimated times per response shown above for the Call Report 
represent the estimated ongoing reporting burden associated with the 
preparation of this report after institutions make the necessary 
recordkeeping and systems changes to enable them to generate the data 
required to be reported in the assessment-related data items that are 
the subject of this proposal. The estimated time per response 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). These factors determine the 
specific Call Report data items in which an individual institution will 
have data it must report. The average ongoing reporting burden for the 
Call Report is estimated to range from 17 to 700 hours per quarter, 
depending on an individual institution's circumstances.
    2. Report Title: Thrift Financial Report (TFR).
    Form Number: OTS 1313 (for savings associations).
    Frequency of Response: Quarterly; Annually.
    Affected Public: Business or other for-profit.
    OTS:
    OMB Number: 1550-0023.
    Estimated Number of Respondents: 724 savings associations.
    Estimated Time per Response: 60.3 hours average for quarterly 
schedules and 1.6 hours average for schedules required only annually 
plus recordkeeping of an average of one hour per quarter.
    Estimated Total Annual Burden: 182,166 burden hours.
    3. Report Titles: Report of Assets and Liabilities of U.S. Branches 
and Agencies of Foreign Banks; Report of Assets and Liabilities of a 
Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or 
Agency of a Foreign (Non-U.S.) Bank
    Form Numbers: FFIEC 002; FFIEC 002S
    Board:
    OMB Number: 7100-0032
    Frequency of Response: Quarterly
    Affected Public: U.S. branches and agencies of foreign banks
    Estimated Number of Respondents: FFIEC 002-236; FFIEC 002S-57
    Estimated Time per Response: FFIEC 002-25.43 hours; FFIEC 002S-6 
hours
    Estimated Total Annual Burden: FFIEC 002-24,003 hours; FFIEC 002S-
1,368 hours
    As previously stated with respect to the Call Report, the burden 
estimates shown above are for the quarterly filings of the Call Report, 
the TFR, and the FFIEC 002/002S reports. The initial burden arising 
from implementing recordkeeping and systems changes to enable insured 
depository institutions to report the applicable assessment-related 
data items that have been added to these regulatory reports will vary 
significantly. For the vast majority of the nearly 7,600 insured 
depository institutions, including the smallest institutions, this 
initial burden will be nominal because only three of the new data items 
will be relevant to them and the amounts to be reported can be carried 
over from amounts reported elsewhere in the report.
    At the other end of the spectrum, many of the new data items are 
applicable only to about 110 large and highly complex institutions (as 
defined in the FDIC's assessment regulations). To achieve consistency 
in reporting across this group of institutions, the instructions for 
these new data items, which are drawn directly from definitions 
contained in the FDIC's assessment regulations (as amended in February 
2011), are prescriptive. Transition guidance has been provided for the 
two categories of higher-risk assets (subprime and leveraged loans) for 
which large and highly complex institutions have indicated that their 
data systems do not currently enable them to identify individual assets 
meeting the FDIC's definitions that will be used for assessment 
purposes only. The transition guidance provides time for large and 
highly complex institutions to revise their data systems to support the 
identification and reporting of assets in these two categories on a 
going-forward basis. The guidance also permits these institutions to 
use existing internal methodologies developed for supervisory purposes 
to identify existing assets (and, in general, assets acquired during 
the transition period) that would be reportable in these higher-risk 
asset categories on an ongoing basis.
    Before the agencies submitted emergency clearance requests to OMB 
for approval of the assessment-related reporting revisions that are the 
subject to this notice, the agencies had published an initial PRA 
notice on March 16, 2011, requesting comment on these revisions. 
Comments submitted in response to the agencies' initial PRA notice that 
addressed the initial burden that large and highly complex institutions 
would incur to identify assets meeting the definitions of subprime and 
leveraged loans in the FDIC's assessment regulations were written in 
the context of applying these definitions to all existing loans. The 
transition guidance created for these loans is intended to mitigate the 
initial data capture and systems burden that institutions would 
otherwise incur. Thus, the initial burden associated with implementing 
the recordkeeping and systems changes necessary to identify assets 
reportable in these two higher-risk asset categories will be 
significant for the approximately 110 large and highly complex 
institutions, but the agencies are currently unable to estimate the 
amount of this initial burden. Large and highly complex institutions 
will also experience additional initial burden in connection with 
implementing systems changes to support their ability to report the 
other new assessment-related items applicable

[[Page 44990]]

to such institutions. However, given their focus on subprime and 
leveraged loans, respondents to the agencies' initial PRA notice 
offered limited comments about the burden of the other new items for 
large and highly complex institutions.

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), 12 U.S.C. 
1464 (for savings associations), and 12 U.S.C. 3105(c)(2), 1817(a), and 
3102(b) (for U.S. branches and agencies of foreign banks). Except for 
selected data items, including several of the new data items for large 
and highly complex institutions that are part of this proposal, the 
Call Report, the TFR, and the FFIEC 002 are not given confidential 
treatment. The FFIEC 002S is given confidential treatment [5 U.S.C. 
552(b)(4)].

Abstracts

    Call Report and TFR: 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, identifying areas of focus for both on-site and 
off-site examinations, and 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 ten percent 
of the total amount of deposits of insured depository institutions in 
the United States. Call Report and TFR data also are used to calculate 
all institutions' deposit insurance and Financing Corporation 
assessments, national banks' semiannual assessment fees, and the OTS's 
assessments on savings associations.
    FFIEC 002 and FFIEC 002S: On a quarterly basis, all U.S. branches 
and agencies of foreign banks are required to file the FFIEC 002, which 
is a detailed report of condition with a variety of supporting 
schedules. This information is used to fulfill the supervisory and 
regulatory requirements of the International Banking Act of 1978. The 
data also are used to augment the bank credit, loan, and deposit 
information needed for monetary policy and other public policy 
purposes. The FFIEC 002S is a supplement to the FFIEC 002 that collects 
information on assets and liabilities of any non-U.S. branch that is 
managed or controlled by a U.S. branch or agency of the foreign bank. 
Managed or controlled means that a majority of the responsibility for 
business decisions (including, but not limited to, decisions with 
regard to lending or asset management or funding or liability 
management) or the responsibility for recordkeeping in respect of 
assets or liabilities for that foreign branch resides at the U.S. 
branch or agency. A separate FFIEC 002S must be completed for each 
managed or controlled non-U.S. branch. The FFIEC 002S must be filed 
quarterly along with the U.S. branch or agency's FFIEC 002. The data 
from both reports are used for: (1) Monitoring deposit and credit 
transactions of U.S. residents; (2) monitoring the impact of policy 
changes; (3) analyzing structural issues concerning foreign bank 
activity in U.S. markets; (4) understanding flows of banking funds and 
indebtedness of developing countries in connection with data collected 
by the International Monetary Fund and the Bank for International 
Settlements that are used in economic analysis; and (5) assisting in 
the supervision of U.S. offices of foreign banks. The Federal Reserve 
System collects and processes these reports on behalf of the OCC, the 
Board, and the FDIC.
    Type of Review: Revision and extension of currently approved 
collections of information.

Current Actions

I. Overview

    Section 331(b) of the Dodd-Frank Act, which was signed into law on 
July 21, 2010, required the FDIC to amend its regulations to redefine 
the assessment base used for calculating deposit insurance assessments 
as average consolidated total assets minus average tangible equity. 
Under prior law, the assessment base has been defined as domestic 
deposits minus certain allowable exclusions, such as pass-through 
reserve balances. In general, the intent of Congress in changing the 
assessment base was to shift a greater percentage of overall total 
assessments away from community banks and toward the largest 
institutions, which rely less on domestic deposits for their funding 
than do smaller institutions.
    In May 2010, prior to the enactment of the Dodd-Frank Act, the FDIC 
published a Notice of Proposed Rulemaking (NPR) to revise the 
assessment system applicable to large insured depository 
institutions.\3\ The proposed amendments to the FDIC's assessment 
regulations (12 CFR part 327) were designed to better differentiate 
large institutions by taking a more forward-looking view of risk and 
better take into account the losses that the FDIC will incur if an 
institution fails. The comment period for the May 2010 NPR ended July 
2, 2010, and most commenters requested that the FDIC delay the 
implementation of the rulemaking until the effects of the then pending 
Dodd-Frank legislation were known.
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    \3\ See 75 FR 23516, May 3, 2010, at http://www.fdic.gov/regulations/laws/federal/2010/10proposead57.pdf.
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    On November 9, 2010, the FDIC Board approved the publication of two 
NPRs, one that proposed to redefine the assessment base as prescribed 
by the Dodd-Frank Act \4\ and another that proposed revisions to the 
large institution assessment system while also factoring in the 
proposed redefinition of the assessment base as well as comments 
received on the May 2010 NPR.\5\ After revising the proposals where 
appropriate in response to the comments received on the two November 
2010 NPRs, the FDIC Board adopted a final rule on February 7, 2011, 
amending the FDIC's assessment regulations to redefine the assessment 
base used for calculating deposit insurance assessments for all 7,500 
insured depository institutions and revise the assessment system for 
approximately 110 large institutions.\6\ This final rule took effect 
for the quarter beginning April 1, 2011, and will be reflected for the 
first time in the invoices for deposit insurance assessments due 
September 30, 2011, using data reported in the Call Reports, the TFRs, 
and the FFIEC 002/002S reports for June 30, 2011.
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    \4\ See 75 FR 72582, November 24, 2010, at  http://www.fdic.gov/regulations/laws/federal/2010/10proposeAD66.pdf.
    \5\ See 75 FR 72612, November 24, 2010, at  http://www.fdic.gov/regulations/laws/federal/2010/10proposeAD66LargeBank.pdf.
    \6\ See 76 FR 10672, February 25, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.
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    The FDIC further notes that the definitions of subprime loans, 
leveraged loans, and nontraditional mortgage loans in its February 2011 
final rule (the FDIC assessment definitions) are applicable only for 
purposes of deposit insurance assessments. The FDIC assessment 
definitions are not identical to the definitions included in existing 
supervisory guidance pertaining to these types of loans.\7\ Rather, the 
FDIC

[[Page 44991]]

assessment definitions are more prescriptive and less subjective than 
those contained in the applicable supervisory guidance. The final rule 
includes prescriptive definitions to ensure that large and highly 
complex institutions apply a uniform and consistent approach to the 
identification of loans to be reported as higher-risk assets for 
assessment purposes and to be used as inputs to the scorecards that 
determine these institutions' initial base assessment rates.
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    \7\ Interagency Expanded Guidance for Subprime Lending Programs, 
issued in January 2001 (http://www.fdic.gov/news/news/press/2001/pr0901a.html); Comptroller's Handbook: Leveraged Loans, issued in 
February 2008 (http://www.occ.gov/static/publications/handbook/leveragedlending.pdf); and Interagency Guidance on Nontraditional 
Mortgage Product Risks, issued in October 2006 (http://www.fdic.gov/regulations/laws/federal/2006/06NoticeFINAL.html).
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    Given the specific and limited purpose for which the definitions of 
subprime loans, leveraged loans, and nontraditional mortgage loans in 
the FDIC's final rule on assessments will be used, these definitions 
will not be applied for supervisory purposes. Therefore, the 
definitions of these three types of loans in the FDIC's final rule on 
assessments do not override or supersede any existing interagency or 
individual agency guidance and interpretations pertaining to subprime 
lending, leveraged loans, and nontraditional mortgage loans that have 
been issued for supervisory purposes or for any other purpose other 
than deposit insurance assessments. In this regard, the addition of 
data items to the Call Report and TFR deposit insurance assessment 
schedules for these three higher-risk asset categories, the definitions 
for which are taken directly from the FDIC's final rule (subject to the 
transition guidance discussed in Section II below), represents the 
outcome of decisions by the FDIC in its assessment rulemaking process 
rather than a collective decision of the agencies through interagency 
supervisory policy development activities.
    On March 16, 2011, the agencies published an initial PRA Federal 
Register notice under normal PRA clearance procedures in which they 
requested comment on proposed revisions to the Call Reports, the TFRs, 
and the FFIEC 002/002S reports that would provide the data needed by 
the FDIC to implement the provisions of its February 2011 final rule 
beginning with the June 30, 2011, report date.\8\ The new data items 
proposed in the initial PRA notice were linked to specific requirements 
in the FDIC's assessment regulations as amended by the final rule. The 
draft instructions for these proposed new items incorporated the 
definitions in and other provisions of the FDIC's amended assessment 
regulations. Accordingly, the FDIC did not anticipate receiving 
material comments on the reporting changes proposed in the March 2011 
initial PRA notice because the FDIC's February 2011 final rule on 
assessments had taken into account the comments received on the two 
November 2010 NPRs as well as the earlier May 2010 NPR. Thus, the 
agencies expected to continue following normal PRA clearance procedures 
and publish a final PRA Federal Register notice for the proposed 
reporting changes and submit these changes to OMB for review soon after 
the close of the comment period for the initial PRA notice on May 16, 
2011.
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    \8\ See 76 FR 14460, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
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    The agencies collectively received comments from 19 respondents on 
their initial PRA notice on the proposed assessment-related reporting 
changes published on March 16, 2011. Of these 19 respondents, 17 
addressed the new data items for subprime and leveraged loans that are 
inputs to the revised assessment system for large institutions.\9\ More 
specifically, these commenters stated that institutions generally do 
not maintain data on these loans in the manner in which these two loan 
categories are defined for assessment purposes in the FDIC's final rule 
or do not have the ability to capture the prescribed data to enable 
them to identify these loans in time to file their regulatory reports 
for the June 30, 2011, report date. These data availability concerns, 
particularly as they related to institutions' existing loan portfolios, 
had not been raised as an issue during the rulemaking process for the 
revised large institution assessment system, which included the FDIC's 
publication of two NPRs in 2010.\10\
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    \9\ In contrast, only four respondents commented on other 
aspects of the overall reporting proposal.
    \10\ In response to the November 2010 NPR on the revised large 
institution assessment system, the FDIC received a number of 
comments recommending changes to the definitions of subprime and 
leveraged loans, which the FDIC addressed in its February 2011 final 
rule amending its assessment regulations. For example, several 
commenters on the November 2010 NPR indicated that regular 
(quarterly) updating of data to evaluate loans for subprime or 
leveraged status would be burdensome and costly and, for certain 
types of retail loans, would not be possible because existing loan 
agreements do not require borrowers to routinely provide updated 
financial information. In response to these comments, the FDIC's 
February 2011 final rule stated that large institutions should 
evaluate loans for subprime or leveraged status upon origination, 
refinance, or renewal. However, no comments were received on the 
November 2010 NPR indicating that large institutions would not be 
able to identify and report subprime or leveraged loans in 
accordance with the definitions proposed for assessment purposes in 
their Call Reports and TFRs beginning as of June 30, 2011. These 
data availability concerns were first expressed in comments on the 
March 2011 initial PRA notice.
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    This unanticipated outcome at the end of the public comment process 
for the agencies' March 2011 initial PRA notice required the FDIC to 
consider possible reporting approaches that would address institutions' 
concerns about their ability to identify loans meeting the subprime and 
leveraged loan definitions in the FDIC's assessments final rule while 
also meeting the objectives of the revised large institution assessment 
system. However, as a consequence of the unexpected need to develop and 
reach agreement on a workable transition approach for identifying loans 
that are to be reported as subprime or leveraged for assessment 
purposes,\11\ the agencies concluded that they should follow emergency 
rather than normal PRA clearance procedures to request approval from 
OMB for the assessment-related reporting changes to the Call Report, 
the TFR, and the FFIEC 002/002S reports. The use of emergency clearance 
procedures was intended to provide certainty to institutions on a 
timely basis concerning the initial collection of the new assessment 
data items as of the June 30, 2011, report date as called for under the 
FDIC's final rule.
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    \11\ The FDIC presented this transition approach to large 
institutions during a conference call on June 7, 2011, that all 
large institutions had been invited to attend. Several institutions 
offered favorable comments about the transition approach during this 
call.
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    On June 17, 2011, OMB approved the agencies' emergency clearance 
requests to implement the assessment-related reporting revisions to the 
Call Report, the TFR, and the FFIEC 002/002S reports effective as of 
the June 30, 2011, report date. Because the assessment-related 
reporting revisions will need to remain in effect beyond the limited 
approval period associated with an emergency clearance request, the 
agencies, under the auspices of the FFIEC, are beginning normal PRA 
clearance procedures anew and are requesting public comment on the 
assessment-related reporting revisions to the Call Report, the TFR, and 
the FFIEC 002/002S reports that took effect June 30, 2011.

II. March 2011 Initial PRA Federal Register Notice

    On March 16, 2011, the agencies published an initial PRA Federal 
Register notice in which they requested comment on proposed revisions 
to their regulatory reports: the Call Report, the

[[Page 44992]]

TFR, the FFIEC 002/002S reports.\12\ The agencies proposed to implement 
certain changes to these reports as of June 30, 2011, to provide data 
needed by the FDIC to implement amendments to its assessment 
regulations (12 CFR part 327) that were adopted by the FDIC Board of 
Directors in a final rule on February 7, 2011.\13\ The final rule took 
effect for the quarter beginning April 1, 2011, and will be reflected 
for the first time in the invoices for assessments due September 30, 
2011, using data reported in institutions' regulatory reports for June 
30, 2011. The assessment-related reporting changes were designed to 
enable the FDIC to calculate (1) the assessment bases for insured 
depository institutions as redefined in accordance with section 331(b) 
of the Dodd-Frank Act and the FDIC's final rule, and (2) the assessment 
rates for ``large institutions'' and ``highly complex institutions'' 
using a scorecard set forth in the final rule that combines CAMELS 
ratings and certain forward-looking financial measures to assess the 
risk such institutions pose to the Deposit Insurance Fund (DIF).
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    \12\ See 76 FR 14460, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
    \13\ See 76 FR 10672, February 25, 2011, at  http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.
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    The assessment-related reporting revisions proposed in the March 
2011 initial PRA notice included the deletion of existing data items 
for the total daily averages of deposit liabilities before exclusions, 
allowable exclusions, and foreign deposits and the addition of new 
items, which are summarized as follows:
     Average consolidated total assets, generally as defined 
for Call Report Schedule RC-K, Quarterly Averages, and calculated using 
a daily averaging method. Institutions with less than $1 billion in 
assets (other than newly insured institutions) may report using a 
weekly averaging method unless they opt to report daily averages on a 
permanent basis. Institutions would report the averaging method used, 
i.e., daily or weekly.
     Average tangible equity capital, with tangible equity 
capital defined as Tier 1 capital (or for insured branches, generally 
defined as eligible assets less liabilities), and calculated as a 
monthly average. Institutions with less than $1 billion in assets 
(other than newly insured institutions) may report the quarter-end 
amount of Tier 1 capital unless they opt to report monthly averages on 
a permanent basis.
     For qualifying banker's banks and qualifying custodial 
banks, as defined in the FDIC's final rule, assessment base deductions 
for certain low-risk assets and deduction limits derived from certain 
balance sheet amounts calculated on a daily or weekly average basis.
     The amount of the reporting institution's holdings of 
long-term unsecured debt issued by other insured depository 
institutions. In general, unsecured debt would be considered long-term 
if it has a remaining maturity of at least one year.
     For large and highly complex institutions, other real 
estate owned and certain categories of loans wholly or partially 
guaranteed by the U.S. Government (excluding other real estate and 
loans covered by FDIC loss-sharing agreements), unfunded real estate 
construction and development loans, and nonbrokered time deposits of 
more than $250,000.
     For both large and highly complex institutions, 
``nontraditional mortgage loans,'' ``subprime consumer loans,'' and 
``leveraged loans,'' all as defined for assessment purposes only in the 
FDIC's regulations, as well as criticized and classified items, all of 
which would be accorded confidential treatment.
     For highly complex institutions only, the top 20 
counterparty exposures and the largest counterparty exposure, both of 
which would be accorded confidential treatment.
     New TFR data items for savings associations that are large 
institutions (or report $10 billion or more in total assets in their 
June 30, 2011, or a subsequent TFR) that would provide data used in the 
scorecards for large institutions that are not currently reported in 
the TFR by savings associations, but are reported in the Call Report by 
banks.
    The agencies also proposed an instructional change to the existing 
Call Report and TFR data items for ``Unsecured `Other borrowings' '' 
and ``Subordinated notes and debentures'' with a remaining maturity of 
one year or less, which would require debt instruments redeemable at 
the holder's option within one year to be included in these data items.
    For a more detailed discussion of the proposed reporting revisions 
associated with the redefined deposit insurance assessment base, see 
pages 14463-14465 of the agencies' March 2011 initial PRA notice.\14\ 
For a more detailed discussion of the proposed reporting revisions 
associated with the revised large institutions assessment system, see 
pages 14466-14470 of the agencies' March 2011 initial PRA notice.\15\ 
These assessment-related reporting revisions, as modified in response 
to the comments received on the agencies' initial PRA notice (which are 
discussed hereafter in this notice), were approved by OMB under 
emergency clearance procedures on June 17, 2011, and took effect in the 
Call Report, the TFR, and the FFIEC 002/002S reports effective as of 
the June 30, 2011, report date. Accordingly, the purpose of this notice 
is to enable the agencies to undertake normal clearance procedures 
under the PRA and request comment on the assessment-related reporting 
revisions that are now in effect as a result of OMB's emergency 
approval.
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    \14\ See 76 FR 14463-14465, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
    \15\ See 76 FR 14466-14470, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
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    The agencies collectively received comments from 19 respondents on 
their initial PRA notice on the proposed assessment-related reporting 
requirements published on March 16, 2011. Comments were received from 
fourteen depository institutions, four bankers' organizations, and one 
government agency. Three of the bankers' organizations commented on 
certain aspects of the proposed reporting requirements associated with 
the redefined assessment base, with one of these organizations 
welcoming the proposed reporting changes and deeming them ``reasonable 
and practical.'' Seventeen of the 19 respondents (all of the depository 
institutions and three of the bankers' organizations) addressed the 
reporting requirements proposed for large institutions, with specific 
concerns raised by all 17 about the definitions of subprime consumer 
loans and leveraged loans in the FDIC's final rule, which were carried 
directly into the draft reporting instructions for these two proposed 
data items, and large institutions' ability to report the amount of 
subprime consumer loans and leveraged loans in accordance with the 
final rule's definitions, particularly beginning as of the June 30, 
2011, report date. The comments the agencies received about the 
reporting of subprime consumer loans and leveraged loans are more fully 
discussed later in this notice. Nevertheless, a number of respondents 
expressed support for the concept of applying risk-based evaluation 
tools in the determination of deposit insurance assessments, which is 
an objective of the large institution assessment system under the 
FDIC's final rule.

[[Page 44993]]

    One bankers' organization offered a general comment about the draft 
instructions for the proposed new assessment-related data items, 
recommending that these items ``should include references to other 
related Call Report [, TFR, and FFIEC 002] schedule items, as 
appropriate'' to assist ``banks with the edit checks'' for the report. 
Although many of the proposed new data items include such references, 
others did not. The agencies have reviewed the draft instructions and 
added relevant references to data items in other schedules.
    The following two sections of this notice describe the proposed 
reporting changes related to the redefined assessment base and the 
revised large institution assessment system, respectively, and discuss 
the agencies' evaluation of the comments received on the changes 
proposed in their March 2011 initial PRA notice. The following sections 
also explain the modifications that the agencies made to the March 2011 
reporting proposal in response to these comments, which were 
incorporated into the agencies' June 16, 2011, emergency clearance 
requests to OMB for approval to implement the assessment-related 
reporting revisions as of the June 30, 2011, report date.
    In this regard, as mentioned above, 17 of the 19 respondents on the 
March 2011 initial PRA notice raised data availability concerns about 
the proposed new data items in which large and highly complex 
institutions would report the amounts of their subprime consumer loans 
and leveraged loans in accordance with the FDIC's assessment 
definitions. Accordingly, in recognition of these concerns, the 
agencies decided to provide transition guidance for reporting subprime 
consumer and leveraged loans originated or purchased prior to October 
1, 2011, and securities where the underlying loans were originated 
predominantly prior to October 1, 2011. This transition guidance was an 
integral part of the agencies' emergency clearance requests that were 
submitted to OMB on June 16, 2011.
    The transition guidance provides that for such pre-October 1, 2011, 
loans and securities, if a large or highly complex institution does not 
have within its data systems the information necessary to determine 
subprime consumer or leveraged status in accordance with the 
definitions of these two higher-risk asset categories set forth in the 
FDIC's final rule, the institution may use its existing internal 
methodology for identifying subprime consumer or leveraged loans and 
securities as the basis for reporting these assets for deposit 
insurance assessment purposes in its Call Reports or TFRs. Institutions 
that do not have an existing internal methodology in place to identify 
subprime consumer or leveraged loans \16\ may, as an alternative to 
applying the definitions in the FDIC's final rule to pre-October 1, 
2011, loans and securities, apply existing guidance provided by their 
primary federal regulator, the agencies' 2001 Expanded Guidance for 
Subprime Lending Programs,\17\ or the February 2008 Comptroller's 
Handbook on Leveraged Lending \18\ for purposes of identifying subprime 
consumer and leveraged loans originated or purchased prior to October 
1, 2011, and subprime consumer and leveraged securities where the 
underlying loans were originated predominantly prior to October 1, 
2011. All loans originated on or after October 1, 2011, and all 
securities where the underlying loans were originated predominantly on 
or after October 1, 2011, must be reported as subprime consumer or 
leveraged loans and securities according to the definitions of these 
higher-risk asset categories set forth in the FDIC's final rule.\19\
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    \16\ A large or highly complex institution may not have an 
existing internal methodology in place because it is not required to 
report on these exposures to its primary federal regulator for 
examination or other supervisory purposes or did not measure and 
monitor loans and securities with these characteristics for internal 
risk management purposes.
    \17\ http://www.fdic.gov/news/news/press/2001/pr0901a.html.
    \18\ http://www.occ.gov/static/publications/handbook/
LeveragedLending.pdf.
    \19\ For loans purchased on or after October 1, 2011, large and 
highly complex institutions may apply the transition guidance to 
loans originated prior to that date. Loans purchased on or after 
October 1, 2011, that also were originated on or after that date 
must be reported as subprime or leveraged according to the 
definitions of these higher-risk asset categories set forth in the 
FDIC's final rule.
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    Large and highly complex institutions may need to revise their data 
systems to support the reporting of newly originated or purchased 
subprime consumer and leveraged loans and securities in accordance with 
the FDIC's assessment definitions on a going-forward basis beginning no 
later than October 1, 2011. Large and highly complex institutions 
relying on the transition guidance described above for reporting pre-
October 1, 2011, subprime consumer and leveraged loans and securities 
will be expected to provide the FDIC qualitative descriptions of how 
the characteristics of the assets reported using their existing 
internal methodologies for identifying loans and securities in these 
higher-risk asset categories differ from those specified in the 
subprime consumer and leveraged loan definitions in the FDIC's final 
rule, including the principal areas of difference between these two 
approaches for each higher-risk asset category. The FDIC may review 
these descriptions of differences and assess the extent to which 
institutions' existing internal methodologies align with the applicable 
supervisory policy guidance for categorizing these loans. Any 
departures from such supervisory policy guidance discovered in these 
reviews, as well as institutions' progress in planning and implementing 
necessary data systems changes, will be considered when forming 
supervisory strategies for remedying departures from existing 
supervisory policy guidance and exercising deposit insurance pricing 
discretion for individual large and highly complex institutions.

III. Redefined Assessment Base

    As mentioned above in Section I, on February 7, 2011, the FDIC 
Board of Directors adopted a final rule that implements the 
requirements of section 331(b) of the Dodd-Frank Act by amending part 
327 of the FDIC's regulations to redefine the assessment base used for 
calculating deposit insurance assessments effective April 1, 2011.\20\ 
In general, the FDIC's final rule defines the assessment base as 
average consolidated total assets during the assessment period less 
average tangible equity capital during the assessment period. Under the 
final rule, average consolidated total assets are defined in accordance 
with the Call Report instructions for Schedule RC-K, Quarterly 
Averages, and are measured using a daily averaging method. However, 
institutions with less than $1 billion in assets (other than newly 
insured institutions) may use a weekly averaging method for average 
consolidated total assets unless they opt to report daily averages on a 
permanent basis. Tangible equity capital is defined in the final rule 
as Tier 1 capital \21\ and average tangible equity will be calculated 
using a monthly averaging method, but institutions with less than $1 
billion in assets (other than newly insured institutions) may report on 
an end-of-quarter basis unless they opt to report monthly averages on a 
permanent basis. Institutions that are parents of

[[Page 44994]]

other insured institutions will make certain adjustments when measuring 
average consolidated total assets and average tangible equity 
separately from their subsidiary institutions. For banker's banks and 
custodial banks, as defined in the final rule, the FDIC will deduct the 
average amount of certain low-risk liquid assets from their assessment 
base. All insured institutions are potentially subject to an increase 
in assessment rates for their holdings of long-term unsecured debt 
issued by another insured institution.
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    \20\ See 76 FR 10672, February 25, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.
    \21\ For an insured branch, tangible equity is defined as 
eligible assets (determined in accordance with section 347.210 of 
the FDIC's regulations) less the book value of liabilities 
(exclusive of liabilities due to the foreign bank's head office, 
other branches, agencies, offices, or wholly owned subsidiaries).
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Proposed Regulatory Reporting Changes for the Redefined Assessment Base

    The implementation of the redefined assessment base requires the 
collection of some information from insured institutions that was not 
collected on the Call Report, the TFR, or the FFIEC 002 report prior to 
June 30, 2011. Following OMB's approval of the agencies' emergency 
clearance requests on June 17, 2011, these reporting changes took 
effect as of the June 30, 2011, report date, which was the first 
quarter-end report date after the April 1, 2011, effective date of the 
FDIC's final rule amending its assessment regulations. However, the 
burden of requiring these new data items has been partly offset by the 
elimination of some assessment data items that had been collected in 
these regulatory reports for report dates prior to June 30, 2011.
    The agencies received no comments specifically addressing the 
following assessment-base-related revisions, which were implemented in 
the Call Report, the TFR, and the FFIEC 002 effective June 30, 2011, as 
proposed in the March 2011 initial PRA notice:
     The proposed deletion of the existing data items for the 
total daily averages of deposit liabilities before exclusions, 
allowable exclusions, and foreign deposits.\22\
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    \22\ The specific items being deleted were, in the Call Report, 
existing items 4, 5, and 6 in Schedule RC-O--Other Data for Deposit 
Insurance and FICO Assessments; in the TFR, existing line items 
DI540, DI550, and DI560 in Schedule DI--Consolidated Deposit 
Information; and in the FFIEC 002 report, existing items 4, 5, and 6 
in Schedule O--Other Data for Deposit Insurance Assessments.
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     The proposed addition of a new data item for reporting 
average consolidated total assets, which should be calculated using the 
institution's total assets, as defined for Call Report balance sheet 
(Schedule RC) purposes, except that the calculation should incorporate 
all debt securities (not held for trading) at amortized cost, equity 
securities with readily determinable fair values at the lower of cost 
or fair value, and equity securities without readily determinable fair 
values at historical cost.\23\
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    \23\ For an insured branch, average consolidated total assets is 
calculated using the total assets of the branch (including net due 
from related depository institutions), as defined for purposes of 
Schedule RAL--Assets and Liabilities of the FFIEC 002 report, but 
with debt and equity securities measured in the same manner as for 
other insured institutions.
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     The proposed addition of a new data item for reporting 
average tangible equity, which is defined as Tier 1 capital.\24\
---------------------------------------------------------------------------

    \24\ For an insured branch, tangible equity is defined as 
eligible assets (determined in accordance with section 347.210 of 
the FDIC's regulations) less the book value of liabilities 
(exclusive of liabilities due to the foreign bank's head office, 
other branches, agencies, offices, or wholly owned subsidiaries).
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     The proposed adjustments to the calculation of average 
consolidated total assets and average tangible equity for insured 
depository institutions with consolidated insured depository 
subsidiaries and for insured depository institutions involved in 
mergers and consolidations during the quarter.
     The proposed addition of a yes/no banker's bank 
certification question to Call Report Schedule RC-O and TFR Schedule DI 
and, for a qualifying banker's bank, new data items for reporting the 
average amounts of its banker's bank assessment base deduction (i.e., 
the sum of the averages of its balances due from the Federal Reserve 
and its federal funds sold) and its banker's bank deduction limit 
(i.e., the sum of the averages of its deposit balances due to 
commercial banks and other depository institutions in the United States 
and its federal funds purchased).
     The proposed addition of a yes/no custodial bank 
certification question to Call Report Schedule RC-O and TFR Schedule DI 
and, for a qualifying custodial bank, a new data item for reporting the 
average amount of its custodial bank assessment base deduction (i.e., 
the average portion of its cash and balances due from depository 
institutions, held-to-maturity securities, available-for-sale 
securities, federal funds sold, and securities purchased under 
agreements to resell that have a zero percent risk weight for risk-
based capital purposes plus 50 percent of the portion of these same 
five types of assets that have a 20 percent risk weight \25\).
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    \25\ For all insured institutions, the definitions of these five 
types of assets are found in the instructions for Call Report 
Schedule RC--Balance Sheet, items 1, 2.a, 2.b, 3.a, and 3.b. In the 
Call Report, these types of assets are included, as of quarter-end, 
in items 34 through 37, columns C (zero percent risk weight) and D 
(20 percent risk weight), of Schedule RC-R--Regulatory Capital. In 
the TFR, these types of assets are included, as of quarter-end, in 
line items CCR400, CCR405, CCR409, and CCR 415 (zero percent risk 
weight) and in line items CCR430, CCR435, CCR440, CCR445, and CCR450 
(20 percent risk weight) of Schedule CCR--Consolidated Capital 
Requirement.
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     The proposed instructional change to the existing Call 
Report and TFR data items for ``Unsecured `Other borrowings' '' and 
``Subordinated notes and debentures'' with a remaining maturity of one 
year or less,\26\ which would require debt instruments redeemable at 
the holder's option within one year to be included in these data items, 
which are used in the determination of the unsecured debt adjustment 
when calculating an insured institution's assessment rate.
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    \26\ In the Call Report, Schedule RC-O, items 7.a and 8.a, 
respectively. In the TFR, Schedule DI, line items DI645 and DI655, 
respectively.
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    In response to their March 2011 initial PRA notice, the agencies 
received comments on the following four matters pertaining to the 
proposed changes to the Call Report, the TFR, and the FFIEC 002 
associated with the redefined assessment base: The averaging method to 
be used for reporting average consolidated total assets, the 
measurement of tangible equity at month-ends other than quarter-end, 
the types of assets reportable as long-term unsecured debt issued by 
other insured depository institutions, and the types of deposit 
accounts included in the custodial bank deduction limit. These comments 
are discussed in Sections III.A through III.D below.
    A. Averaging Method for Average Consolidated Total Assets--The 
FDIC's final rule requires average consolidated total assets to be 
calculated on a daily average basis by institutions with $1 billion or 
more in total assets, all newly insured institutions, and institutions 
with less than $1 billion in total assets that elect to do so. 
Institutions with less than $1 billion in total assets (that are not 
newly insured) that do not elect to measure average consolidated total 
assets on a daily average basis must calculate the average on a weekly 
average basis.\27\ To determine the averaging method used by an 
institution and its appropriateness under the final rule, the agencies 
proposed to add a new data item to Call Report Schedule RC-O, TFR 
Schedule DI, and FFIEC 002 Schedule O in which institutions would 
report the averaging method used to measure average consolidated total 
assets, i.e., daily or weekly.
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    \27\ Under the FDIC's final rule, banker's banks and custodial 
banks must calculate their respective assessment base deductions and 
deduction limits using the same averaging method, daily or weekly, 
used to calculate average consolidated total assets. Thus, the 
discussion of averaging methods also applies to these deductions and 
deduction limits.

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[[Page 44995]]

    Under the FDIC's final rule, average consolidated total assets is 
defined for all insured institutions in accordance with the 
instructions for item 9, ``Total assets,'' of Call Report Schedule RC-
K--Quarterly Averages. These instructions provide that the averages 
reported in Schedule RC-K, including the average for consolidated total 
assets, must be calculated as daily or weekly averages. Similarly, the 
instructions for reporting quarterly averages in FFIEC 002 Schedule K 
require daily or weekly average calculations. In contrast, the 
instructions for reporting quarterly averages in TFR Schedule SI--
Supplemental Information, including the average for consolidated total 
assets, permit the use of month-end averaging as an alternative to 
daily or weekly averaging when reporting average total assets in line 
item SI870.
    One bankers' organization recommended in its comment letter that 
insured institutions with less than $1 billion in total assets be 
permitted to report average consolidated total assets as a monthly 
average as an alternative to daily or weekly averaging. The 
organization stated that this would minimize the burden placed on some 
institutions and accommodate institutions with information systems 
capable of generating only monthly average balances. The agencies note 
that the averaging method prescribed in the proposed revised 
assessment-related reporting requirements is driven by the FDIC's final 
rule under which monthly average reporting is not permissible for 
institutions with less than $1 billion in total assets.\28\ In 
addition, as mentioned above, all insured commercial banks, state-
chartered savings banks, and U.S. branches of foreign banks are 
currently required to calculate quarterly averages for regulatory 
reporting purposes on a daily or weekly average basis. Only insured 
savings associations, which constitute less than 10 percent of insured 
institutions with less than $1 billion in total assets, have the option 
to calculate averages on a monthly, weekly, or daily basis for 
regulatory reporting purposes. Given the constraints of the FDIC's 
final rule, the agencies retained the daily and weekly averaging 
methods for reporting average consolidated total assets for assessment 
purposes for institutions (that are not newly insured) with less than 
$1 billion in total assets and also implemented as of June 30, 2011, 
the proposed new item in which an institution would report the 
averaging method it has used.
---------------------------------------------------------------------------

    \28\ See 76 FR 10676-10678, February 25, 2011, for the FDIC's 
discussion of average consolidated total assets for purposes of the 
final rule.
---------------------------------------------------------------------------

    B. Measurement of Average Tangible Equity--Under the FDIC's final 
rule, tangible equity is defined as Tier 1 capital.\29\ Because the 
final rule redefines the deposit insurance assessment base as average 
consolidated total assets minus average tangible equity, the agencies 
proposed to add a new item to Call Report Schedule RC-O, TFR Schedule 
DI, and FFIEC 002 Schedule O for average tangible equity. The final 
rule requires average tangible equity to be calculated on a monthly 
average basis by institutions with $1 billion or more in total assets, 
all newly insured institutions, and institutions with less than $1 
billion in total assets that elect to do so. For institutions with less 
than $1 billion in total assets (that are not newly insured) that do 
not elect to calculate average tangible equity on a monthly average 
basis, ``average'' tangible equity would be based on quarter-end Tier 1 
capital.
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    \29\ For an insured branch, tangible equity would be defined as 
eligible assets (determined in accordance with section 347.210 of 
the FDIC's regulations) less the book value of liabilities 
(exclusive of liabilities due to the foreign bank's head office, 
other branches, agencies, offices, or wholly owned subsidiaries).
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    One bankers' organization commented that although it ``believes it 
is industry practice for many banks to calculate their risk-based 
capital numbers on a monthly basis, we do not believe it is industry 
practice for banks to update their provision/allowance and deferred tax 
calculations more than quarterly.'' It observed that ``these two items 
are potentially significant drivers'' of the calculation of Tier 1 
capital and recommended that ``the agencies clarify that they accept 
that these two drivers may not be updated for the interim monthly 
capital calculations, and that a quarter-end calculation is 
acceptable.''
    The regulatory reports for insured depository institutions, which 
include regulatory capital data, are prepared as of each calendar 
quarter-end date during the year. Other than at year-end, these reports 
would be regarded as interim financial information that is prepared for 
external reporting purposes. For recognition and measurement purposes, 
the agencies' regulatory reporting requirements conform to U.S. 
generally accepted accounting principles (GAAP). According to 
Accounting Standards Codification paragraph 270-10-45-2, ``[i]n 
general, the results for each interim period shall be based on the 
accounting principles and practices used by an entity in the 
preparation of its latest annual financial statements.'' Thus, 
institutions are expected to follow this concept when preparing their 
quarterly regulatory reports, including the determination of the 
allowance for loan and leases losses and related provision expense and 
the measurement of current and deferred income taxes.
    Month-end averaging for tangible equity in the FDIC's final rule 
was not intended to impose a fully GAAP-compliant requirement for 
monthly updating of loan loss allowances and deferred tax calculations 
for months other than quarter-end. However, the agencies believe that 
it is a sound practice to accrue provision for loan and lease losses 
expense and income tax expense on some reasonable basis during the 
first two months of a quarter and then ``true-up'' these expenses for 
the quarter on a GAAP-compliant basis at quarter-end, rather than 
ignoring these expenses until the final month of the quarter. 
Therefore, although the agencies acknowledge that institutions' 
``provision/allowance and deferred tax calculations'' may not be 
updated at month-ends prior to quarter-end by recording amounts 
determined in full compliance with GAAP, it would not be acceptable to 
recognize no provision or income tax expense in the months before 
quarter-end when an institution reasonably expects that some amount 
will need to be recognized for the quarter.
    C. Long-Term Unsecured Debt Issued by Other Insured Depository 
Institutions--As an input to the new Depository Institution Debt 
Adjustment created in the FDIC's final rule, the agencies proposed to 
add an item to Call Report Schedule RC-O, TFR Schedule DI, and FFIEC 
002 Schedule O in which institutions would report the amount of their 
holdings of long-term unsecured debt issued by other insured depository 
institutions (as reported on the balance sheet). Debt would be 
considered long-term if it has a remaining maturity of at least one 
year, except if the holder has the option to redeem the debt within the 
next 12 months. Unsecured debt includes senior unsecured liabilities 
and subordinated debt. Senior unsecured liabilities are unsecured 
liabilities that are reportable as ``Other borrowings'' by the issuing 
insured depository institution on its quarterly regulatory report, 
excluding any such liabilities that the FDIC has guaranteed under the 
Temporary Liquidity Guarantee Program (12 CFR part 370). Subordinated 
debt includes subordinated notes and debentures and limited-life 
preferred stock.
    One bankers' organization requested that the agencies confirm and 
clarify that long-term unsecured debt issued by other insured 
depository institutions

[[Page 44996]]

includes only debt securities reported in certain specific Call Report 
items (and, presumably, in certain specific items in the TFR and the 
FFIEC 002). The bankers' organization stated that such long-term 
unsecured debt ``generally is not separately identified in bank 
systems'' and that ``banks would need to retrospectively identify these 
assets at the instrument level for holdings currently in the systems 
and put processes in place to ensure that future holdings are 
identifiable.''
    The agencies note that the FDIC received a few comments on the 
proposed Depository Institution Debt Adjustment aspect of its November 
2010 NPR on the redefined assessment base that stated that this 
adjustment ``will result in a reporting burden for insured depository 
institutions.'' The FDIC considered these comments in adopting the 
final rule and acknowledged that although ``some reporting 
modifications may have to be made at some institutions, the FDIC 
believes those changes can be accomplished at minimal time and cost.'' 
\30\
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    \30\ 76 FR 10682, February 25, 2011.
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    Holdings of long-term unsecured debt issued by other insured 
depository institutions are not limited to debt securities; rather, 
such debt also may be included in an institution's loans. From a Call 
Report perspective, loans to depository institutions (unless held for 
trading) are separately identifiable in bank systems because they have 
long been a specific category of loans in the loan schedule (Schedule 
RC-C, part I), although loans that meet the definition of long-term 
unsecured debt are not reported separately from other loans in this 
category. For institutions that file Call Reports, depending on the 
form of the debt and the intent for which it is held, holdings of long-
term unsecured debt issued by other insured depository institutions 
would be included in Schedule RC-B, item 6.a, ``Other domestic debt 
securities''; Schedule RC-C, part I, item 2, ``Loans to depository 
institutions and acceptances of other banks''; Schedule RC-D, item 5.b, 
``All other debt securities''; and Schedule RC-D, item 6.d, ``Other 
loans.'' \31\ For institutions that file TFRs, holdings of long-term 
unsecured debt issued by other depository institutions would be 
included in Schedule SC, line item SC185, ``Other Investment 
Securities,'' and Schedule SC, line item SC303, Commercial Loans: 
``Unsecured.'' For institutions that file the FFIEC 002, holdings of 
long-term unsecured debt issued by other depository institutions would 
be included in Schedule RAL, item 1.c.(4), ``All other'' bonds, notes, 
and debentures; Schedule RAL, item 1.f.(4), ``Other trading assets''; 
and Schedule C, item 2, ``Loans to depository institutions and 
acceptances of other banks.'' In response to this comment, the agencies 
have clarified the instructions for the new item for holdings of long-
term unsecured debt issued by other insured depository institutions by 
referencing the other items elsewhere in the report where these debt 
holdings are included.
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    \31\ For an institution that files a Call Report but does not 
complete Schedule RC-D--Trading Assets and Liabilities, long-term 
unsecured debt issued by other insured depository institutions that 
is held for trading is included in Schedule RC, item 5, ``Trading 
assets.''
---------------------------------------------------------------------------

    D. Custodial Bank Deduction Limit--Consistent with the FDIC's final 
rule, an institution that is a custodial bank is permitted to report 
the average amount of certain low-risk assets, which the FDIC will 
deduct from the custodial bank's assessment base up to a specified 
limit. For an institution that is a qualifying custodial bank, the 
agencies proposed that the institution would report the average amount 
of (1) qualifying low-risk assets and (2) transaction account deposit 
liabilities identified by the institution as being directly linked to a 
fiduciary, custody, or safekeeping account at the institution, which is 
the limit for the assessment base deduction.
    As defined in Federal Reserve Regulation D, a ``transaction 
account'' is defined in general as a domestic office deposit or account 
from which the depositor or account holder is permitted to make 
transfers or withdrawals by negotiable or transferable instruments, 
payment orders of withdrawal, telephone transfers, or other similar 
devices for the purpose of making payments or transfers to third 
persons or others or from which the depositor may make third party 
payments at an automated teller machine, a remote service unit, or 
another electronic device, including by debit card. For purposes of 
determining and reporting the custodial bank deduction limit, a foreign 
office deposit liability with the preceding characteristics also would 
be treated as a transaction account. For a transaction account to fall 
within the scope of the custodial bank deduction limit, the titling of 
the transaction account or specific references in the deposit account 
documents should clearly demonstrate the link between the transaction 
account and a fiduciary, custodial, or safekeeping account.
    Two bankers' organizations commented on the scope of the custodial 
bank deduction limit. The agencies proposed that a qualifying custodial 
bank's deduction limit should include foreign office deposit 
liabilities with the characteristics of a transaction account, as 
defined in Regulation D, that are linked to a fiduciary, custody, or 
safekeeping account when reporting the deduction limit. Both bankers' 
organizations recommended that the foreign office deposits eligible for 
inclusion in the deduction limit be expanded to include ``short-term 
time deposit accounts (usually 1-7 days)'' that are used on occasion in 
lieu of transaction accounts to ``provide cash management features for 
the client and are not part of a wealth management strategy.'' In 
addition, both organizations recommended that the agencies permit 
escrow accounts, Interest on Lawyers Trust Accounts (IOLTAs),\32\ and 
other trust and custody-related accounts, which may be held in 
transaction accounts or short-term time deposit accounts, to be 
included in the deduction limit because they are operational in nature 
and not related to wealth management.
---------------------------------------------------------------------------

    \32\ An IOLTA is an interest-bearing account maintained by a 
lawyer or law firm for clients. The interest from these accounts is 
not paid to the law firm or its clients, but rather is used to 
support law-related public service programs, such as providing legal 
aid to the poor. See 73 FR 72256, November 26, 2008.
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    In adopting the final rule, the FDIC considered whether the 
custodial bank deduction limit should encompass all deposits or just 
transaction accounts linked to a fiduciary, custody, or safekeeping 
account and decided that the limit should be confined to transaction 
accounts. Furthermore, in describing the nature of the transaction 
accounts upon which the deduction limit should be based, the FDIC 
stated that the accounts should be those used for payments and clearing 
purposes in connection with fiduciary, custody, and safekeeping 
accounts. This would include, for example, transaction accounts used to 
pay for securities or other assets purchased for such accounts. 
Accordingly, the agencies concluded that, consistent with the FDIC's 
final rule, deposits reported in the new item for the deduction limit 
beginning June 30, 2011, should exclude short-term time deposits. 
Similarly, given the constraints of the FDIC's final rule, escrow 
accounts, IOLTAs, and other trust and custody-related deposit accounts 
related to commercial bank services, or otherwise offered outside a 
custodial bank's fiduciary business unit or another distinct business 
unit devoted to institutional custodial services, cannot be included in 
the accounts falling within the scope of the custodial bank deduction 
limit.

[[Page 44997]]

IV. Risk-Based Assessment System for Large Insured Depository 
Institutions

    The final rule adopted by the FDIC Board of Directors on February 
7, 2011, also amended the assessment system applicable to large insured 
depository institutions to better capture risk at the time the 
institution assumes the risk, better differentiate risk among large 
institutions during periods of good economic and banking conditions 
based on how they would fare during periods of stress or economic 
downturns, and better take into account the losses that the FDIC may 
incur if a large institution fails.\33\ As previously stated, the final 
rule took effect for the quarter beginning April 1, 2011, and will be 
reflected for the first time in the invoices for assessments due 
September 30, 2011, using data reported in institutions' regulatory 
reports for June 30, 2011.
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    \33\ See 76 FR 10688, February 25, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf, for the FDIC's 
overview of the final rule's amendments to the assessment system 
applicable to large insured depository institutions.
---------------------------------------------------------------------------

    Under the FDIC's final rule, assessment rates for large 
institutions will be calculated using a scorecard that combines CAMELS 
ratings and certain forward-looking financial measures to assess the 
risk a large institution poses to the DIF. One scorecard will apply to 
most large institutions and another scorecard will apply to a subset of 
large institutions that are structurally and operationally complex or 
pose unique challenges and risk in the case of failure (highly complex 
institutions). In general terms, a large institution is an insured 
depository institution with total assets of $10 billion or more whereas 
a highly complex institution is an insured depository institution 
(other than a credit card bank \34\) with total assets of $50 billion 
or more that is controlled by a U.S. holding company that has total 
assets of $500 billion or more or an insured depository institution 
that is a processing bank or trust company.\35\
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    \34\ As defined in the FDIC's final rule, a credit card bank is 
an IDI for which credit card receivables plus securitized 
receivables exceed 50 percent of assets plus securitized 
receivables.
    \35\ See sections 327.8(f), (g), and (s) of the FDIC's 
regulations for the full definitions of the terms ``large 
institution,'' ``highly complex institution,'' and ``processing bank 
or trust company,'' respectively. Under both the FDIC's final rule 
and the FDIC's assessment regulations in effect before April 1, 
2011, an insured U.S. branch of a foreign bank is a ``small 
institution'' regardless of its total assets.
---------------------------------------------------------------------------

    The scorecard for large institutions (other than highly complex 
institutions) produces two scores--a performance score and a loss 
severity score--that are converted into a total score. The performance 
score, which measures a large institution's financial performance and 
its ability to withstand stress, is a weighted average of the scores 
for three components: (1) Weighted average CAMELS rating score; (2) 
ability to withstand asset-related stress score, which is itself a 
weighted average of the scores for four measures; and (3) ability to 
withstand funding-related stress score, which is a weighted average of 
the scores for two measures. The loss severity score measures the 
relative magnitude of potential losses to the FDIC in the event of a 
large institution's failure by applying a standardized set of 
assumptions (based on recent failures) regarding liability runoffs and 
the recovery value of asset categories.
    For highly complex institutions, there is a different scorecard 
with measures tailored to the risks these institutions pose. However, 
the structure and much of the scorecard for a highly complex 
institution are similar to the scorecard for other large institutions 
because it contains both a performance score and a loss severity score. 
The performance score for highly complex institutions is the weighted 
average of the scores for the same three components as for large 
institutions: (1) Weighted average CAMELS rating score; (2) ability to 
withstand asset-related stress score; and (3) ability to withstand 
funding-related stress score. However, the measures contained in the 
latter two components for highly complex institutions differ from those 
for large institutions. For highly complex institutions, the score for 
the ability to withstand asset-related stress is the weighted average 
of the scores for four measures, two of which differ from those used to 
calculate large institutions' asset-related stress score, and the score 
for the ability to withstand funding-related stress is the weighted 
average of the scores for three measures, the first two of which also 
are used to calculate large institutions' funding-related stress score.
    The method for calculating the total score for large institutions 
and highly complex institutions is the same. Once the performance and 
loss severity scores are calculated for a large or highly complex 
institution, these scores are converted to a total score. Each 
institution's total score is calculated by multiplying its performance 
score by a loss severity factor derived from its loss severity score. 
The total score is then used to determine the initial base assessment 
rate for each large institution and highly complex institution.
    For complete details on the scorecards for large institutions and 
highly complex institutions, including the measures used in the 
calculation of performance scores and loss severity scores, see the 
FDIC's final rule.\36\
---------------------------------------------------------------------------

    \36\ See 76 FR 10688-10703, February 25, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.
---------------------------------------------------------------------------

Proposed Regulatory Reporting Changes for the Revised Risk-Based 
Assessment System for Large Institutions and Highly Complex 
Institutions

    Most of the data used as inputs to the scorecard measures for large 
institutions and highly complex institutions are available from the 
Call Reports and TFRs filed quarterly by these institutions, but the 
data items needed to compute scorecard measures for criticized and 
classified items, higher-risk assets (as defined in accordance with the 
FDIC's final rule on assessments), top 20 counterparty exposures, and 
the largest counterparty exposure are not available from the Call 
Reports and TFRs. With the revised risk-based assessment system for 
these institutions under the FDIC's final rule taking effect in the 
second quarter of 2011, the agencies proposed in their March 2011 
initial PRA notice that large and highly complex institutions begin to 
report the new data items needed as inputs to their respective 
scorecards in their Call Reports and TFRs beginning June 30, 2011.\37\ 
In addition, certain other data items that will be used in the 
scorecards for large institutions are not currently reported in the TFR 
by savings associations. Thus, the agencies also proposed in their 
March 2011 initial PRA notice to add these data items to the TFR as of 
June 30, 2011, and to require these data items to be reported by 
savings associations that are large institutions or have $10 billion or 
more in total assets as of that date or a subsequent quarter-end date. 
Currently, there are about 110 insured depository institutions with $10 
billion or more in total assets that would be affected by some or all 
of the additional reporting requirements, of which about 20 are savings 
associations.
---------------------------------------------------------------------------

    \37\ No savings associations are expected to meet the definition 
of a highly complex institution. Accordingly, the agencies proposed 
to add the new data items for highly complex institutions only to 
the Call Report and not to the TFR. If a savings association were to 
become a highly complex institution before its proposed conversion 
from filing TFRs to filing Call Reports effective March 31, 2012 
(see 76 FR 39981, July 7, 2011), the FDIC would collect the 
necessary data directly from the savings association.
---------------------------------------------------------------------------

    The agencies received no comments specifically addressing the 
following proposed data items that would support the revised risk-based 
assessment system for large institutions and highly complex 
institutions, which were implemented in the Call Report and the

[[Page 44998]]

TFR effective June 30, 2011, as proposed in the March 2011 initial PRA 
notice:
     For seven categories of funded loans, new data items to be 
completed by large institutions for the portion of the balance sheet 
amount that is guaranteed or insured by the U.S. government, including 
its agencies and its government-sponsored agencies, other than by the 
FDIC under loss-sharing agreements.\38\
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    \38\ The seven loan categories are (1) construction, land 
development, and other land loans secured by real estate (in 
domestic offices), (2) loans secured by multifamily residential and 
nonfarm nonresidential properties (in domestic offices), (3) closed-
end first lien 1-4 family residential mortgages (in domestic 
offices) and non-agency residential mortgage-backed securities, (4) 
closed-end junior lien 1-4 family residential mortgages and home 
equity lines of credit (in domestic offices), (5) commercial and 
industrial loans, (6) credit card loans to individuals for 
household, family, and other personal expenditures, and (7) other 
consumer loans. Highly complex institutions would report the new 
item for the portion of the balance sheet amount of construction, 
land development, and other land loans secured by real estate (in 
domestic offices) that is guaranteed or insured by the U.S. 
government, other than by the FDIC.
---------------------------------------------------------------------------

     New data items for large and highly complex institutions 
for the unused portion of commitments to fund construction, land 
development, and other land loans secured by real estate (in domestic 
offices) and for the portion of these unfunded commitments that is 
guaranteed or insured by the U.S. government, including by the FDIC.
     A new data item for large and highly complex institutions 
for the amount of other real estate owned (ORE) that is recoverable 
from the U.S. government, including its agencies and its government-
sponsored agencies, under guarantee or insurance provisions, excluding 
any ORE covered under FDIC loss-sharing agreements.
     A new data item for large and highly complex institutions 
for the amount of their nonbrokered time deposits of more than 
$250,000.
     New TFR data items for savings associations that are large 
institutions (or report $10 billion or more in total assets in their 
June 30, 2011, or a subsequent TFR) that would provide data used in the 
scorecards for large institutions that are not currently reported in 
the TFR by savings associations, but are reported in the Call Report by 
banks, including the fair value of trading assets and liabilities 
included in various balance sheet asset and liability categories 
reported in TFR Schedule SC as well as data on certain securities, 
loans, deposits, borrowings, and loan commitments.\39\
---------------------------------------------------------------------------

    \39\ For further information on these new TFR data items, see 76 
FR 14469-14470, March 16, 2011.
---------------------------------------------------------------------------

    In contrast, as mentioned above, all 14 of the depository 
institutions and three of the bankers' organizations that commented on 
the proposed assessment-related reporting changes for large and highly 
complex institutions in the agencies' March 2011 initial PRA notice 
raised concerns about the reporting requirements for subprime consumer 
loans and leveraged loans. In addition, one depository institution and 
two bankers' organizations offered comments on other aspects of the 
proposed reporting requirements for large and highly complex 
institutions. These comments are discussed in Sections IV.A through 
IV.F below.
    As stated earlier in this notice, the FDIC previously provided the 
banking industry opportunities to comment on all of the measures and 
definitions of the measures used within the scorecard for large insured 
depository institution pricing purposes through the publication of two 
separate NPRs in May and November 2010.\40\ During the 2010-2011 
rulemaking process, the FDIC received numerous recommendations to 
refine and clarify scorecard measures and definitions. The FDIC staff 
considered all of these recommendations and finalized the definitions 
that were included in the final rule redefining the assessment base and 
revising the assessment system for large insured depository 
institutions that was approved by the FDIC Board on February 7, 
2011.\41\ With the exception of some of the data availability issues 
discussed below, most of the comments received in response to the 
agencies' March 2011 initial PRA notice were not new recommendations 
and had already been considered by the FDIC during the 2010-2011 
rulemaking process prior to issuance of the final rule.
---------------------------------------------------------------------------

    \40\ See 75 FR 23516, May 3, 2010, at http://www.fdic.gov/regulations/laws/federal/2010/10proposead57.pdf, and 75 FR 72612, 
November 24, 2010, at http://www.fdic.gov/regulations/laws/federal/2010/10proposeAD66LargeBank.pdf.
    \41\ See 76 FR 10672, February 25, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.
---------------------------------------------------------------------------

    As previously noted, the definitions of subprime loans, leveraged 
loans, and nontraditional mortgage loans in the FDIC's February 2011 
final rule are applicable only for purposes of deposit insurance 
assessments. Given the specific and limited purpose for which these 
definitions will be used, they will not be applied for supervisory 
purposes.
    A. Data Availability for Reporting Subprime Consumer Loans and 
Leveraged Loans--In their March 2011 initial PRA notice, the agencies 
proposed that two new items be added to the Call Report and the TFR for 
the amount of subprime consumer loans and leveraged loans. The 
definitions to be used for these two asset categories for regulatory 
reporting purposes were taken from Appendix C of the FDIC's final 
rule.\42\ These two new items are to be completed by large institutions 
and highly complex institutions.
---------------------------------------------------------------------------

    \42\ See 76 FR 10722-10724, February 25, 2011.
---------------------------------------------------------------------------

    According to Appendix C of the FDIC's final rule, which applies for 
assessment purposes only, subprime loans include:

loans made to borrowers that display one or more of the following 
credit risk characteristics (excluding subprime loans that are 
previously included as nontraditional mortgage loans) at origination 
or upon refinancing, whichever is more recent.
     Two or more 30-day delinquencies in the last 12 months, 
or one or more 60-day delinquencies in the last 24 months;
     Judgment, foreclosure, repossession, or charge-off in 
the prior 24 months;
     Bankruptcy in the last 5 years; or
     Debt service-to-income ratio of 50 percent or greater, 
or otherwise limited ability to cover family living expenses after 
deducting total monthly debt-service requirements from monthly 
income.\11\
    Subprime loans also include loans identified by an insured 
depository institution as subprime loans based upon similar borrower 
characteristics and securitizations where more than 50 percent of 
assets backing the securitization meet one or more of the preceding 
criteria for subprime loans, excluding those securities classified 
as trading book.

    \11\ http://www.fdic.gov/news/news/press/2001/pr0901a.html; 
however, the definition in the text above excludes any reference to 
FICO or other credit bureau scores.

    The amount to be reported for subprime loans would include 
purchased credit impaired loans \43\ that meet the definition of a 
subprime loan in the FDIC's final rule, but would exclude amounts 
recoverable on subprime loans from the U.S. government, its agencies, 
or its government-sponsored agencies under guarantee or insurance 
provisions. The final rule defines subprime loans as those that meet 
the criteria for being subprime at origination or upon refinancing, 
whichever is more recent, and excludes loans that have deteriorated 
subsequent to origination or refinancing.
---------------------------------------------------------------------------

    \43\ The definition of purchased credit impaired loans is found 
in Financial Accounting Standards Board Accounting Standards 
Codification Subtopic 310-30, Receivables--Loans and Debt Securities 
Acquired with Deteriorated Credit Quality (formerly AICPA Statement 
of Position 03-3, ``Accounting for Certain Loans or Debt Securities 
Acquired in a Transfer'').
---------------------------------------------------------------------------

    As described in Appendix C of the FDIC's final rule, which applies 
for

[[Page 44999]]

---------------------------------------------------------------------------
assessment purposes only, leveraged loans include:

    (1) all commercial loans (funded and unfunded) with an original 
amount greater than $1 million that meet any one of the conditions 
below at either origination or renewal, except real estate loans; 
(2) securities issued by commercial borrowers that meet any one of 
the conditions below at either origination or renewal, except 
securities classified as trading book; and (3) securitizations that 
are more than 50 percent collateralized by assets that meet any one 
of the conditions below at either origination or renewal, except 
securities classified as trading book.4 5
     Loans or securities where borrower's total or senior 
debt to trailing twelve-month EBITDA`` \6\ (i.e. operating leverage 
ratio) is greater than 4 or 3 times, respectively. For purposes of 
this calculation, the only permitted EBITDA adjustments are those 
adjustments specifically permitted for that borrower in its credit 
agreement; or
     Loans or securities that are designated as highly 
leveraged transactions (HLT) by syndication agent.\7\

    \4\ The following guidelines should be used to determine the 
``original amount'' of a loan:
    (1) For loans drawn down under lines of credit or loan 
commitments, the ``original amount'' of the loan is the size of the 
line of credit or loan commitment when the line of credit or loan 
commitment was most recently approved, extended, or renewed prior to 
the report date. However, if the amount currently outstanding as of 
the report date exceeds this size, the ``original amount'' is the 
amount currently outstanding on the report date.
    (2) For loan participations and syndications, the ``original 
amount'' of the loan participation or syndication is the entire 
amount of the credit originated by the lead lender.
    (3) For all other loans, the ``original amount'' is the total 
amount of the loan at origination or the amount currently 
outstanding as of the report date, whichever is larger.
    \5\ Leveraged loans criteria are consistent with guidance issued 
by the Office of the Comptroller of the Currency in its 
Comptroller's Handbook, http://www.occ.gov/static/publications/
handbook/LeveragedLending.pdf, but do not include all of the 
criteria in the handbook.
    \6\ Earnings before interest, taxes, depreciation, and 
amortization.
    \7\ http://www.fdic.gov/news/news/press/2001/pr2801.html.

    Large and highly complex institutions are to report the balance 
sheet amount of leveraged loans that have been funded. Unfunded amounts 
include the unused portions of irrevocable and revocable commitments to 
make or purchase leveraged loans. The amount to be reported for 
leveraged loans would include purchased credit impaired loans, but 
would exclude amounts recoverable on leveraged loans from the U.S. 
government, its agencies, or its government-sponsored agencies under 
guarantee or insurance provisions. Under the FDIC's final rule, a 
commercial loan will be considered leveraged for assessment purposes 
only if it meets one of two conditions at origination or renewal, but 
excludes loans that have deteriorated subsequent to origination or 
renewal.
    In their comments on the proposed reporting requirements for large 
institutions and highly complex institutions, 14 depository 
institutions and three bankers' organizations stated that institutions 
do not have data on subprime and leveraged loans in the manner in which 
these categories of loans are defined in the FDIC's final rule or do 
not have the ability to capture the prescribed data on subprime and 
leveraged loans in time to file their June 2011 regulatory reports and 
attest to the correctness of the reports. Some of these commenters 
recommended that the agencies allow large and highly complex 
institutions to delay the initial reporting of subprime and leveraged 
loans until the industry and other agencies can work with the FDIC to 
revise the definitions contained in the FDIC's assessment regulations. 
Other commenters recommended that large and highly complex institutions 
be allowed to use their own internal methodologies for identifying 
subprime and leveraged loans, arguing that these methodologies have 
been reviewed by regulatory agencies as part of the examination 
process.
    In presenting their views on the definitions of subprime and 
leveraged loans contained in the FDIC's final rule that were carried 
forward into the draft reporting instructions for these data items, 
commenters cited various aspects of the definitions that they found 
troublesome, made a number of recommendations regarding the 
definitions, and suggested that large and highly complex institutions 
be permitted to use their own internal methodologies for identifying 
such loans rather than the definitions in the final rule.
    With respect to the subprime consumer loan definition in the FDIC's 
final rule, several commenters stated that the FDIC's departure from 
the subprime definition in the agencies' 2001 Expanded Guidance for 
Subprime Lending Programs (2001 Guidance) is problematic because it 
changed the process for identifying subprime loans from one that 
allowed flexibility to one in which a list of specific characteristics 
must be considered. Thus, the final rule's definition mandates the 
credit quality characteristics that must be considered, whereas the 
2001 Guidance provides that these same characteristics ``may'' be 
considered in identifying loans as subprime. Some commenters stated 
that the definition does not allow for limited exceptions for prime 
borrowers with minor or isolated credit issues. Several commenters, 
including one bankers' organization, requested that large and highly 
complex institutions be allowed to determine their subprime exposures 
by using a credit scoring algorithm or system (developed either 
internally or by a vendor) that measures a borrower's probability of 
default. One commenter stated that loans should only be identified as 
subprime when they are originated, not when they are refinanced. In 
addition, one commenter requested that the agencies clarify the scope 
of the exclusion from reporting for amounts recoverable on subprime 
loans from the U.S. government, its agencies, or its government-
sponsored agencies under guarantee or insurance provisions.\44\
---------------------------------------------------------------------------

    \44\ Although this comment was made only with respect to 
subprime consumer loans, this exclusion is also applicable to 
certain other proposed new items for large and highly complex 
institutions.
---------------------------------------------------------------------------

    The agencies note that the FDIC issued two NPRs in 2010 that gave 
institutions and the industry opportunities to comment twice on the 
subprime definition. Compared to the definition of subprime in its May 
2010 NPR, the FDIC removed the word ``may'' from this definition and 
made the definition more prescriptive when it issued the November 2010 
NPR to ensure uniformity and consistency in the identification of loans 
to be reported as subprime for deposit insurance assessment purposes. 
The publication of the November 2010 NPR provided an opportunity for 
institutions and the industry to comment on the FDIC's more 
prescriptive subprime loan definition, but the FDIC received no 
comments regarding the removal of the word ``may'' from the subprime 
loan definition. The FDIC believes that a prescriptive definition is 
necessary for purposes of setting assessment rates for large and highly 
complex institutions. When developing the subprime loan definition that 
would apply to the scorecards for large and highly complex institutions 
in the final rule, the FDIC used certain elements of the existing 
supervisory guidance, but it modified the definition proposed for 
assessment purposes in the November 2010 NPR in response to industry 
comments. As explained in the preamble for the final rule,\45\ the FDIC 
decided to remove the credit score threshold from the list of potential 
credit risk characteristics of a

[[Page 45000]]

subprime borrower because there may be differences among various models 
that the credit rating bureaus use. In addition, the FDIC viewed 
reliance on credit scoring models that are controlled by credit rating 
bureaus as undesirable because these models may be changed at the 
discretion of the credit rating bureaus. The FDIC concluded in its 
rulemaking that the credit risk characteristics included in the final 
rule's subprime loan definition represent information an institution 
should be able to capture during the loan underwriting process, which 
would therefore enable the institution to identify consumer loans as 
subprime based on the specified characteristics.
---------------------------------------------------------------------------

    \45\ See 76 FR 10692, February 25, 2011.
---------------------------------------------------------------------------

    As mentioned above, one commenter requested clarification--in the 
context of subprime loans--of the exclusion from reporting for amounts 
recoverable from the U.S. government, its agencies, or its government-
sponsored agencies under guarantee or insurance provisions. The FDIC's 
final rule includes this exclusion not just for subprime loans, but for 
each loan concentration category. To clarify the scope of this 
exclusion, examples include guarantees or insurance (or reinsurance) 
provided by the Department of Veterans Affairs, the Federal Housing 
Administration, the Small Business Administration (SBA), the Department 
of Agriculture Rural Development Loan Program, and the Department of 
Education for individual loans as well as coverage provided by the FDIC 
under loss-sharing agreements. For loan securitizations and securities, 
examples include those guaranteed by the Government National Mortgage 
Association, the Federal National Mortgage Association (Fannie Mae), 
and the Federal Home Loan Mortgage Corporation (Freddie Mac) as well as 
SBA Guaranteed Loan Pool Certificates and securities covered by FDIC 
loss-sharing agreements. However, if an institution holds securities 
backed by mortgages it has transferred to Fannie Mae or Freddie Mac 
with recourse or other transferor-provided enhancements, these 
securities should not be considered guaranteed to the extent of the 
institution's maximum contractual credit exposure arising from the 
enhancements.
    With respect to the proposed data item for leveraged loans, several 
commenters recommended that the definition be modified so that it only 
applies to loans where the proceeds are used for buyouts, acquisitions, 
and recapitalizations. A number of commenters also objected to the 
FDIC's prescription in the final rule of one specific ``bright-line'' 
financial metric--debt to EBITDA--to determine whether a loan is 
leveraged, arguing that a single financial metric is too simplistic and 
does not consider the risk characteristics of borrowers in different 
industries. One commenter suggested collateral protection be considered 
in the definition. Another commenter suggested that securities and 
securitizations backed by leveraged loans should be excluded from the 
leveraged loan definition. This commenter also questioned the proposed 
instructional language stating that undrawn credit lines should be 
considered fully drawn when calculating debt to EBITDA ratios because 
this treatment penalizes borrower leverage, especially because undrawn 
commitments are often not drawn.
    The FDIC's definition of leveraged loans in the final rule for 
large and highly complex institution deposit insurance pricing purposes 
is the result of several modifications to the original definition 
proposed by the FDIC in the NPRs published by the FDIC in May 2010 and 
November 2010. The FDIC's final rule includes modifications to the 
proposed definition that were made in response to comments received 
from the industry during the comment periods on the two NPRs. 
Commenters on the November 2010 notice recommended that the purpose of 
a loan should not be used as an independent condition for identifying 
the loan as leveraged, stating that a loan that is made ``for buyout, 
acquisition, and recapitalization'' is not implicitly risky and ignores 
the current financial condition of the borrower. As it prepared the 
leveraged loan definition for inclusion in the final rule, the FDIC 
agreed, in part, with this assessment and concluded that the amount of 
borrower leverage, rather than the purpose of a loan, should dictate 
whether or not the loan is leveraged and thus possesses higher risk. 
The higher-risk asset concentration measure in the scorecards for large 
and highly complex institutions is designed to capture this elevated 
risk. As further noted in the preamble for the final rule,\46\ the FDIC 
believes that some bright-line metrics are necessary to ensure that 
institutions take a uniform approach to identifying loans to be 
reported as leveraged for assessment purposes. The FDIC used the 
metrics outlined in the February 2008 Comptroller's Handbook on 
Leveraged Lending (Handbook) \47\ as the initial basis for its 
definition; however, to ensure consistency among institutions, the 
leveraged loan definition in the FDIC's final rule is more prescriptive 
than the Handbook guidance. However, the FDIC and the agencies 
considered the comment opposing the inclusion of undrawn credit lines 
in the debt to EBITDA metrics and are removing this provision from the 
draft instructions for reporting leveraged loans. Finally, for purposes 
of the final rule's definition of leveraged loans, the FDIC concluded 
that the inclusion of securities and securitizations within the 
definition of leveraged lending is consistent with the concept of a 
comprehensive concentration measure, which should include the total 
exposure arising from assets that share a particular set of 
characteristics.
---------------------------------------------------------------------------

    \46\ See 76 FR 10692, February 25, 2011.
    \47\ http://www.occ.gov/static/publications/handbook/
LeveragedLending.pdf.
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    The agencies acknowledged commenters' concerns about the 
definitions of subprime consumer loans and leveraged loans in the 
FDIC's final rule and the inability of large and highly complex 
institutions to report the amounts of these two categories of higher-
risk assets in accordance with the final rule's definitions, 
particularly beginning with the June 30, 2011, report date. In 
consideration of these concerns, the agencies agreed to provide 
transition guidance for the reporting of subprime consumer loans and 
leveraged loans. As more fully explained in Section II above, for loans 
originated or purchased prior to October 1, 2011, and securities where 
the underlying loans were originated predominantly prior to October 1, 
2011, for which a large or highly complex institution does not have 
within its data systems the information necessary to determine subprime 
consumer or leveraged status in accordance with the definitions of 
these two higher-risk asset categories in the FDIC's final rule, the 
institution may use its existing internal methodology for identifying 
subprime consumer or leveraged loans for purposes of reporting these 
assets in its Call Reports or TFRs. Institutions that do not have an 
existing internal methodology in place to identify subprime consumer or 
leveraged loans may, as an alternative to applying the definitions in 
the FDIC's final rule to pre-October 1, 2011, loans and securities, 
apply existing guidance provided by their primary federal regulator, 
the agencies' 2001 Expanded Guidance for Subprime Lending Programs,\48\ 
or the February 2008 Comptroller's Handbook on Leveraged Lending \49\ 
for purposes of identifying subprime consumer and leveraged loans

[[Page 45001]]

originated or purchased prior to October 1, 2011, and subprime consumer 
and leveraged securities where the underlying loans were originated 
predominantly prior to October 1, 2011. All loans originated on or 
after October 1, 2011, and all securities where the underlying loans 
were originated predominantly on or after October 1, 2011, must be 
reported as subprime consumer or leveraged loans and securities 
according to the definitions of these higher-risk asset categories set 
forth in the FDIC's final rule.\50\
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    \48\ http://www.fdic.gov/news/news/press/2001/pr0901a.html.
    \49\ http://www.occ.gov/static/publications/handbook/
LeveragedLending.pdf.
    \50\ For loans purchased on or after October 1, 2011, large and 
highly complex institutions may apply the transition guidance to 
loans originated prior to that date. Loans purchased on or after 
October 1, 2011, that also were originated on or after that date 
must be reported as subprime or leveraged according to the 
definitions of these higher-risk asset categories set forth in the 
FDIC's final rule.
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    B. Criticized and Classified Items--The agencies proposed to add 
separate data items to the Call Report for the amount of items 
designated Special Mention, Substandard, Doubtful, and Loss.\51\ These 
four data items are to be completed by large institutions and highly 
complex institutions and would cover both on- and off-balance sheet 
items that are criticized and classified. These data items were already 
being collected on a confidential basis from all savings associations 
on the TFR in Schedule VA--Consolidated Valuation Allowances and 
Related Data in line items VA960, VA965, VA970, and VA975.
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    \51\ Loss items would include any items graded Loss that have 
not yet been written off against the allowance for loan and leases 
losses (or another valuation allowance) or charged directly to 
earnings, as appropriate.
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    According to Appendix A of the FDIC's final rule:

    Criticized and classified items include items an institution or 
its primary federal regulator have graded ``Special Mention'' or 
worse and include retail items under Uniform Retail Classification 
Guidelines, securities, funded and unfunded loans, other real estate 
owned (ORE), other assets, and marked-to-market counterparty 
positions, less credit valuation adjustments.\2\ Criticized and 
classified items exclude loans and securities in trading books, and 
the amount recoverable from the U.S. government, its agencies, or 
government-sponsored agencies, under guarantee or insurance 
provisions.

------------

    \2\ A marked-to-market counterparty position is equal to the sum 
of the net marked-to-market derivative exposures for each 
counterparty. The net marked-to-market derivative exposure equals 
the sum of all positive marked-to-market exposures net of legally 
enforceable netting provisions and net of all collateral held under 
a legally enforceable CSA \52\ plus any exposure where excess 
collateral has been posted to the counterparty. For purposes of the 
Criticized and Classified Items/Tier 1 Capital and Reserves 
definition a marked-to-market counterparty position less any credit 
valuation adjustment can never be less than zero.

    \52\ Credit Support Annex.
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    Saving associations that are large or highly complex institutions 
would complete existing line items VA960, VA965, VA970, and VA975 in 
accordance with the preceding Appendix A guidance rather than the 
existing TFR instructions for these four line items. All other savings 
associations would continue to follow the existing TFR instructions for 
these four line items.
    Comments were received from one depository institution and two 
bankers' organizations on the reporting of criticized and classified 
items proposed in the agencies' March 2011 initial PRA notice. One 
commenter expressed concerns about the comparability of criticized and 
classified totals that would be reported by different institutions, 
stating that some institutions may be conservative and ``over-report'' 
the amount of criticized and classified items while other institutions 
may be willing to take on more risk and ``under-report'' the amount of 
such items. This commenter requested assurances that items will be 
judged similarly across all institutions. This commenter also requested 
that the agencies clarify the meaning of ``unfunded loans'' as used in 
the definition of criticized and classified items. Another commenter 
requested that the phrase ``less credit valuation adjustments'' be 
removed from the definition to ensure consistency with information on 
criticized and classified items currently reported to the OCC by many 
institutions. The third commenter similarly recommended that 
institutions report the same data in the new items for criticized and 
classified items that they currently submit to their primary federal 
regulator. In this regard, both of these commenters cited the ``Fast 
Data Reporting Form'' used for this purpose by OCC-regulated 
institutions.
    The agencies have developed uniform definitions for criticized and 
classified items and these definitions have been utilized for many 
years.\53\ Additionally, the agencies expect the classifications or 
grades assigned to an institution's credit exposures to be subject to 
review and validation as part of the institution's internal control 
processes and by the institution's primary federal regulator as part of 
an ongoing supervisory program. In this regard, an institution that 
maintains a credit grading system that differs from the agencies' 
framework for criticized and classified items is expected to maintain 
documentation that translates the institution's system into the 
framework used by the agencies. This documentation should be sufficient 
to enable examiners to reconcile the totals for the various credit 
grades under the institution's system to the agencies' categories of 
criticized and classified items. Thus, the agencies believe that there 
is comparability across institutions in designating items as criticized 
or classified. Nevertheless, the FDIC will consider the effectiveness 
of an institution's internal credit grading system, generally as 
determined by the institution's primary federal regulator, when making 
adjustments to an institution's total score for purposes of setting 
assessment rates for large and highly complex institutions.
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    \53\ See the Uniform Agreement on the Classification of Assets 
and Appraisal of Securities Held by Banks and Thrifts issued by the 
OCC, the Board, the FDIC, and the OTS in June 2004 at http://www.fdic.gov/news/news/financial/2004/fil7004.html. The 2004 
agreement replaced an interagency agreement with the same title that 
was issued in 1979 and had its origins in interagency guidance 
issued in 1938.
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    As used in the definition of criticized and classified items, the 
term ``unfunded loans'' represents the amount that the borrower is 
entitled to draw upon as of the quarter-end report date, i.e., the 
unused commitment as defined in the instructions to Call Report 
Schedule RC-L, item 1. The agencies have clarified the instructions for 
reporting criticized and classified items accordingly.
    Lastly, for purposes of measuring the actual risk exposure to a 
large or highly complex institution from a criticized and classified 
marked-to-market counterparty position under its final rule, the FDIC 
concluded that it is appropriate to reduce the counterparty position by 
any applicable credit valuation adjustment. Not requiring an 
institution to apply credit valuation adjustments to its marked-to-
market counterparty positions could potentially result in over-
reporting the amount of criticized and classified items. However, a 
large or highly complex institution that has not previously measured 
its marked-to-market counterparty positions net of any applicable 
credit valuation adjustments for purposes of reporting criticized and 
classified items internally and to its primary federal regulator may 
report these positions in this same manner for deposit insurance 
assessment purposes in the Call Report or TFR, particularly if the 
institution concludes that updating its reporting systems to net these 
adjustments would impose an undue burden on the institution.

[[Page 45002]]

    C. Nontraditional Mortgage Loans--The agencies proposed to add a 
data item to the Call Report and the TFR for the balance sheet amount 
of nontraditional 1-4 family residential mortgage loans, including 
certain securitizations of such mortgages. The data item is to be 
completed by large and highly complex institutions. As described in 
Appendix C of the FDIC's final rule, which applies for assessment 
purposes only, nontraditional mortgage loans include all:

residential loan products that allow the borrower to defer repayment 
of principal or interest and includes all interest-only products, 
teaser rate mortgages, and negative amortizing mortgages, with the 
exception of home equity lines of credit (HELOCs) or reverse 
mortgages.8 9 10
    For purposes of the higher-risk concentration ratio, 
nontraditional mortgage loans include securitizations where more 
than 50 percent of the assets backing the securitization meet one or 
more of the preceding criteria for nontraditional mortgage loans, 
with the exception of those securities classified as trading book.
------------
    \8\ For purposes of this rule making, a teaser-rate mortgage 
loan is defined as a mortgage with a discounted initial rate where 
the lender offers a lower rate and lower payments for part of the 
mortgage term.
    \9\ http://www.fdic.gov/regulations/laws/federal/2006/
06noticeFINAL.html.
    \10\ A mortgage loan is no longer considered a nontraditional 
mortgage once the teaser rate has expired. An interest only loan is 
no longer considered nontraditional once the loan begins to 
amortize.

    The amount to be reported for nontraditional mortgage loans for 
deposit insurance assessment purposes would include purchased credit 
impaired loans, but would exclude amounts recoverable on nontraditional 
mortgage loans from the U.S. government, its agencies, or its 
government-sponsored agencies under guarantee or insurance provisions.
    One depository institution and two bankers' organizations requested 
certain clarifications of the scope of the nontraditional mortgage loan 
data item. More specifically, these commenters asked whether 
nontraditional mortgages include conventional amortizing adjustable 
rate mortgages (ARMs) and residential construction loans on which the 
borrower is required to make only interest payments during the 
construction period and whether nontraditional mortgages can be 
reclassified as traditional loans when they begin to fully amortize. 
One commenter requested clarification of the term ``discounted initial 
rate'' as used in the nontraditional mortgage loan definition. This 
commenter also asked whether the teaser-rate mortgage loan definition 
applied to all ARMs or only to those that permit negative amortization. 
Another commenter recommended either removing the reference to teaser 
rates from the nontraditional mortgage loan definition or changing the 
definition to be consistent with existing regulatory definitions. This 
commenter cited the description of teaser rates in the OTS's 2011 
Examination Handbook.\54\
---------------------------------------------------------------------------

    \54\ http://www.ots.treas.gov/?p=ExaminationHandbook.
---------------------------------------------------------------------------

    Although the FDIC used the October 2006 Interagency Guidance on 
Nontraditional Mortgage Product Risks \55\ as the starting point for 
the definition of nontraditional mortgage loans in its final rule, the 
final rule's definition for assessment purposes only differs from the 
Interagency Guidance in some respects. Therefore, in response to the 
comments, the agencies agreed that certain clarifications of the final 
rule's definition would be appropriate to assist institutions in 
properly reporting the amount of nontraditional mortgage loans in the 
Call Report and TFR. Accordingly, the agencies have revised the 
reporting instructions to state that nontraditional mortgage loans do 
not include residential construction loans on which the borrower is 
required to pay only interest or conventional fully amortizing ARMs 
that do not have a teaser rate. However, ARMs that have a teaser rate 
that has not expired would be considered nontraditional mortgage loans 
for deposit insurance assessment purposes. In addition, the reporting 
instructions have been clarified to state that nontraditional mortgages 
can be reclassified as traditional loans once they become fully 
amortizing loans, provided they do not have a teaser rate. Finally, the 
reporting instructions now indicate that a loan has a teaser rate, 
i.e., a discounted initial rate, when the loan's effective interest 
rate at the time of origination or refinancing is less than the rate 
the bank is willing to accept for an otherwise similar extension of 
credit with comparable risk.
---------------------------------------------------------------------------

    \55\ See 71 FR 58609, October 4, 2006.
---------------------------------------------------------------------------

    D. Counterparty Exposures--The agencies proposed to add new items 
to the Call Report for the total amount of an institution's 20 largest 
counterparty exposures and the amount of the institution's largest 
counterparty exposure, which would be completed only by highly complex 
institutions. According to Appendix A of the FDIC's final rule:

    Counterparty exposure is equal to the sum of Exposure at Default 
(EAD) associated with derivatives trading and Securities Financing 
Transactions (SFTs) and the gross lending exposure (including all 
unfunded commitments) for each counterparty or borrower at the 
consolidated entity level [of the counterparty].\1\

    \1\ EAD and SFTs are defined and described in the compilation 
issued by the Basel Committee on Banking Supervision in its June 
2006 document, ``International Convergence of Capital Measurement 
and Capital Standards.'' The definitions are described in detail in 
Annex 4 of the document. Any updates to the Basel II capital 
treatment of counterparty credit risk would be implemented as they 
are adopted. http://www.bis.org/publ/bcbs128.pdf.

    When measuring counterparty exposure for deposit insurance pricing 
purposes, highly complex institutions should exclude exposure amounts 
arising from due from accounts, federal funds sold, investments in debt 
and equity securities, and credit protection purchased or sold where 
the counterparty under consideration is the reference entity.
    Two bankers' organizations requested that, for purposes of the two 
counterparty exposure data items, highly complex institutions be 
permitted to use the same EAD amounts for derivatives and SFTs as 
reported in the schedules of Form FFIEC 101, Risk-Based Capital 
Reporting for Institutions Subject to the Advanced Capital Adequacy 
Framework, produced for their Basel II ``parallel run.'' These 
organizations argued that a requirement to produce EADs under a 
different methodology would be burdensome and inconsistent with the 
risk associated with these exposures. One bankers' organization 
suggested that a second-best alternative to using the EAD amounts 
reported in the Form FFIEC 101 would be to use the asset amounts 
reported on an institution's balance sheet.
    In order for a highly complex institution to adopt an Internal 
Models Methodology (IMM) to calculate EAD, the agencies believe that 
the institution must receive approval from its primary federal 
regulator in accordance with the risk-based capital standards issued by 
its regulator. In this regard, an institution supervised by the FDIC 
should follow the methodology prescribed by 12 CFR Part 325, Appendix 
D, Section 32; an institution supervised by the Office of the 
Comptroller of the Currency should follow the methodology prescribed by 
12 CFR Part 3, Appendix C, Section 32; and an institution supervised by 
the Federal Reserve should follow the methodology prescribed by 12 CFR 
Part 208, Appendix F, Section 32. If a highly complex institution has 
not received regulatory approval to adopt an IMM,

[[Page 45003]]

then it may calculate EAD using the current exposure methodology in 
accordance with the risk-based capital standards issued by its primary 
federal regulator. As an alternative, an institution without approval 
to adopt the IMM or not adopting an IMM may report the credit 
equivalent amount for each counterparty's derivative exposures as 
calculated in accordance with the instructions for Call Report Schedule 
RC-R, item 54, ``Derivative contracts.'' The agencies have incorporated 
this guidance into the reporting instructions for counterparty exposure 
data items.
    E. Treatment of Loans Held for Trading When Reporting Higher-Risk 
Asset Categories--One bankers' organization noted that ``for several 
new reporting items (e.g. nontraditional mortgage loans, subprime 
consumer loans, and leveraged loans) * * * securities included in the 
definition of higher-risk assets exclude those securities held for 
trading purposes.'' The organization recommended that loans held for 
trading also be excluded from these higher-risk asset items, consistent 
with the treatment of securities held for trading.
    The agencies agree that there should be a consistent treatment of 
securities and loans held for trading for deposit insurance pricing 
purposes. Therefore, a large or highly complex institution should 
exclude loans that would otherwise fall within the scope of the 
definitions of nontraditional mortgage loans, subprime consumer loans, 
and leveraged loans, but are reported as trading assets in its Call 
Report or TFR, from the amounts reported for these higher-risk asset 
categories. The agencies have revised the instructions for these three 
data items accordingly.
    F. Confidential Treatment for Certain Data Items for Large 
Institutions and Highly Complex Institutions--The proposed data items 
for criticized and classified items, nontraditional mortgage loans, 
subprime consumer loans, leveraged loans, top 20 counterparty 
exposures, and largest counterparty exposure have been gathered for the 
FDIC's use through examination processes at large and highly complex 
institutions and are treated as confidential examination information. 
The agencies proposed to obtain these data items directly from each 
large or highly complex institution in its regular quarterly regulatory 
report (Call Report or TFR) and use the reported data as inputs to 
scorecard measures. Because the agencies continue to regard these items 
as examination information, the information would continue to be 
accorded confidential treatment when collected via the Call Report and 
TFR.
    The agencies received comments from two bankers' organizations 
supporting the confidential treatment of the proposed examination-
related data items identified above. However, they recommended that the 
agencies collect these data items on a new Call Report Schedule RC-O, 
part II, rather than within the Memorandum section of Schedule RC-O, 
which also contains data items that are not accorded confidential 
treatment, and in a similarly segregated section of the TFR. According 
to these organizations, the suggested reformatting of these data items 
would more efficiently facilitate the agencies' ability to remove the 
examination-related data items from the Call Report and the TFR before 
making the reports available to the public. In addition, one bankers' 
organization requested confirmation from the agencies that any change 
to the confidential treatment of these data items would be published in 
the Federal Register.
    The agencies currently accord confidential treatment to selected 
data items in the Call Report and the TFR. These data items are located 
in various schedules within these two reports and, except for two TFR 
schedules that in their entirety receive confidential treatment, these 
data items are not segregated from other data items that are publicly 
available. Data items designated as confidential, regardless of their 
location within the Call Report or the TFR, are flagged as such within 
the agencies' data systems that generate the versions of the Call 
Report and the TFR that are made available to the public on the 
Internet at https://cdr.ffiec.gov/public/ManageFacsimiles.aspx. 
Accordingly, based on their experience with existing confidential items 
in the Call Report and the TFR, the agencies do not believe it is 
necessary to move the examination-related data items to a new Call 
Report Schedule RC-O, part II, or a similarly segregated section of the 
TFR to ensure that the agencies do not make the information reported in 
these data items available to the public.
    The agencies confirm that if they decide at a future date to begin 
making any of the examination-related data items publicly available, 
such a proposed change will be published for public comment in the 
Federal Register. The agencies have followed this practice in the past 
when changing the status of a data item from confidential to publicly 
available.
    One bankers' organization requested that the FDIC restrict access 
to the Assessment Rate Calculator on the FDIC's Web site,\56\ which is 
publicly available, ``to persons authorized by the institution to 
calculate its own assessment rates.'' The organization recommended this 
action because ``the spreadsheet is automatically populated by data 
from a bank's Call Report, providing the user [who enters a bank's FDIC 
certificate number] with an estimate of the bank's assessment rate.'' 
The organization expressed concern that the new data items used as 
inputs to the scorecards for large and highly complex institutions that 
would be accorded confidential treatment under the agencies' proposal 
``would be able to be viewed by the public if they have access to the 
certificate number of a bank.''
---------------------------------------------------------------------------

    \56\ See http://www.fdic.gov/deposit/insurance/calculator.html.
---------------------------------------------------------------------------

    Restricting access to the Assessment Rate Calculator to authorized 
personnel at individual institutions is not necessary. Inputs to the 
calculator that are designated as confidential Call Report and TFR data 
items are not downloaded into the calculator when a user enters an 
institution's FDIC Certificate Number into the calculator's data entry 
worksheet. Only those data items that are publicly available are 
automatically downloaded into the calculator. All confidential data 
items must be manually entered into the appropriate worksheet cells by 
the user in order for the calculator to work.

Request for Comment

    As previously stated, the assessment-related reporting revisions to 
the Call Report, the TFR, and the FFIEC 002/002S reports that are the 
subject of this notice were approved by OMB under emergency clearance 
procedures on June 17, 2011; took effect as of the June 30, 2011, 
report date; and incorporate modifications made in response to the 
comments received on the agencies' March 2011 initial PRA notice. 
Because these revisions will need to remain in effect beyond the 
limited period associated with OMB's emergency approval, the agencies 
are publishing this notice to begin normal PRA clearance procedures 
anew for these revisions.
    Accordingly, public comment is requested on all aspects of this 
joint notice. Comments are invited on:
    (a) Whether the proposed revisions to the collections of 
information that are the subject of this notice 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

[[Page 45004]]

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; 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
    (d) 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. All comments will become a matter of public record.

    Dated: July 20, 2011.
Michele Meyer,
Assistant Director, Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency.

    Board of Governors of the Federal Reserve System, July 21, 2011.
Robert deV. Frierson,
Deputy Secretary of the Board.

    Dated at Washington, DC, this 20th day of July, 2011.

Federal Deposit Insurance Corporation.
Ralph E. Frable,
Counsel.

    Dated: July 20, 2011.
Ira L. Mills,
Paperwork Clearance Officer, Office of Chief Counsel, Office of Thrift 
Supervision.
[FR Doc. 2011-19021 Filed 7-26-11; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714- 01-P; 7720-01-P