[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77315-77325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31888]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

Federal Reserve System

Federal Deposit Insurance Corporation


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

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

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

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act (PRA) of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the 
FDIC (the ``agencies'') may not conduct or sponsor, and the respondent 
is not required to respond to, an information collection unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. On 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. OMB's emergency approval of the assessment-
related reporting revisions extends through the December 31, 2011, 
report date. (As separately approved by OMB, December 31, 2011, is also 
the final report date as of which the TFR will be collected; savings 
associations will begin to file the Call Report as of the March 31, 
2012, report date (76 FR 39986)).
    Because of the limited approval period associated with OMB's 
emergency clearance, the agencies, under the auspices of the Federal 
Financial Institutions Examination Council (FFIEC), requested public 
comment for 60 days on July 27, 2011, on the assessment-related 
reporting revisions to which the emergency approval pertained (76 FR 
44987). After considering the comments received on these revisions, the 
transition guidance for the reporting of subprime and leveraged loans 
and securities by large and highly complex institutions that was 
adopted by the agencies in connection with their emergency clearance 
request to OMB has been extended to April 1, 2012. Furthermore, the 
FDIC has decided to review the subprime and leveraged loan definitions 
in its February 2011 final rule on assessments (76 FR 10672) to 
determine whether changes to these definitions could alleviate concerns 
expressed by bankers without sacrificing accuracy in risk 
differentiation for deposit insurance pricing purposes. The 
instructions for reporting subprime and leveraged loans and securities 
for assessment purposes in the agencies' regulatory reports will be 
conformed to any revised definitions of these terms in the FDIC's 
assessment regulations that may result from the FDIC's review process, 
including any necessary rulemaking. In addition, the agencies have made 
certain other modifications to the assessment-related reporting 
revisions covered by OMB's emergency approval in response to comments 
received.

DATES: Comments must be submitted on or before January 11, 2012.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the agencies. All comments, which should refer to the OMB 
control number(s), will be shared among the agencies.
    OCC: You should direct all written comments to: Communications 
Division, Office of the Comptroller of the Currency, 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.
     Email: [email protected].

[[Page 77316]]

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 
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.
     Email: [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.
    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).\1\
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    \1\ Copies of the TFR, the collection of which will be 
discontinued after the filing of the reports for December 31, 2011, 
can be obtained at http://www.ots.treas.gov/?p=ThriftFinancialReports.
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    OCC: Ira Mills and Mary Gottlieb, OCC Clearance Officers, (202) 
874-6055 and (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, 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.

SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and 
extend for three years the Call Report, the FFIEC 002, and the FFIEC 
002S, which currently are approved collections of 
information.2 3
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    \2\ The assessment-related changes to the Call Report and the 
FFIEC 002/002S that are the subject of this notice were 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. OMB's emergency approval also applies to the TFR, the 
collection of which will be discontinued after the reports for 
December 31, 2011, are filed. As separately approved by OMB, savings 
associations currently filing the TFR will convert to filing the 
Call Report beginning as of the March 31, 2012, report date (76 FR 
39981, July 7, 2011).
    \3\ The agencies have also proposed to implement other revisions 
to the Call Report in 2012 (76 FR 72035, November 21, 2011). The new 
data items are proposed to be added to the Call Report as of the 
June 30, 2012, report date, except for two proposed revisions that 
would take effect March 31, 2012, in connection with the initial 
filing of Call Reports by savings associations. Proposed revisions 
to certain Call Report instructions would take effect March 31, 
2012. In addition, the Board, on behalf of the agencies, has 
proposed certain revisions to the FFIEC 002 report effective June 
30, 2012 (76 FR 72410, November 23, 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: 2,035 (1,399 national banks and 
636 federal savings associations).
    Estimated Time per Response: National banks: 53.97 burden hours per 
quarter to file. Federal savings associations: 54.48 burden hours per 
quarter to file and 188 burden hours for the first year to convert 
systems and conduct training.
    Estimated Total Annual Burden: National banks: 302,016 burden hours 
to file. Federal savings associations: 138,597 burden hours to file 
plus 119,568 burden hours for the first year to convert systems and 
conduct training. Total: 560,181 burden hours.

Board

    OMB Number: 7100-0036.
    Estimated Number of Respondents: 826 state member banks.
    Estimated Time per Response: 55.48 burden hours per quarter to 
file.
    Estimated Total Annual Burden: 183,306 burden hours.

FDIC

    OMB Number: 3064-0052.
    Estimated Number of Respondents: 4,747 (4,687 insured state 
nonmember banks and 60 state savings associations).
    Estimated Time per Response: State nonmember banks: 40.47 burden 
hours per quarter to file. State savings associations: 40.47 burden 
hours per quarter to file and 188 burden hours for the first year to 
convert systems and conduct training.
    Estimated Total Annual Burden: State nonmember banks: 758,732 
burden hours to file. State savings associations: 9,713 burden hours to 
file plus 11,280 burden hours for the first year to convert systems and 
conduct training. Total: 779,725 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

[[Page 77317]]

which an individual institution will have data it must report. The 
average ongoing reporting burden for the Call Report (including the 
additional revisions proposed for implementation in 2012 referred to in 
footnote 3) is estimated to range from 17 to 715 hours per quarter, 
depending on an individual institution's circumstances.
    2. 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--24,006 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 
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, which currently extends until April 1, 2012) 
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 of this notice, the agencies had published an initial PRA 
notice on March 16, 2011, requesting comment on these revisions (76 FR 
14460). 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 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 data items for large and 
highly complex institutions that are part of this proposal, the Call 
Report 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: Institutions submit Call Report data to the agencies 
each quarter for the agencies' use in monitoring the condition, 
performance, and risk profile of individual institutions and the 
industry as a whole. Call Report data provide the most current 
statistical data available for evaluating institutions' corporate 
applications, identifying areas of focus for both on-site and off-site 
examinations, and monetary and other public policy purposes. The 
agencies use Call Report data in evaluating interstate merger and 
acquisition applications to determine, as required by law, whether the 
resulting institution would control more than ten percent of the total 
amount of deposits of insured depository institutions in the United 
States. Call Report data also are used to calculate all institutions' 
deposit insurance and Financing Corporation assessments, and assessment 
fees for national banks and federal 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

[[Page 77318]]

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. Background

    Section 331(b) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the Dodd-Frank Act) (Pub. L. 111-203, 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.\4\ 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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    \4\ 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 \5\ 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.\6\ 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.\7\ This final rule took effect 
for the quarter beginning April 1, 2011, and was 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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    \5\ See 75 FR 72582, November 24, 2010, at http://www.fdic.gov/regulations/laws/federal/2010/10proposeAD66.pdf.
    \6\ See 75 FR 72612, November 24, 2010, at http://www.fdic.gov/regulations/laws/federal/2010/10proposeAD66LargeBank.pdf.
    \7\ 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.\8\ Rather, the 
FDIC 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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    \8\ 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 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 Report, the TFR, 
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.\9\ Thus, 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). The new data items proposed 
in the March 2011 initial PRA notice were linked to specific 
requirements in the FDIC's assessment regulations as amended by the 
final rule. The draft instructions for

[[Page 77319]]

these proposed new items incorporated the definitions in, and other 
provisions of, the FDIC's amended assessment regulations. For a 
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.\10\ For a 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.\11\
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    \9\ See 76 FR 14460, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
    \10\ See 76 FR 14463-14465, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
    \11\ See 76 FR 14466-14470, March 16, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticeMar16.pdf.
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    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.
    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. 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.\12\ Concerns were also expressed regarding 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. 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.\13\ 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.
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    \12\ In contrast, only four respondents commented on other 
aspects of the overall reporting proposal.
    \13\ 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.
---------------------------------------------------------------------------

    For a detailed discussion of the comments received on the reporting 
revisions associated with the redefined deposit insurance assessment 
base proposed in the agencies' March 2011 initial PRA notice, the 
agencies' evaluation of these comments, and the modifications that the 
agencies made to the March 2011 reporting proposal in response to these 
comments, see pages 44994-44996 of the agencies' second initial PRA 
notice for the assessment-related reporting changes, which was 
published on July 27, 2011.\14\ For a detailed discussion of the 
comments received on the reporting revisions associated with the 
revised large institutions assessment system proposed in the agencies' 
March 2011 initial PRA notice, the agencies' evaluation of these 
comments, and the modifications that the agencies made to the March 
2011 reporting proposal in response to these comments, see pages 44998-
45003 of the agencies' second initial PRA notice for the assessment-
related reporting changes, which was published on July 27, 2011.\15\
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    \14\ See 76 FR 44994-44996, July 27, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticejuly27no3.pdf.
    \15\ See 76 FR 44998-45003, July 27, 2011, at http://www.fdic.gov/regulations/laws/federal/2011/11noticejuly27no3.pdf.
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    The unanticipated outcome 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. 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. However, as a consequence of the unexpected 
need to develop and reach agreement on a workable transition approach 
for loans that are to be reported as subprime or leveraged for 
assessment purposes,\16\ 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.
---------------------------------------------------------------------------

    \16\ 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.
---------------------------------------------------------------------------

    The transition guidance for reporting subprime and leveraged loans 
was an integral part of the agencies' emergency clearance requests that 
were submitted to OMB on June 16, 2011. This guidance, as originally 
promulgated in June 2011, provides that for pre-October 1, 2011, loans 
and securities, if a large or highly complex institution does not

[[Page 77320]]

have within its data systems the information necessary to determine 
subprime consumer or leveraged loan 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 \17\ 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,\18\ or the February 2008 Comptroller's 
Handbook on Leveraged Lending \19\ for identification purposes. Under 
the agencies' transition guidance as originally issued in June 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, were to 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.\20\
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    \17\ 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.
    \18\ http://www.fdic.gov/news/news/press/2001/pr0901a.html.
    \19\ http://www.occ.gov/static/publications/handbook/
LeveragedLending.pdf.
    \20\ 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.
---------------------------------------------------------------------------

    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. OMB's emergency approval extends 
through the December 31, 2011, report date. Because the assessment-
related reporting revisions need to remain in effect beyond the limited 
approval period associated with an emergency clearance request, the 
agencies, under the auspices of the FFIEC, began normal PRA clearance 
procedures anew with the publication of a second initial PRA Federal 
Register notice on July 27, 2011 (76 FR 44987). This second initial 
notice requested public comment on the assessment-related reporting 
revisions to the Call Report, the TFR, and the FFIEC 002/002S reports 
that had taken effect June 30, 2011, under OMB's emergency approval, 
including the transition guidance and the other modifications the 
agencies had made in response to the comments received on the revisions 
first proposed in March 2011.
    After the publication of the agencies' second initial PRA notice on 
July 27, 2011, OMB approved the agencies' separate requests that 
savings associations begin to file the Call Report beginning with the 
reports for March 31, 2012. As a result, December 31, 2011, is the 
final report date as of which the TFR will be collected from savings 
associations. Because OMB's emergency approval of the assessment-
related reporting revisions that were implemented as of the June 30, 
2011, report date extends through the December 31, 2011, report date 
(after which the TFR will no longer be collected), this notice and the 
agencies' related submissions to OMB requesting approval to revise and 
extend for three years the Call Report and the FFIEC 002/002S report do 
not request this same approval for the TFR. For information on the 
conversion by savings associations from filing the TFR to filing the 
Call Report, see the agencies' final PRA notice published July 7, 
2011.\21\
---------------------------------------------------------------------------

    \21\ See 76 FR 39981, July 7, 2011, http://www.fdic.gov/regulations/laws/federal/2011/11noticejuly07.pdf.
---------------------------------------------------------------------------

II. Comments Received on the July 2011 Second Initial PRA Federal 
Register Notice and the Agencies' Response to the Comments

    The agencies collectively received comments from eight respondents 
on their July 27, 2011, second initial PRA notice on the assessment-
related reporting revisions to the Call Report, the TFR, and the FFIEC 
002/002S reports that had taken effect June 30, 2011, under OMB's 
emergency approval. Comments were received from four depository 
institutions, all of which are ``large institutions'' for deposit 
insurance assessment purposes, and four bankers' organizations, three 
of which submitted a joint comment letter.\22\ The jointly commenting 
bankers' organizations stated they ``collectively represent all of the 
banks that are affected or may be affected by'' the revised assessment 
system for ``large institutions'' and ``highly complex institutions'' 
in the FDIC's February 2011 final rule on assessments. Six of the eight 
respondents on the second initial PRA notice focused their comments on 
the definitions of subprime consumer and leveraged loans in the FDIC's 
assessments final rule, which (subject to the transition guidance for 
reporting such assets described above) are the basis for the regulatory 
reporting instructions for reporting the amounts of these two 
categories of higher-risk assets for assessment purposes in the Call 
Report and (through the December 31, 2011, report date) the TFR. In 
addition, as noted in the public comment file for the second initial 
PRA notice, representatives of the four commenting bankers' 
organizations and certain large and highly complex institutions met 
twice with FDIC staff prior to the close of the comment period for the 
notice to explain their concerns about the definitions of, and the 
availability of the information necessary to report, subprime and 
leveraged loans by such institutions.
---------------------------------------------------------------------------

    \22\ The American Bankers Association (ABA), The Clearing House, 
and the Financial Services Roundtable jointly commented. The Risk 
Management Association submitted a separate comment letter.
---------------------------------------------------------------------------

    Comments also were received on the definition of nontraditional 1-4 
family residential mortgage loans, the reporting of counterparty 
exposures by highly complex institutions, the frequency of loan loss 
provision and deferred tax calculations for reporting average tangible 
equity, the treatment of prepaid deposit insurance assessments in the 
measurement of average total assets for assessment base purposes, and 
the reporting of certain troubled debt restructurings that are 
guaranteed or insured by the U.S. Government. In addition, during the 
initial reporting of the revised assessment-related data items as of 
June 30, 2011, questions arose about which data items should be 
reported on a consolidated or an unconsolidated single FDIC certificate 
number basis by institutions that own another insured institution as a 
subsidiary because of the way in which these data are used in the 
FDIC's risk-based deposit insurance system.
    These issues are discussed in Sections II.A through II.G below.
    A. Definitions of Subprime and Leveraged Loans and Securities--Two 
new data items for subprime consumer and leveraged loans and securities 
were among the assessment-related reporting revisions applicable to 
large and highly

[[Page 77321]]

complex institutions that were included in OMB's approval of the 
agencies' emergency clearance requests and implemented in the Call 
Report and the TFR as of the June 30, 2011, report date. These two data 
items are used as inputs to the scorecard measures for large and highly 
complex institutions in the revised risk-based assessment system for 
such institutions brought about by the FDIC's February 2011 assessments 
final rule.
    In their comments on the agencies' second initial PRA notice, the 
four bankers' organizations and two institutions requested that the 
definitions of subprime and leveraged loans in the FDIC's assessments 
final rule be revised, asserting that the definitions do not 
effectively capture the risk that the FDIC desires or needs for its 
large bank deposit insurance pricing model. Rather, these commenters 
stated that the final rule's current definitions would capture loans 
that are not subprime or leveraged (i.e., are not higher-risk), would 
entail excessive reporting that would often be inconsistent across 
institutions, would greatly overstate institutions' actual risk 
exposures, and would produce a biased representation of relative risk 
(resulting in institutions with less risky portfolios being treated the 
same as institutions with more risky portfolios). The bankers' 
organizations, in their two comment letters, proposed ``consensus 
solutions'' for modifying the definitions of subprime and leveraged 
loans that would better correspond to industry standards and practices 
for such loans, better differentiate risk among large institutions, and 
thereby simplify and reduce the cost of the regulatory reporting 
process for such loans. The two institutions that addressed these 
definitions offered similar recommendations.
    The three jointly commenting bankers' organizations stated that 
having the ``right definitions'' is so important that it is imperative 
for the FDIC to revise its assessments final rule,\23\ but they also 
observed that revising the rule ``cannot be done instantaneously.'' 
Accordingly, these organizations as well as one institution recommended 
extending the transition approach for reporting subprime and leveraged 
loans and securities (which was summarized above and was scheduled to 
end on October 1, 2011) until more workable and accurate definitions 
are developed. The same commenters also noted that if the FDIC decides 
not to make changes to the assessments final rule's definitions of 
subprime and leveraged loans and securities, large and highly complex 
institutions will need until at least the second quarter of 2012 to 
build reliable systems for identifying such loans and securities and to 
train staff to input reliable data. According to these commenters, the 
additional preparation time that institutions would need if the 
definitions are not revised would also justify an extension of the 
transition reporting approach.
---------------------------------------------------------------------------

    \23\ The other bankers' organization requested that the FDIC 
reopen discussions on the subprime and leveraged loan definitions.
---------------------------------------------------------------------------

    The FDIC has decided to review the definitions of subprime and 
leveraged loans and securities in the February 2011 assessments final 
rule to determine whether changes to the definitions could alleviate 
industry concerns without sacrificing accuracy in risk differentiation 
for deposit insurance pricing purposes. To allow sufficient time for 
the FDIC to undertake this review, and--in the event that the FDIC does 
not propose to alter the definitions in the February 2011 assessments 
final rule following this review--to give large and highly complex 
institutions additional time to adapt reporting systems to the 
definitions in the rule, the FDIC has also decided to allow such 
institutions to continue to follow the transition approach under which 
they may use either their existing internal methodologies or existing 
supervisory guidance to identify and report, for assessment purposes, 
subprime and leveraged loans originated or purchased prior to April 1, 
2012. Thus, by extending the previous transition guidance for these two 
loan categories, the February 2011 assessment definitions--if left 
unaltered--would begin to apply to loans originated on or after April 
1, 2012.
    Any revised definitions of subprime and leveraged loans for 
assessment purposes would require approval by the FDIC Board of 
Directors through the notice and comment rulemaking process. The 
effective date for applying any revised definitions would be 
communicated through the rulemaking process and would be subject to 
comment by the industry.
    The FDIC communicated these decisions in an email it sent to all 
large and highly complex institutions on September 28, 2011. In 
addition, the Call Report and TFR instructions were updated as of 
September 30, 2011, to reflect the extension of the transition guidance 
for reporting subprime and leveraged loans and securities from October 
1, 2011, to April 1, 2012.
    At present, the instructions for reporting subprime and leveraged 
loans and securities in the Call Report and the TFR (until the 
collection of the TFR is discontinued after the filing of the year-end 
2011 reports) specifically reference the definitions of these high-risk 
asset categories that are contained in the FDIC's assessment 
regulations (12 CFR part 327) as amended by the FDIC's February 2011 
final rule and then incorporate the text of these definitions from the 
final rule (as well as the previously mentioned transition guidance). 
Accordingly, if and when one or both of these two definitions--as used 
for assessment purposes--are revised through FDIC rulemaking, the 
definitions of these asset categories in the agencies' regulatory 
reporting instructions will be revised in the same manner to maintain 
conformity with the assessment regulations.
    B. Nontraditional 1-4 Family Residential Mortgage Loans--The 
assessment-related reporting revisions applicable to large and highly 
complex institutions that were included in OMB's approval of the 
agencies' emergency clearance requests and implemented as of June 30, 
2011, also included a new data item for nontraditional 1-4 family 
residential mortgage loans and certain securitizations of such loans. 
Like the new data items for subprime and leveraged loans, the new 
nontraditional mortgage loan data item is an input to the scorecard 
measures for large and highly complex institutions in the FDIC's 
revised risk-based assessment system for such institutions.
    The three jointly commenting bankers' organizations stated that the 
reporting of nontraditional residential mortgage loans based on the 
definition in the FDIC's assessments final rule ``does not distinguish 
risk between banks or within the population being reported.'' These 
bankers' organizations recommended that their proposed consensus 
solution for identifying which consumer loans should be reported as 
subprime loans also be applied to nontraditional residential mortgage 
loans.\24\ According to these organizations, taking this approach would 
enable the agencies to eliminate the separate data item for 
nontraditional residential mortgage loans because those mortgage loans 
meeting the criteria in the organizations' recommended consensus 
solution could be reported

[[Page 77322]]

with the consumer loans being reported as subprime.
---------------------------------------------------------------------------

    \24\ Although the comment letter from the other bankers' 
organization did not specifically discuss nontraditional residential 
mortgage loans, the agencies note that the demonstration matrix 
provided in support of the organization's recommended consensus 
solution for identifying subprime loans included a column for 
nontraditional mortgages.
---------------------------------------------------------------------------

    The agencies note that the nature, extent, and level of concern 
about the definitions of subprime and leveraged loans and related data 
availability issues that bankers and bankers' organizations cited in 
their comments on the agencies' March 2011 first initial PRA notice, 
which led the FDIC to devise transition guidance for the reporting of 
these two categories of higher-risk assets, were not also expressed 
with respect to the definition and reporting on nontraditional mortgage 
loans.\25\ As a consequence, the reporting of the new data item for 
nontraditional mortgage loans using the definition in the FDIC's 
assessments final rule was not subject to the transition guidance 
provided for subprime and leveraged loans. Therefore, after considering 
the bankers' organizations comments about nontraditional residential 
mortgage loans, the definition of this high-risk asset category will 
remain as defined in the FDIC's assessments final rule unless the 
results of the FDIC's review of the subprime and leveraged loan 
definitions (discussed above) also indicate that it would be 
appropriate for the FDIC to amend the definition of nontraditional 
residential mortgage loans through rulemaking. Should that occur, the 
definition of high risk residential mortgage loans in the agencies' 
regulatory reporting instructions will be revised in the same manner to 
maintain conformity with the FDIC's assessment regulations.
---------------------------------------------------------------------------

    \25\ However, commenters on the agencies' March 2011 first 
initial PRA notice did request certain clarifications of the scope 
of the nontraditional mortgage loan data item. As mentioned in the 
agencies' July 2011 second initial PRA notice, in response to these 
comments, the agencies agreed that certain clarifications of the 
final rule's nontraditional mortgage loan definition would be 
appropriate to assist institutions in properly reporting the amount 
of such loans in the Call Report and TFR. These clarifications were 
incorporated into the instructions for reporting nontraditional 
mortgage loans that were issued and took effect for the June 30, 
2011, report date.
---------------------------------------------------------------------------

    C. Counterparty Exposures--The assessment-related reporting 
revisions that took effect June 30, 2011, pursuant to OMB's approval of 
the agencies' emergency clearance request included two new Call Report 
data items applicable only to highly complex institutions for the total 
amount of an institution's 20 largest counterparty exposures and the 
amount of the institution's largest counterparty exposure. As with the 
other new data items that are inputs to the revised assessment system 
for large and highly complex institutions, the Call Report instructions 
explaining the scope and measurement of the two counterparty exposure 
items are drawn from the definitional guidance on counterparty 
exposures in the FDIC's February 2011 assessments final rule.
    The final rule's definition of counterparty exposure states that 
exposure should be measured for each counterparty or borrower at the 
consolidated entity level. The three jointly commenting bankers' 
organizations recommended that the term ``legal consolidated entity,'' 
as used in this definition in relation to a counterparty, should be 
clarified, but they also noted that an outstanding Office of Financial 
Research proposal is considering the creation of unique identifiers for 
derivative counterparties, thereby ``demonstrating regulatory 
recognition of unanswered questions on consolidating counterparty 
exposures.'' Given the absence of an industry standard for recognizing 
connections between counterparties and the regulatory uncertainty in 
this area, the three bankers' organizations asserted that this 
reporting requirement is not appropriate at present.
    The three jointly commenting bankers' organizations also stated 
that there is an inconsistency between the counterparty credit risk 
data the FDIC used to calibrate the assessment pricing model for highly 
complex institutions in its final rule and the counterparty exposure 
data these institutions are required to report in the Call Report. The 
organizations stated that the model was calibrated using Exposure at 
Default (EAD) data reported in the FFIEC 101 reports \26\ of 
institutions going through their Basel II parallel runs as opposed to 
the data that highly complex institutions are asked to submit on their 
Call Reports for deposit insurance assessment pricing purposes. The 
organizations recommended that the FDIC review the counterparty credit 
exposure that highly complex institutions report in their Call Reports 
in accordance with the guidance provided in the assessments final rule, 
compare this to the counterparty credit exposure the institutions 
report in their FFIEC 101 reports, and then consider whether the 
pricing model should be recalibrated based upon the FDIC's findings. 
These commenters further requested that the FDIC accept the results of 
a highly complex institution's Internal Models Methodology (IMM) for 
deposit insurance assessment pricing purposes only, prior to its exit 
from its parallel run, provided the IMM models are acceptable. Finally, 
these commenters recommended that once an institution's IMM model is 
approved, the institution should be allowed to amend the amounts 
previously reported on its Call Reports for counterparty EADs and the 
FDIC should use these amended amounts to retroactively adjust the 
institution's assessments for those previous periods.
---------------------------------------------------------------------------

    \26\ Risk-Based Capital Reporting for Institutions Subject to 
the Advanced Capital Adequacy Framework, OMB Nos.: Board, 7100-0319; 
FDIC, 3064-0159; and OCC, 1557-0239.
---------------------------------------------------------------------------

    The FDIC continues to believe that, for the purposes of calculating 
deposit insurance premiums, highly complex institutions should report 
counterparty credit exposure on a consolidated entity basis (legal 
consolidated entity). The FDIC believes that highly complex 
institutions should have the ability to aggregate exposures arising 
from financial contracts with entities within a legal consolidated 
entity and report the exposure as outlined in the final rule. Although 
the Office of Financial Research's November 2010 Statement on Legal 
Entity Identification for Financial Contracts addresses the 
establishment of a system to uniquely identify all market participants, 
which would enable institutions to better aggregate counterparty 
exposures, the main goal of the proposal is to standardize the system 
and allow for better oversight, tracking, monitoring, and enforcement. 
The absence of such a system does not preclude institutions from 
internally aggregating their exposures to entities within a legal 
consolidated entity.
    The FDIC is reviewing the claim that there is an inconsistency 
between the counterparty credit risk data used to calibrate the model 
and the data required to be provided in the Call Report under the final 
rule. The FDIC has asked highly complex institutions to voluntarily 
submit counterparty credit risk data to the FDIC that has been measured 
under the institutions' IMMs for comparison with the data reported in 
the Call Report. The FDIC will review these data and consider the need 
for appropriate changes to the pricing model to ensure that it 
differentiates risk, including consideration of the effect on prior 
periods. In the interim, institutions should continue to report 
counterparty exposures in the Call Report using the final rule's 
existing definition. Additionally, the FDIC continues to believe that 
it is not appropriate for pricing purposes to use data calculated via 
an institution's IMM model before the IMM model has been approved and 
the bank has exited its parallel run period. To adopt the IMM to 
calculate EADs for purposes of the risk-based capital requirements 
under the Advanced Capital Adequacy Framework, institutions must first

[[Page 77323]]

receive approval from their primary federal regulator to exit the 
parallel run period. Institutions also must receive approval from their 
primary federal regulator to use their IMMs. Once an institution has 
conducted a satisfactory parallel run and satisfied the approval 
requirements for the IMM, the IMM results should be used to report 
counterparty exposure data in the Call Report for deposit insurance 
pricing purposes.
    D. Frequency of Loan Loss Provision and Deferred Tax Calculations 
for Reporting Average Tangible Equity--As required by section 331(b) of 
the Dodd-Frank Act, the FDIC's assessments final rule redefines the 
deposit insurance assessment base as average consolidated total assets 
minus average tangible equity. Under the final rule, tangible equity is 
defined as Tier 1 capital.\27\ As one of the assessment-related 
reporting revisions applicable to all institutions that was included in 
OMB's approval of the agencies' emergency clearance requests and 
implemented in the Call Report, the TFR, and the FFIEC 002 report as of 
June 30, 2011, the agencies added a new data item 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 all other institutions, ``average'' tangible equity is based on 
quarter-end Tier 1 capital.
---------------------------------------------------------------------------

    \27\ 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).
---------------------------------------------------------------------------

    The three jointly commenting bankers' organizations and one 
institution stated that the requirement for certain institutions to 
estimate month-end Tier 1 capital numbers prior to quarter-end is 
problematic because they do not calculate their provision for loan and 
lease losses expense and deferred taxes on a monthly basis, which are 
two potentially significant drivers of Tier 1 capital. These commenters 
recommended that, for purposes of measuring average tangible equity on 
a monthly average basis, institutions that do not perform monthly loan 
loss provision or deferred tax calculations be allowed to use a ``pro-
rated, one-third estimate of the quarter-end reported'' provision and 
deferred tax amounts for months other than quarter-end. These 
commenters argued that institutions are not required to update these 
calculations monthly in accordance with generally accepted accounting 
principles for external reporting purposes and the cost of doing so 
would outweigh the benefits.
    The agencies believe the commenters' suggested approach has merit 
as a means to reduce institutions' compliance costs. Accordingly, for 
institutions required or electing to report average tangible equity on 
a monthly average basis that do not perform monthly loan loss provision 
or deferred tax calculations, the agencies will permit such 
institutions to use one third of the amount of provision for loan and 
lease losses and deferred tax expense (benefit) reported for the 
quarterly regulatory reporting period for purposes of estimating the 
retained earnings component of Tier 1 capital in each of the first two 
months of the quarter. As suggested by the institution commenting on 
this issue, the agencies will revise the instructions for the data item 
for average tangible equity to describe this permissible approach.
    For example, if the reported amount of the provision expense for 
the quarterly reporting period for an institution applying this 
approach is $3 million, then the institution would include a $1 million 
provision expense as an adjustment to its earnings when measuring its 
tangible equity for assessment purposes in each of the first two months 
of the quarter. Similarly, if the reported amount of the institution's 
deferred tax expense (benefit) for the quarterly reporting period is a 
benefit of $900,000, then the institution would include a $300,000 
deferred tax benefit as an earnings adjustment for assessment purposes 
in each of the first two months of the quarter. By making these 
adjustments, the institution's retained earnings component of Tier 1 
capital for monthly average tangible equity calculation purposes would 
be $700,000 and $1.4 million less than its internally reported retained 
earnings at the end of the first and second months of the quarterly 
reporting period, respectively. In addition, the agencies remind 
institutions that the measurement of Tier 1 capital includes a limit on 
deferred tax assets, with the amount in excess of the limit deducted 
from Tier 1 capital. Thus, the month-end pro-rated amounts of an 
institution's reported amount of deferred tax expense (benefit) for the 
quarterly reporting period also should be taken into account when 
determining the amount of the institution's deferred tax assets 
(liabilities) and, hence, the amount of disallowed deferred tax assets, 
if any, at the end of each of the first two months of the quarter for 
monthly average tangible equity calculation purposes.
    E. Prepaid Deposit Insurance Assessments--The three jointly 
commenting bankers' organizations requested that prepaid deposit 
insurance assessments, which institutions include in the total assets 
reported on their balance sheets, should not be included in the 
redefined assessment base. These commenters argued that there is no 
justification for charging deposit insurance premiums on funds that 
institutions were forced to give the FDIC as interest-free loans. These 
commenters recommended that if the FDIC believes it is required by law 
to include prepaid assessments in the assessment base, then ``this 
asset should be allowed a zero risk-weighting in the risk-based 
premiums formula.''
    Section 331(b) of the Dodd-Frank Act explicitly states that an 
institution's assessment base is average consolidated total assets 
minus average tangible equity. Because prepaid assessments are included 
in the assets of an institution, this asset amount must be included in 
the assessment base. In addition, the risk-weightings that apply to 
assets for risk-based capital purposes under the agencies' regulatory 
capital standards are not used when calculating the assessment base for 
deposit insurance assessment purposes.
    F. Troubled Debt Restructurings Guaranteed or Insured by the U.S. 
Government--Under the FDIC's February 2011 final rule, assessment rates 
for large and highly complex institutions are calculated using 
scorecards that combine CAMELS ratings and certain forward-looking 
financial measures to assess the risk such an institution poses to the 
Deposit Insurance Fund. The Credit Quality Measure for large and highly 
complex institutions includes a score for ``Underperforming Assets/Tier 
1 Capital and Reserves.'' For purposes of this score, ``Underperforming 
Assets'' includes:

loans that are 30 days or more past due and still accruing interest, 
nonaccrual loans, restructured loans (including restructured 1-4 
family loans), and ORE, excluding the maximum amount recoverable 
from the U.S. Government, its agencies, or government-sponsored 
agencies, under guarantee or insurance provisions.'' \28\
---------------------------------------------------------------------------

    \28\ See Appendix A to Subpart A of part 327-- Description of 
Scorecard Measures in the FDIC's assessments final rule, 76 FR 
10721, at http://www.fdic.gov/regulations/laws/federal/2011/11FinalFeb25.pdf.

    Two institutions commented that the Call Report and TFR do not 
collect all of the data necessary to correctly measure 
``Underperforming Assets.''

[[Page 77324]]

More specifically, although institutions report the amount of loans 
restructured in troubled debt restructurings that are in compliance 
with their modified terms (i.e., restructured loans other than those 
that are 30 days or more past due and still accruing interest or that 
are in nonaccrual status), the amount of such restructured loans that 
is recoverable from the U.S. government, including its agencies and its 
government-sponsored agencies, under guarantee or insurance provisions 
is not reported. Thus, these institutions stated that the agencies 
should begin to collect data on recoverable restructured loans so that 
the underperforming assets ratio can be properly calculated.
    The agencies agree that the collection of this information is 
necessary to accurately calculate a large or highly complex 
institution's underperforming assets ratio, as defined in the FDIC's 
assessments final rule, and its total score within the scorecard. 
Accordingly, the agencies propose to include a new Memorandum item 16 
to Call Report Schedule RC-O beginning with the June 30, 2012, report 
date in which large and highly complex institutions would report the 
``Portion of loans restructured in troubled debt restructurings that 
are in compliance with their modified terms and are guaranteed or 
insured by the U.S. government (including the FDIC).'' For quarter-end 
report dates after the effective date of the FDIC's assessments final 
rule but prior to the effective date of this Call Report change (i.e., 
June 30, 2011, through March 31, 2012), large and highly complex 
institutions that have such restructured loans may choose to, but are 
not required to, provide this information to the FDIC on a voluntary 
basis. Large and highly complex institutions interested in submitting 
this restructured loan information to the FDIC for scorecard purposes 
for quarter-end dates before the information begins to be collected in 
the Call Report should send an email to [email protected] 
notifying the FDIC of their interest. The FDIC will provide the 
institution with an Excel worksheet and instructions that will enable 
the institution to submit the data to the FDIC in a specific format via 
FDICConnect. For an institution that chooses to submit this prior 
period information, the FDIC will adjust the institution's total score 
and corresponding assessments for the affected periods as applicable.
    G. Consolidated or Unconsolidated Single FDIC Certificate Number 
Reporting--Before the assessment-related reporting revisions took 
effect June 30, 2011, the information that institutions reported for 
assessment purposes generally consisted of deposit data. Because 
deposit insurance premiums are assessed separately against each 
individual insured depository institution, the instructions for 
reporting assessment data before June 30, 2011, advised institutions to 
report these data on an unconsolidated single FDIC certificate number 
basis. If an institution owns another insured institution as a 
subsidiary, this means that the parent institution must complete the 
assessment data items by accounting for this subsidiary under the 
equity method of accounting rather than consolidating the subsidiary. 
With limited exceptions, all other data items reported in the Call 
Report and the TFR are reported on a consolidated basis. For the vast 
majority of institutions that do not own another insured institution as 
a subsidiary, there is no difference between reporting on a 
consolidated basis or on unconsolidated single FDIC certificate number 
basis.
    The assessment-related reporting revisions that took effect June 
30, 2011, included several new data items applicable to large and 
highly complex institutions that serve as inputs to the scorecards used 
to determine the initial base assessment rate for each large 
institution and highly complex institution under their revised risk-
based assessment system. The ratios in these scorecards are calculated 
on a fully consolidated basis. In addition, for certain small 
institutions, the initial base assessment rate is determined using the 
financial ratios method. Like the scorecard ratios, the financial 
ratios method employs fully consolidated data. Most of the data items 
used as inputs to the scorecards and financial ratios are collected in 
other schedules of the Call Report and the TFR on a fully consolidated 
basis. However, five assessment data items that were collected from all 
institutions before June 30, 2011, on an unconsolidated single FDIC 
certificate number basis and continue to be collected also serve as 
either scorecard or financial ratio inputs.
    As a result, during the initial reporting of the revised 
assessment-related data as of June 30, 2011, questions were raised as 
to whether the new data items for large and highly complex institutions 
as well as the five existing, but retained, assessment data items 
should be reported on a consolidated or an unconsolidated single FDIC 
certificate number basis. For the large and highly complex institution 
data items,\29\ consolidated reporting is appropriate and the reporting 
instructions will be clarified accordingly.
---------------------------------------------------------------------------

    \29\ For example, Memorandum items 6 through 15 on Call Report 
Schedule RC-O.
---------------------------------------------------------------------------

    On the other hand, for the five existing assessment data items 
reported on a single FDIC certificate number basis, among the purposes 
for which the FDIC has used and continues to use them is to perform 
industry analyses of the Deposit Insurance Fund, which rely on 
unconsolidated single FDIC certificate number data consistent with how 
institutions are insured. However, because these existing items now 
also enter into scorecard and financial ratio calculations, these five 
data items are also needed on a consolidated basis from institutions 
that own another insured depository institution. Therefore, to resolve 
this issue for these parent institutions given the inquiries about the 
appropriate basis of reporting, the agencies will add five items to 
Call Report Schedule RC-O effective June 30, 2012, one of which would 
be applicable to all institutions that own another institution while 
the other four would be completed only by the large and highly complex 
institutions that own another insured depository institution. More 
specifically, in new item 9.a of Schedule RC-O, the five institutions 
that own another institution and have reciprocal brokered deposits 
would report the fully consolidated amount of reciprocal brokered 
deposits. In new Memorandum items 17.a through 17.d of Schedule RC-O, 
the three large and highly complex institutions that own another 
insured depository institution would report total deposit liabilities 
before exclusions, total allowable exclusions, unsecured other 
borrowings with a remaining maturity of one year or less, and estimated 
amount of uninsured deposits on a fully consolidated basis. For 
quarter-end report dates after the effective date of the FDIC's 
assessments final rule but prior to the effective date of these Call 
Report changes (i.e., June 30, 2011, through March 31, 2012), 
institutions that own another insured depository institution may choose 
to, but are not required to, provide the applicable additional fully 
consolidated information to the FDIC on a voluntary basis. Institutions 
that own another insured institution and are interested in submitting 
the applicable additional fully consolidated information to the FDIC 
for scorecard or financial ratio purposes for quarter-end dates before 
the information begins to be collected in the Call Report should send 
an email to [email protected] notifying the FDIC of their 
interest. The FDIC will provide the institution with an Excel

[[Page 77325]]

worksheet and instructions that will enable the institution to submit 
the data to the FDIC in a specific format via FDICConnect. For an 
institution that chooses to submit this prior period information, the 
FDIC will adjust the institution's scorecard or financial ratios and 
corresponding assessments for the affected periods as applicable.

Request for Comment

    Public comment is requested on all aspects of this joint notice. 
Comments are invited on:
    (a) Whether the proposed revisions to the 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 proposed to be revised, including 
the validity of the methodology and assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments submitted in response to this joint notice will be shared 
among the agencies. All comments will become a matter of public record.

    Dated: December 5, 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, December 6, 
2011.
Jennifer J. Johnson,
Secretary of the Board.

    Dated at Washington, DC, this 6th day of December, 2011.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2011-31888 Filed 12-9-11; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P