[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63870-63885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26818]
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FEDERAL RESERVE SYSTEM
Proposed Agency Information Collection Activities; Comment
Request
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice, request for comment.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
invites comment on a proposal to extend for three years, with revision,
the Financial Statements for Holding Companies (FR Y-9 family of
reports) (OMB No. 7100-0128), the Financial Statements of U.S. Nonbank
Subsidiaries Held by Foreign Banking Organizations (FR Y-7N family of
reports) (OMB No. 7100-0125), the Bank Holding Company Report of
Insured Depository Institutions' Section 23A Transactions with
Affiliates (FR Y-8) (OMB No. 7100-0126), the Financial Statements of
U.S. Nonbank Subsidiaries of U.S. Holding Companies (FR Y-11 family of
reports) (OMB No. 7100-0244), the Domestic Finance Company Report of
Consolidated Assets and Liabilities (FR 2248) (OMB No. 7100-0005), the
Financial Statements of Foreign Subsidiaries of U.S. Banking
Organizations (FR 2314 family of reports) (OMB No. 7100-0073), the
Quarterly Savings and Loan Holding Company Report (FR 2320) (OMB No.
7100-0345), the Weekly Report of Selected Assets and Liabilities of
Domestically Chartered Commercial Banks and U.S. Branches and Agencies
of Foreign Banks (FR 2644) (OMB No. 7100-0075), and the Consolidated
Report of Condition and Income for Edge and Agreement Corporations (FR
2886b) (OMB No. 7100-0086).
DATES: Comments must be submitted on or before February 11, 2019.
ADDRESSES: You may submit comments, identified by FR Y-9C, FR Y-9LP, FR
Y-9SP, FR Y-9ES, FR Y-9CS, FR Y-7, FR Y-7N, FR Y-7Q, FR Y-8, FR Y-11,
FR Y-11S, FR 2248, FR 2314, FR 2320, FR 2644, or FR 2886b by any of the
following methods:
Agency Website: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
Email: [email protected]. Include OMB
number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann Misback, 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 website at
http://www.federalreserve.gov/apps/foia/proposedregs.aspx 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 form in Room
3515, 1801 K Street (between 18th and 19th Streets NW), Washington, DC
20006, between 9:00 a.m. and 5:00 p.m. on weekdays. For security
reasons, the Board requires that visitors make an appointment to
inspect comments. You may do so by calling (202) 452-3684. 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. Additionally, commenters may send a
copy of their comments to the OMB Desk Officer--Shagufta Ahmed--Office
of Information and Regulatory Affairs, 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: A copy of the PRA OMB submission,
including the proposed reporting form and instructions, supporting
statement, and other documentation will be placed into OMB's public
docket files, if approved. These documents will also be made available
on the Federal Reserve Board's public website at: http://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested
from the agency clearance officer, whose name appears below.
Federal Reserve Board Clearance Officer--Nuha Elmaghrabi--Office of
the Chief Data Officer, Board of Governors of the Federal Reserve
System, Washington, DC 20551, (202) 452-3829. Telecommunications Device
for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors
of the Federal Reserve System, Washington, DC 20551.
SUPPLEMENTARY INFORMATION: On June 15, 1984, the Office of Management
and Budget (OMB) delegated to the Board authority under the Paperwork
Reduction Act (PRA) to approve and assign OMB control numbers to
collection of information requests and requirements conducted or
sponsored by the Board. In exercising this delegated authority, the
Board is directed to take every reasonable step to solicit comment. In
determining whether to approve a collection of information, the Board
will consider all comments received from the public and other agencies.
Request for Comment on Information Collection Proposal
The Board invites public comment on the following information
collection, which is being reviewed under authority delegated by the
OMB under the PRA. Comments are invited on the following:
a. Whether the proposed collection of information is necessary for
the proper performance of the Board's functions; including whether the
information has practical utility;
b. The accuracy of the Board's estimate of the burden of the
proposed information collection, including the validity of the
methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
At the end of the comment period, the comments and recommendations
received will be analyzed to determine the extent to which the Board
should modify the proposal.
Proposal To Approve Under OMB Delegated Authority the Extension for
Three Years, With Revision, of the Following Reports
1. Report title: Financial Statements for Holding Companies.
Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR
Y-9CS.
OMB control number: 7100-0128.
Frequency: Quarterly, semiannually, and annually.
Reporters: Bank holding companies, savings and loan holding
companies, securities holding companies, and U.S.
[[Page 63871]]
Intermediate Holding Companies (collectively, holding companies (HCs)).
Estimated number of respondents: FR Y-9C (non-advanced approaches
holding companies): 292; FR Y-9C (advanced approached holding
companies): 18; FR Y-9LP: 338; FR Y-9SP: 4,238; FR Y-9ES: 82; FR Y-9CS:
236.
Estimated average hours per response: FR Y-9C (non-advanced
approaches holding companies): 46.34 hours; FR Y-9C (advanced
approached holding companies HCs): 47.59 hours; FR Y-9LP: 5.27 hours;
FR Y-9SP: 5.40 hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
Estimated annual burden hours: FR Y-9C (non-advanced approaches
holding companies): 54,125 hours; FR Y-9C (advanced approached holding
companies): 3,426 hours; FR Y-9LP: 7,125 hours; FR Y-9SP: 45,770; FR Y-
9ES: 41 hours; FR Y-9CS: 472 hours.
General description of report: The FR Y-9C serves as standardized
financial statements for the consolidated holding company. The FR Y-9
family of reporting forms continues to be the primary source of
financial data on HCs that examiners rely on between on-site
inspections. Financial data from these reporting forms is used to
detect emerging financial problems, review performance, conduct pre-
inspection analysis, monitor and evaluate capital adequacy, evaluate HC
mergers and acquisitions, and analyze an HC's overall financial
condition to ensure the safety and soundness of its operations. The
Board requires HCs to provide standardized financial statements to
fulfill the Board's statutory obligation to supervise these
organizations. HCs file the FRY-9C on a quarterly basis, FR Y-9LP
quarterly, and the FR Y-9SP semiannually, the FR Y-9ES annually, and
the FR Y-9CS on a schedule that is determined when this supplement is
used.
2. Report title: The Financial Statements of U.S. Nonbank
Subsidiaries Held by Foreign Banking Organizations, Abbreviated
Financial Statements of U.S. Nonbank Subsidiaries Held by Foreign
Banking Organizations, and the Capital and Asset Report of Foreign
Banking Organizations.
Agency form number: FR Y-7N, FR Y-7NS, and FR Y-7Q.
OMB control number: 7100-0125.
Frequency: Quarterly and annually.
Reporters: Foreign banking organizations (FBOs).
Number of respondents: FR Y-7N (quarterly): 35; FR Y-7N (annual):
19; FR Y-7NS: 22; FR Y-7Q (quarterly): 130; FR Y-7Q (annual): 29.
Estimated average hours per response: FR Y-7N (quarterly): 7.6
hours; FR Y-7N (annual): 7.6 hours; FR Y-7NS: 1 hour; FR Y-7Q
(quarterly): 3 hours; FR Y-7Q (annual): 1.5 hours.
Estimated annual reporting hours: FR Y-7N (quarterly): 1,064 hours;
FR Y-7N (annual): 144 hours; FR Y-7NS: 22 hours; FR Y-7Q (quarterly):
1,560 hours; FR Y-7Q (annual): 44 hours.
General description of report: The FR Y-7N and the FR Y-7NS are
used to assess an FBO's ability to be a continuing source of strength
to its U.S. operations and to determine compliance with U.S. laws and
regulations. FBOs file the FR Y-7N quarterly or annually or the FR Y-
7NS annually predominantly based on asset size thresholds. The FR Y-7Q
is used to assess consolidated regulatory capital and asset information
from all FBOs. The FR Y-7Q is filed quarterly by FBOs that have
effectively elected to become or be treated as a U.S. financial holding
company (FHC) and by FBOs that have total consolidated assets of $50
billion or more, regardless of FHC status. All other FBOs file the FR
Y-7Q annually.
3. Report title: Holding Company Report of Insured Depository
Institutions' Section 23A Transactions with Affiliates.
Agency form number: FR Y-8.
OMB control number: 7100-0126.
Frequency: Quarterly.
Estimated number of respondents: 933.
Estimated average hours per response: 7.8 hours.
Estimated annual burden hours: 29,110 hours.
General description of report: The FR Y-8 collects information on
covered transactions between an insured depository institution and its
affiliates that are subject to the quantitative limits and requirements
of section 23A of the Federal Reserve Act and the Board's Regulation W
(12 CFR Pt. 223). The FR Y-8 is filed quarterly by all U.S. top-tier
bank holding companies (BHCs) and savings and loan holding companies
(SLHCs), and by FBOs that directly own or control a U.S. subsidiary
insured depository institution. If an FBO indirectly controls a U.S.
insured depository institution through a U.S. holding company, the U.S.
holding company must file the FR Y-8. A respondent must file a separate
report for each U.S. insured depository institution it controls. The
primary purpose of the data is to enhance the Board's ability to
monitor the credit exposure of insured depository institutions to their
affiliates and to ensure that insured depository institutions are in
compliance with section 23A of the Federal Reserve Act and Regulation
W. Section 23A of the Federal Reserve Act limits an insured depository
institution's exposure to affiliated entities and helps to protect
against the expansion of the federal safety net to uninsured entities.
4. Report title: Financial Statements of U.S. Nonbank Subsidiaries
of U.S. Holding Companies and the Abbreviated Financial Statements of
U.S. Nonbank Subsidiaries of U.S. Holding Companies.
Agency form number: FR Y-11 and FR Y-11S.
OMB control number: 7100-0244.
Frequency: Quarterly and annually.
Reporters: Domestic bank holding companies, savings and loan
holding companies, securities holding companies, and intermediate
holding companies (collectively, ``holding companies'').
Number of respondents: FR Y-11 (quarterly): 445; FR Y-11 (annual):
189; FR Y-11S: 273.
Estimated average hours per response: FR Y-11 (quarterly): 7.6; FR
Y-11 (annual): 7.6; FR Y-11S: 1.
Estimated annual reporting hours: FR Y-11 (quarterly): 13,528
hours; FR Y-11 (annual): 1,436 hours; FR Y-11S: 273 hours.
General description of report: The FR Y-11 family of reports
collects financial information for individual U.S. nonbank subsidiaries
of domestic holding companies, which is essential for monitoring the
subsidiaries' potential impact on the condition of the holding company
or its subsidiary banks. Holding companies file the FR Y-11 on a
quarterly or annual basis or the FR Y-11S on an annual basis,
predominantly based on whether the organization meets certain asset
size thresholds.
5. Report title: Domestic Finance Company Report of Consolidated
Assets and Liabilities.
Agency form number: FR 2248.
OMB control number. 7100-0005.
Frequency: Monthly, Quarterly and Semi-annually.
Reporters: Domestic finance companies and mortgage companies.
Estimated number of respondents: 150.
Estimated average hours per response: Monthly: .33 hours;
Quarterly: .50 hours; Addendum: 17 hours.
Estimated annual burden hours: Monthly, 400 hours; Quarterly, 300
hours; Addendum, 50 hours.
General description of report: The FR 2248 collects information on
amounts outstanding in major categories of consumer and business credit
held by finance companies and on major short-term liabilities of the
finance
[[Page 63872]]
companies. For quarter-end months (March, June, September, and
December) the report also collects information on other assets and
liabilities outstanding as well as information on capital accounts in
order to provide a full balance sheet. In addition, a supplemental
section collects data about assets that have been pooled by finance
companies and sold to third parties that issue securities based on
those assets. The supplemental section is organized in the same four
categories of credit (consumer, real estate, business, and lease-
related). The special addendum section may be used if the need arises
for the collection of timely information on questions of immediate
concern to the Board. When necessary, respondents would be asked no
more than twice a year to provide answers to a limited number of
relevant questions, which would be distributed in advance to ease
burden and which would take, on average, ten minutes to complete. This
addendum provides the Board a valuable source of information regarding
timely topics and events in financial markets.
6. Report title: Financial Statements of Foreign Subsidiaries of
U.S. Banking Organizations and the Abbreviated Financial Statements of
Foreign Subsidiaries of U.S. Banking Organizations.
Agency form number: FR 2314 and FR 2314S.
OMB control number: 7100-0073.
Frequency: Quarterly and annually.
Reporters: U.S. state member banks, BHCs, SLHCs, intermediate
holding companies (IHCs), and Edge or agreement corporations.
Number of respondents: FR 2314 (quarterly): 439; FR 2314 (annual):
239; FR 2314S: 300.
Estimated average hours per response: FR 2314 (quarterly): 7.2
hours; FR 2314 (annual): 7.2 hours; FR 2314S: 1 hour.
Estimated annual reporting hours: FR 2314 (quarterly): 12,643
hours; FR 2314 (annual): 1,768 hours; FR 2314S: 300 hours.
General description of report: The FR 2314 family of reports is the
only source of comprehensive and systematic data on the assets,
liabilities, and earnings of the foreign nonbank subsidiaries of U.S.
banking organizations, and the data are used to monitor the growth,
profitability, and activities of these foreign companies. The data help
the Board identify present and potential problems of these companies,
monitor their activities in specific countries, and develop a better
understanding of activities within the industry and within specific
institutions. Parent organizations (state member banks (SMBs), Edge and
agreement corporations, or holding companies) file the FR 2314 on a
quarterly or annual basis, or the FR 2314S on an annual basis,
predominantly based on whether the organization meets certain asset
size thresholds.
7. Agency form number: FR 2320.
OMB control number: 7100-0345.
Frequency: Quarterly.
Reporters: SLHCs that are currently exempt from filing other Board
regulatory reports.
Estimated number of respondents: 13.
Estimated average hours per response: 2.5 hours.
Estimated annual burden hours: 130 hours.
General description of report: The FR 2320 collects select parent
only and consolidated balance sheet and income statement financial data
and organizational structure data from SLHCs that are currently exempt
from filing other Board regulatory reports (exempt SLHCs). The FR 2320
is used by the Board to analyze the overall financial condition of
exempt SLHCs to ensure safe and sound operations. These data assist the
Board in the evaluation of a diversified holding company and in
determining whether an institution is in compliance with applicable
laws and regulations.
8. Report title: Weekly Report of Selected Assets and Liabilities
of Domestically Chartered Commercial Banks and U.S. Branches and
Agencies of Foreign Banks.
Agency form number: FR 2644.
OMB control number: 7100-0075.
Respondents: Domestically chartered commercial banks and U.S.
branches and agencies of foreign banks.
Estimated number of respondents: 875.
Estimated average hours per response: 2.35 hours.
Estimated annual burden hours: 106,925 hours.
General description of report: The FR 2644 is a balance sheet
report that is collected as of each Wednesday from an authorized
stratified sample of 875 domestically chartered commercial banks and
U.S. branches and agencies of foreign banks. The FR 2644 is the only
source of high-frequency data used in the analysis of current banking
developments. The FR 2644 collects sample data that are used to
estimate universe levels using data from the quarterly commercial bank
Consolidated Reports of Condition and Income (FFIEC 031, FFIEC 041, and
FFIEC 051; OMB No. 7100-0036) and the Report of Assets and Liabilities
of U.S. Branches and Agencies of Foreign Banks (FFIEC 002; OMB No.
7100-0032) (Call Reports). Data from the FR 2644, together with data
from other sources, are used to construct weekly estimates of bank
credit, balance sheet data for the U.S. banking industry, sources and
uses of banks' funds, and to analyze current banking and monetary
developments. The Board publishes the data in aggregate form in the
weekly H.8 statistical release, Assets and Liabilities of Commercial
Banks in the United States, which is followed closely by other
government agencies, the banking industry, the financial press, and
other users. The H.8 release provides a balance sheet for the banking
industry as a whole and data disaggregated by its large domestic, small
domestic, and foreign-related bank components.
9. Report title: Consolidated Report of Condition and Income for
Edge and Agreement Corporations.
Agency form number: FR 2886b.
OMB control number: 7100-0086.
Frequency: Quarterly.
Reporters: Edge and agreement corporations and investment
(nonbanking) Edge and agreement corporations.
Number of respondents: Banking: Edge and agreement corporations
(quarterly): 9; Banking: Edge and agreement corporations (annually): 1;
Investment: Edge and agreement corporations (quarterly): 21;
Investment: Edge and agreement corporations (annually): 7.
Estimated average hours per response: Banking: Edge and agreement
corporations (quarterly): 15.77; Banking: Edge and agreement
corporations (annually): 15.87; Investment: Edge and agreement
corporations (quarterly): 11.81; Investment: Edge and agreement
corporations (annually): 10.82
Estimated annual reporting hours: Banking: Edge and agreement
corporations (quarterly): 568; Banking: Edge and agreement corporations
(annually): 16; Investment: Edge and agreement corporations
(quarterly): 922; Investment: Edge and agreement corporations
(annually): 76.
General description of report: The FR 2886b reporting form is filed
quarterly and annually by banking Edge and agreement corporations and
investment (nonbanking) Edge and agreement corporations (collectively,
``Edges or Edge corporations''). The mandatory FR 2886b comprises an
income statement with two schedules reconciling changes in capital and
reserve accounts and a balance sheet with 11 supporting schedules.
Other than examination reports, it provides the only financial data
available for these corporations. The Board is solely responsible for
authorizing, supervising, and assigning
[[Page 63873]]
ratings to Edges. The Board uses the data collected on the FR 2886b to
identify present and potential problems and monitor and develop a
better understanding of activities within the industry.
Proposed Revisions:
The Board proposes to (1) implement changes to address the revised
accounting standards for the adoption of the current expected credit
loss (CECL) methodology across all of the reports, (2) extend for three
years through the normal delegated review process certain revisions to
the FR Y-9C that the Board previously approved on a temporary basis \1\
in order to implement changes consistent with Section 214 and Section
202 of the Economic Growth, Regulatory Relief, and Consumer Protection
Act (EGRRCPA) pertaining to the risk-weighting of HVCRE exposures and
the treatment of reciprocal deposits, (3) clarify reporting of
unrealized holding gains and losses on equity securities on the FR Y-9C
report, and (4) make several revisions to the FR 2886b report,
including updating references to applicable capital requirements,
revising the eligibility criteria for reporting the trading schedule
and implement changes pertaining to the accounting treatment of equity
securities.
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\1\ See 83 FR 48990 (September 28, 2018).
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The proposed reporting changes related to CECL are tied to the
revisions proposed in the CECL notice of proposed rulemaking (the CECL
NPR) \2\ by the Board, the Federal Deposit Insurance Corporation
(FDIC), and the Office of the Comptroller of the Currency (OCC)
(collectively, the agencies) to revise their regulatory capital rules
related to the implementation and capital transition for CECL and to
the corresponding proposed CECL revisions to the Consolidated Reports
of Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, and FFIEC
051; OMB No. 7100-0036).\3\ To the extent the agencies alter proposed
elements of the CECL NPR or the Call Report CECL proposal, the Board
would make any necessary corresponding adjustments to the proposed CECL
reporting revisions for the reports outlined in this notice prior to
final approval of this proposal.
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\2\ See 83 FR 22312 (May 14, 2018).
\3\ See 83 FR 49160 (September 28, 2018).
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The effective dates for adopting CECL vary depending on whether a
firm is a public business entity (PBE), a Securities and Exchange
Commission (SEC) report filer, or an early adopter. For institutions
that are PBEs and also are SEC filers, as both terms are defined in
U.S. generally accepted accounting principles (U.S. GAAP), the new
credit losses standard is effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years.
For a PBE that is not an SEC filer, the credit losses standard is
effective for fiscal years beginning after December 15, 2020, including
interim periods within those fiscal years. For an institution that is
not a PBE, the credit losses standard is effective for fiscal years
beginning after December 15, 2020, and for interim period financial
statements for fiscal years beginning after December 15, 2021. For
regulatory reporting purposes, early application of the new credit
losses standard will be permitted for all institutions for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. See Appendix A for more details surrounding CECL
adoption by entity type, as well as the table summarizing the possible
effective dates.\4\
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\4\ See CECL FAQs, question 36, for examples of how and when
institutions with non-calendar fiscal years must incorporate the new
credit losses standard into their regulatory reports. The CECL FAQs
and a related link to the joint statement can be found on the
Board's website: https://www.federalreserve.gov/supervisionreg/srletters/sr1708a1.pdf.
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Due to the different effective dates for ASU 2016-13, the period
over which institutions may be implementing this ASU ranges from the
first quarter of 2019 through the fourth quarter of 2022. December 31,
2022, will be the first quarter-end of which all institutions would be
required to prepare their reports in accordance with ASU 2016-13. It is
expected that the majority of institutions will implement the standard
in the first or fourth quarter of 2021. Schedule titles or specific
data item captions resulting from the change in nomenclature upon the
adoption of CECL generally would not be reflected in the reporting
forms until March 31, 2021, as outlined in the following schedule-by-
schedule descriptions of the proposed changes to the affected reporting
schedules.
Because of the staggered adoption dates, the Board proposes to
implement the CECL revisions in stages. First, the Board would revise
the reporting form and instructions, add data items and schedules for
certain impacted reports effective for March 31, 2019. The changes
would include guidance stating how institutions that have adopted ASU-
2016-13 would report the data items related to the ``provision for
credit losses'' and ``allowance for credit losses, as applicable. Next,
for the transition period from March 31, 2021, through December 31,
2022, the reporting form and instructions for each impacted schedule
title or data item would be updated to include guidance stating how
institutions that have not adopted ASU 2016-13 would report the
``provision for loan and lease losses'' or the ``allowance for loan and
lease losses,'' as applicable. The table below summarizes the effective
dates for the 2019 and 2021 proposed CECL revisions.
------------------------------------------------------------------------
Add items,
add, footnotes Revise item
Report and or revise captions
instructions
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FR 2644................................. 03/27/2019 01/06/2021
FR 2248................................. 03/31/2019 01/31/2021
FR 2320................................. 03/31/2019 ..............
FR Y-8.................................. 03/31/2019 ..............
FR Y-9C................................. 03/31/2019 03/31/2021
FR Y-9LP................................ 03/31/2019 03/31/2021
FR 2314/S............................... 03/31/2019 03/31/2021
FR Y-11/S............................... 03/31/2019 03/31/2021
FR 2886b................................ 03/31/2019 03/31/2021
FR Y-7N/NS.............................. 03/31/2019 03/31/2021
FR Y-9SP................................ 06/30/2019 06/30/2021
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[[Page 63874]]
The proposed non-CECL related revisions to the FR Y-9C and FR 2886b
reports would be effective for the March 31, 2019, report date.
1. Proposed CECL Revisions--ASU 2016-13
In June 2016, the Financial Accounting Standard Board (FASB) issued
ASU 2016-13, which introduced the CECL methodology for estimating
allowances for credit losses and added Topic 326, Credit Losses, to the
Accounting Standards Codification (ASC). The new credit losses standard
changes several aspects of existing U.S. GAAP, such as introducing a
new credit loss methodology, reducing the number of credit impairment
models, replacing the concept of purchased credit-impaired (PCI) assets
with that of purchased credit-deteriorated (PCD) financial assets, and
changing the impairment treatment for available-for-sale (AFS)
securities. See Appendix B for more details on each of these U.S. GAAP
changes as a result of ASU 2016-13.
The Board is proposing revisions to all regulatory reports listed
in this document in response to ASU 2016-13 in order to align the
information reported with the new standard as it relates to the credit
losses for loans and leases, including off-balance sheet credit
exposures. These revisions address the broadening of the scope of
financial assets for which an allowance for credit losses assessment
must be established and maintained, along with the elimination of the
existing model for PCI assets. The revisions for the FR Y-9C are
described in detail, mostly on a schedule-by-schedule basis in the
Detailed discussion of Proposed Revisions. The CECL revisions to all
the other reports will mirror the revisions to the FR Y-9C, where
applicable.
CECL is applicable to all financial instruments carried at
amortized cost (including loans held for investment (HFI) and held to
maturity (HTM) debt securities as well as trade and reinsurance
receivables and receivables that relate to repurchase agreements and
securities lending agreements), net investments in leases, and off-
balance-sheet credit exposures not accounted for as insurance,
including loan commitments, standby letters of credit, and financial
guarantees. Under ASU 2016-13, institutions will record credit losses
through an allowance for credit losses for AFS debt securities rather
than as a write-down through earnings for other-than-temporary
impairment (OTTI). The broader scope of financial assets for which
allowances must be estimated under ASU 2016-13 results in the proposed
reporting of additional allowances, and related charge-off and recovery
data and proposed changes to the terminology used to describe
allowances for credit losses. To address the broader scope of assets
that will have allowances under ASU 2016-13, the Board proposes to
change the allowance nomenclature to consistently use ``allowance for
credit losses'' followed by the specific asset type as relevant, e.g.,
``allowance for credit losses on loans and leases'' and ``allowance for
credit losses on HTM debt securities.
By broadening the scope of financial assets for which the need for
allowances for credit losses must be assessed to include HTM and AFS
debt securities, the new standard eliminates the existing OTTI model
for such securities. Subsequent to a firm's adoption of ASU 2016-13,
the concept of OTTI will no longer be relevant and information on OTTI
will no longer be captured.
The new standard also eliminates the separate impairment model for
PCI loans and debt securities. Under CECL, credit losses on PCD
financial assets are subject to the same credit loss measurement
standard as all other financial assets carried at amortized cost.
Subsequent to an institution's adoption of ASU 2016-13, information on
PCI loans will no longer be captured.
While the standard generally does not change the scope of off-
balance sheet credit exposures subject to an allowance for credit loss
assessment, the standard does change the period over which the firm
should estimate expected credit losses. For off-balance sheet credit
exposures, a firm will estimate expected credit losses over the
contractual period in which they are exposed to credit risk. For the
period of exposure, the estimate of expected credit losses should
consider both the likelihood that funding will occur and the amount
expected to be funded over the estimated remaining life of the
commitment or other off-balance sheet exposure. In contrast to the
existing practices, the FASB decided that no credit losses should be
recognized for off-balance sheet credit exposures that are
unconditionally cancellable by the issuer. The exclusion of
unconditionally cancellable commitments from the allowance for credit
losses assessment on off-balance sheet credit exposures requires
clarification to applicable reporting instructions.
As of the new accounting standard's effective date, institutions
will apply the standard based on the characteristics of financial
assets as follows:
Financial assets carried at amortized cost (that are not
PCD assets) and net investments in leases: A cumulative-effect
adjustment for the changes in the allowances for credit losses will be
recognized in retained earnings, net of applicable taxes, as of the
beginning of the first reporting period in which the new standard is
adopted. The cumulative-effect adjustment to retained earnings should
be reported in FR Y-9C Schedule HI-A, item 2, ``Cumulative effect of
changes in accounting principles and corrections of material accounting
errors,'' and explained in Notes to the Income Statement for which a
preprinted caption, ``Adoption of Current Expected Credit Losses
Methodology--ASC Topic 326,'' will be provided in the text field for
this item.
Purchased credit-deteriorated financial assets: Financial
assets classified as PCI assets prior to the effective date of the new
standard will be classified as PCD assets as of the effective date. For
all financial assets designated as PCD assets as of the effective date,
an institution will be required to gross up the balance sheet amount of
the financial asset by the amount of its allowance for expected credit
losses as of the effective date, resulting in an adjustment to the
amortized cost basis of the asset to reflect the addition of the
allowance for credit losses as of that date. For loans held for
investment and HTM debt securities, this allowance gross-up as of the
effective date of ASU 2016-13 should be reported in the appropriate
columns of Schedule HI-B, Part II, item 6, ``Adjustments,'' and should
be explained in the Notes to the Income Statement for which a
preprinted caption, ``Effect of adoption of current expected credit
losses methodology on allowances for credit losses on loans and leases
held for investment and held-to-maturity debt securities,'' will be
provided in the text field for this item. Subsequent changes in the
allowance for credit losses on PCD financial assets will be recognized
by charges or credits to earnings through the provision for credit
losses. The institution will continue to accrete the noncredit discount
or premium to interest income based on the effective interest rate on
the PCD financial assets determined after the gross-up for the CECL
allowance as of the effective date of adoption, except for PCD
financial assists in nonaccrual status.
AFS and HTM debt securities: A debt security on which OTTI
had been recognized prior to the effective date of the new standard
will transition to the new guidance prospectively (i.e., with no change
in the amortized cost basis of the security). The effective interest
rate
[[Page 63875]]
on such a debt security before the adoption date will be retained and
locked in. Amounts previously recognized in accumulated other
comprehensive income related to cash flow improvements will continue to
be accreted to interest income over the remaining life of the debt
security on a level-yield basis. Recoveries of amounts previously
written off relating to improvements in cash flows after the date of
adoption will be recognized in income in the period received.
Schedule HI
To address the broader scope of financial assets for which a
provision will be calculated under ASU 2016-13, the Board proposes to
revise Schedule HI, item 4, from ``Provision for loan and lease
losses'' to ``Provision for Credit losses on financial assets,''
effective March 31, 2021. To address the elimination of the concept of
OTTI by ASU 2016-13, effective December 31, 2022, the Board proposes to
remove Schedule HI, Memorandum item 17, ``Other-than-temporary
impairment losses on held-to-maturity and available-for-sale debt
securities recognized in earnings.'' Under the new standard,
institutions will recognize credit losses on HTM and AFS debt
securities through an allowance for credit losses, and the Board
proposes to collect information on the allowance for credit losses on
these two categories of debt securities in Schedule HI-B as discussed
below. From March 31, 2019, through September 30, 2022, the report form
and instructions for Memorandum item 17 will include guidance stating
that Memorandum item 17 is to be completed only by institutions that
have not adopted ASU 2016-13.
Schedule HI-B
To address the broader scope of financial assets for which
allowances will be calculated under ASU 2016-13 and for which charge-
offs and recoveries will be applicable, the Board proposes to change
the title of Schedule HI-B effective March 31, 2021, from ``Charge-offs
and Recoveries on Loans and Leases and Changes in Allowance for Loan
and Lease Losses'' to ``Charge-offs and Recoveries on Loans and Leases
and Changes in Allowance for Credit Losses.''
In addition, effective March 31, 2021, to address the change in
allowance nomenclature arising from the broader scope of allowances
under ASU 2016-13, the Board proposes to revise Schedule HI-B, Part I,
Memorandum item 4, from ``Uncollectible retail credit card fees and
finance charges reversed against income (i.e., not included in charge-
offs against the allowance for loan and lease losses)'' to
``Uncollectible retail credit card fees and finance charges reversed
against income (i.e., not included in charge-offs against the allowance
for credit losses on loans and leases).''
To further address the broader scope of financial assets for which
allowances will be calculated under ASU 2016-13, the Board proposes to
revise Schedule HI-B, Part II, to also include changes in the
allowances for credit losses on HTM and AFS debt securities. Effective
March 31, 2019, the Board proposes to change the title of Schedule HI-
B, Part II, from ``Changes in Allowance for Loan and Lease Losses'' to
``Changes in Allowances for Credit Losses.''
In addition, effective March 31, 2019, Schedule HI-B, Part II,
would be expanded from one column to a table with three columns titled:
Column A: Loans and leases held for investment
Column B: Held-to-maturity debt securities
Column C: Available-for-sale debt securities
From March 31, 2019, through September 30, 2022, the reporting form
and the instructions for Schedule HI-B, Part II, would include guidance
stating that Columns B and C are to be completed only by institutions
that have adopted ASU 2016-13.
In addition, effective March 31, 2019, Schedule HI-B, Part II, item
4, will be revised from ``Less: Write-downs arising from transfers of
loans to a held-for-sale account'' to ``Less: Write-downs arising from
transfers of financial assets'' to capture changes in allowances from
transfers of loans from held-to-investment to held-for-sale and from
transfers of securities between categories, e.g., from the AFS to the
HTM category. Further, effective March 31, 2019, Schedule HI-B, Part
II, item 5, will be revised from ``Provision for loan and lease
losses'' to ``Provision for credit losses'' to capture the broader
scope of financial assets included in the schedule.
Effective March 31, 2019, or the first quarter in which a holding
company reports its adoption of ASU 2016-13, whichever is later,
Schedule HI-B, Part II, item 6, ``Adjustments,'' would be used to
capture the initial impact of applying ASU 2016-13 as of the effective
date in the period of adoption as well as the initial allowance gross-
up for PCD assets as of the effective date. Item 6 also would be used
to report the allowance gross-up upon the acquisition of PCD assets on
or after the effective date. These adjustments would be explained in
items for which preprinted captions would be provided in the text
fields on the Notes to the Income Statement, as proposed below.
In the memorandum section of Schedule HI-B, Part II, to address the
change in allowance nomenclature arising from the broader scope of
allowances under ASU 2016-13 the Board proposes to revise the caption
for Memorandum item 3, effective March 31, 2021, from ``Amount of
allowance for loan and lease losses attributable to retail credit card
fees and finance charges'' to ``Amount of allowance for credit losses
on loans and leases attributable to retail credit card fees and finance
charges.'' Also, in the memorandum section of Schedule HI-B, Part II,
effective December 31, 2022, the Board proposes to remove existing
Memorandum item 4, ``Amount of allowance for post-acquisition credit
losses on purchased credit impaired loans accounted for in accordance
with AICPA Statement of Position 03-3'' as ASU 2016-13 eliminates the
concept of PCI loans and the separate credit impairment model for such
loans. From March 31, 2019, through September 30, 2022, the reporting
form and instructions for Schedule HI-B, Part II, Memorandum item 4,
would specify that this item should be completed only by institutions
that have not yet adopted ASU 2016-13.
Given that the scope of ASU 2016-13 is broader than the three
financial asset types proposed to be included in the table in Schedule
HI-B, Part II, effective March 31, 2019, the Board proposes to also add
new Memorandum item 5, ``Provisions for credit losses on other
financial assets carried at amortized cost,'' and Memorandum item 6,
``Allowance for credit losses on other financial assets carried at
amortized cost,'' to Schedule HI-B, Part II, at the same time. For
purposes of Memorandum items 5 and 6, other financial assets would
include all financial assets measured at amortized cost other than
loans and leases held for investment and HTM debt securities. From
March 31, 2019, through September 30, 2022, the reporting form and
instructions for Schedule HI-B, Part II, would include guidance stating
that Memorandum items 5 and 6 are to be completed only by institutions
that have adopted ASU 2016-13.
Schedule HI-C
Schedule HI-C currently requests allowance information for specific
categories of loans held for investment that is disaggregated on the
basis of three separate credit impairment models, and the amounts of
the related
[[Page 63876]]
recorded investments, from institutions with $1 billion or more in
total assets. ASU 2016-13 eliminates these separate credit impairment
models and replaces them with CECL for all financial assets measured at
amortized cost. As a result of this change, effective March 31, 2021,
the Board proposes to change the title of Schedule HI-C from
``Disaggregated Data on the Allowance for Loan and Lease Losses'' to
``Disaggregated Data on Allowances for Credit Losses.''
To capture disaggregated data on allowances for credit losses from
institutions that have adopted ASU 2016-13, the Board proposes to
create Schedule HI-C, Part II, ``Disaggregated Data on Allowances for
Credit Losses,'' effective March 31, 2019. The existing table in
Schedule HI-C, which includes items 1 through 6 and columns A through
F, would be renamed ``Part I. Disaggregated Data on the Allowance for
Loan and Lease Losses.'' From March 31, 2019, through September 30,
2022, the reporting form and instructions for Schedule HI-C, Part I,
would include guidance stating that only those institutions that have
not adopted ASU 2016-13 should complete Schedule HI-C, Part I.
The proposed Part II of this schedule would contain the six loan
portfolio categories and the unallocated category for which data are
currently collected in existing Schedule HI-C along with the following
portfolio categories for which allowance information would begin to be
reported for HTM debt securities:
1. Securities issued by states and political subdivisions in the
U.S.
2. Mortgage-backed securities (MBS) (including collateralized
mortgage obligations, real estate mortgage investment conduit, and
stripped MBS).
a. Mortgage-backed securities issued or guaranteed by U.S.
Government agencies or sponsored agencies.
b. Other mortgage-backed securities.
3. Asset-backed securities and structured financial products.
4. Other debt securities.
5. Total.
For each category of loans in Part II of Schedule HI-C,
institutions would report the amortized cost and the allowance balance
in Columns A and B, respectively. The amortized cost amounts to be
reported would exclude the accrued interest receivable that is reported
in ``Other assets'' on the balance sheet. For each category of HTM debt
securities in Part II of Schedule HI-C, institutions would report the
allowance balance. The amortized cost and allowance information on
loans and the allowance information on HTM debt securities would be
reported quarterly and would be completed only by institutions with $1
billion or more in total assets, as is currently done with existing
Part I of Schedule HI-C.
The Board will use the securities-related information gathered in
proposed Part II of the schedule to monitor the allowance levels for
the categories of HTM debt securities specified above. Further, with
the proposed removal of FR Y-9C item for OTTI losses recognized in
earnings (Schedule HI, Memorandum item 17), proposed Schedule HI-C,
Part II, will become another source of information regarding credit
losses of HTM debt securities, in addition to data proposed to be
reported in Schedule HI-B, Part II. From March 31, 2019, through
September 30, 2022, the reporting form and instructions for Schedule
HI-C, Part II, would include guidance stating that only those
institutions with $1 billion or more in total assets that have adopted
ASU 2016-13 should complete Schedule HI-C, Part II.
In addition, effective December 31, 2022, the Board proposes to
remove the existing Schedule HI-C, Part I. Schedule HI-C, Part II,
would then be the only table remaining within this schedule and the
``Part II'' designation would be removed.
Notes to the Income Statement-Predecessor Financial Items
Effective March 31, 2021, the Board proposes to address the broader
scope of financial assets for which a provision will be calculated
under ASU 2016-13. From March 31, 2019, through September 30, 2022, the
reporting form and instructions for line item 4, ``Provision for loan
and lease losses,'' would include guidance that only institutions that
have adopted ASU 2016-13 should report the provision for credit losses
in this item. Effective March 31, 2021, the Board proposes to revise
line item 4 from ``Provision for Loan and Lease losses'' to ``Provision
for Credit Losses.''
Notes to the Income Statement
Effective March 31, 2019, the Board proposes to add a preprinted
caption to the text field that would be titled ``Adoption of Current
Expected Credit Losses Methodology--ASC Topic 326.'' Institutions will
use this item to report the cumulative-effect adjustment (net of
applicable income taxes) recognized in retained earnings for the
changes in the allowances for credit losses on financial assets and
off-balance sheet credit exposures as of the beginning of the fiscal
year in which the institution adopts ASU 2016-13. Providing a
preprinted caption for this data item, rather than allowing each
holding company to enter its own description for this cumulative-effect
adjustment, will enhance the Board's ability to compare the impact of
the adoption of ASU 2016-13 across institutions. From March 31, 2019,
through December 31, 2022, the reporting form and instructions for
Notes to the Income Statement, would specify that this item is to be
completed only in the quarter-end FR Y-9C for the remainder of the
calendar year in which a holding company adopts ASU 2016-13. The Board
anticipates that this preprinted caption would be removed after all
holding companies have adopted ASU 2016-13.
To address the broader scope of financial assets for which an
allowance will be maintained under ASU 2016-13, effective March 31,
2019, the Board proposes to add two preprinted captions to the text
field that would be titled ``Initial allowances for credit losses
recognized upon the acquisition of purchased deteriorated assets on or
after the effective date of ASU 2016-13'' and ``Effect of adoption of
current expected credit losses methodology on allowances for credit
losses on loans and leases held for investment and held-to-maturity
debt securities.'' The latter of these preprinted captions would be
used to capture the change in the amount of allowances from initially
applying ASU 2016-13 on these two categories of assets as of the
effective date of the accounting standard in the period of adoption,
including the initial gross-up for any PCD assets held as of the
effective date. From March 31, 2019, through September 30, 2022, the
reporting form and instructions would specify that these items are to
be completed only by holding companies that have adopted ASU 2016-13
and, for the latter preprinted caption, only in the quarter-end FR Y-9C
report for the remainder of the calendar year in which an institution
adopts ASU 2016-13. The Board anticipates the latter preprinted caption
would be removed after all institutions have adopted ASU 2016-13.
Schedule HC
To address the broader scope of financial assets for which
allowances will be estimated under ASU 2016-13, the Board proposes
revisions to the reporting form and instructions to specify which
assets should be reported net of an allowance for credit losses on the
balance sheet and which asset categories should be reported gross of
such an allowance. The Board determined that the only financial asset
category for which separate (i.e., gross)
[[Page 63877]]
reporting of the amortized cost \5\ and the allowance is needed on
Schedule HC continues to be item 4.b, ``Loans and leases held for
investment,'' because of the large relative size and importance of
these assets and their related allowances to the overall balance sheet
for most institutions. For other financial assets within the scope of
CECL, the Board proposes that holding companies report these assets at
amortized cost \6\ net of the related allowance for credit losses on
Schedule HC.
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\5\ Amortized cost amounts to be reported by asset category
would exclude any accrued interest receivable on assets in that
category that is reported in ``Other assets'' on the balance sheet.
\6\ See footnote 2.
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Effective March 31, 2021, the Board proposes to revise Schedule HC,
item 2.a, from ``Held-to-maturity securities'' to ``Held-to-maturity
securities, net of allowance for credit losses.'' From March 31, 2019,
through December 31, 2020, the Board proposes to add a footnote to
Schedule HC, item 2.a, specifying that holding companies should
``report this amount net of any applicable allowance for credit
losses.'' Additionally, for Schedule HC, item 3.b, ``Securities
purchased under agreements to resell,'' and Schedule HC, item 11,
``Other assets,'' effective March 31, 2019, the Board proposes to add a
footnote to these items specifying that holding companies should
``report this amount net of any applicable allowance for credit
losses.'' From March 31, 2019, through September 30, 2022, the
reporting form and the instructions for Schedule HC, items 2.a, 3.b,
and 11, would specify that reporting such items net of any related
allowances for credit losses is applicable only to those institutions
that have adopted ASU 2016-13. Given that AFS debt securities are
carried on Schedule HC at fair value, the Board is not proposing any
changes to Schedule HC, item 2.b, ``Available-for-sale securities,''
and instead propose reporting allowances for credit losses on AFS debt
securities only in Schedule HI-B, Part II.
In addition, to address the change in allowance nomenclature
arising from the broader scope of allowances under ASU 2016-13, the
Board proposes to revise Schedule HC, item 4.c, from ``LESS: Allowance
for loan and lease losses'' to ``LESS: Allowance for credit losses on
loans and leases'' effective March 31, 2021. Effective March 31, 2019,
the Board proposes to add a footnote to this item specifying that
institutions who have adopted ASU 2016-13 should report the allowance
for credit losses on loans and leases in this item.
Schedule HC-B
Effective March 31, 2019, the Board proposes to revise the
instructions to Schedule HC-B to clarify that for institutions that
have adopted ASU 2016-13, allowances for credit losses should not be
deducted from the amortized cost amounts reported in columns A and C of
this schedule.\7\ In other words, institutions should continue
reporting the amortized cost of HTM and AFS debt securities in these
two columns of Schedule HC-B gross of their related allowances for
credit losses.
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\7\ Amortized cost amounts to be reported by securities category
in Schedule HC-B would exclude any accrued interest receivable on
the securities in that category that is reported in ``Other assets''
on the balance sheet.
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Schedule HC-C
Effective March 31, 2021, to address the change in allowance
nomenclature, the Board proposes to revise the reporting form and the
instructions for Schedule HC-C by replacing references to the allowance
for loan and lease losses in statements indicating that the allowance
should not be deducted from loans and leases in this schedule with
references to the allowance for credit losses. Thus, loans and leases
will continue to be reported gross of any allowances or allocated
transfer risk reserve in Schedule HC-C.
In addition, to address the elimination of PCI assets by ASU 2016-
13, the Board proposes to remove Schedule HC-C, Part I, Memorandum
items 5.a and 5.b, in which institutions report the outstanding balance
and balance sheet amount, respectively, of PCI loans held for
investment effective December 31, 2022. The agencies determined that
these items were not needed after the transition to PCD loans under ASU
2016-13 because the ASU eliminates the separate credit impairment model
for PCI loans and applies CECL to all loans held for investment
measured at amortized cost. From March 31, 2019, through September 30,
2022, the reporting form and the instructions for Schedule HC-C,
Memorandum items 5.a and 5.b, would specify that these items should be
completed only by institutions that have not yet adopted ASU 2016-13.
Additionally, since ASU 2016-13 supersedes ASC 310-30, the Board
proposes to revise Schedule HC-C, Memorandum item 12, ``Loans (not
subject to the requirements of the American Institute of Certified
Public Accountants (AICPA) Statement of Position 03-3) and leases held
for investment that were acquired in business combinations with
acquisition dates in the current calendar year,'' effective December
31, 2022. As revised, the loans held for investment to be reported in
Memorandum item 12 would be those not considered purchased credit
deteriorated per ASC 326. From March 31, 2019, through September 30,
2022, the Board proposes to revise the reporting form and the
instructions for Schedule HC-C, by adding a statement explaining that,
subsequent to adoption of ASU 2016-13, a holding company should report
only loans held for investment not considered purchased credit
deteriorated per ASC 326 in Schedule HC-C, Memorandum item 12.
Schedule HC-F
To address the broader scope of financial assets for which an
allowance will be applicable under ASU 2016-13, the Board proposes to
specify that assets within the scope of the ASU that are included in
Schedule HC-F should be reported net of any applicable allowances for
credit losses. Effective March 31, 2019, the Board proposes to revise
the reporting form and the instructions for Schedule HC-F by adding a
statement explaining that, subsequent to adoption of ASU 2016-13, a
holding company should report asset amounts in Schedule HC-F net of any
applicable allowances for credit losses.
In addition, effective March 31, 2019, the Board is proposing to
add a footnote to item 1, ``Accrued interest receivable'' on the
reporting form and a statement to the instructions for item 1 that
specifies that holding companies should exclude from this item any
accrued interest receivables that is reported elsewhere on the balance
sheet as part of the related financial asset's amortized cost.
Schedule HC-G
To address ASU 2016-13's exclusion of off-balance sheet credit
exposures that are unconditionally cancellable from the scope of off-
balance sheet credit exposures for which allowances for credit losses
should be measured, the Board proposes to revise the reporting form and
instructions for Schedule HC-G, item 3, ``Allowance for credit losses
on off-balance-sheet credit exposures,'' effective March 31, 2019. As
revised, the reporting form and instructions would state that holding
companies that have adopted ASU 2016-13 should report in item 3 the
allowance for credit losses on those off-balance sheet credit exposures
that are not unconditionally cancellable.
[[Page 63878]]
Schedule HC-K
Effective March 31, 2019, the Board proposes to revise the
instructions to Schedule HC-K to clarify that, for institutions that
have adopted ASU 2016-13, allowances for credit losses should not be
deducted from the related amortized cost amounts when calculating the
quarterly averages for all debt securities.
Schedule HC-N
To address the elimination of PCI assets by ASU 2016-13, the Board
proposes to remove Schedule HC-N, Memorandum items 9.a and 9.b, in
which institutions report the outstanding balance and balance sheet
amount, respectively, of past due and nonaccrual PCI loans effective
December 31, 2022. The Board determined that these items were not
needed for PCD loans under ASU 2016-13 given that the ASU eliminates
the separate credit impairment model for PCI loans and applies CECL to
PCD loans and all other loans held for investment measured at amortized
cost. From March 31, 2019, through September 30, 2022, the reporting
form and the instructions for Schedule HC-N, Memorandum items 9.a and
9.b, would specify that these items should be completed only by holding
companies that have not yet adopted ASU 2016-13.
Schedule HC-R
In connection with the agencies' recently issued proposed rule on
implementation of CECL and related transition for regulatory capital
(CECL NPR),\8\ the Board is proposing a number of revisions to Schedule
HC-R to incorporate new terminology and the proposed optional
regulatory capital transition. The proposed reporting changes to
Schedule HC-R are tied to the revisions proposed in the CECL NPR. To
the extent the Agencies revise the proposed elements of the CECL NPR
when issuing a final rule, the Board would make any necessary
corresponding adjustments to the proposed reporting revisions. Unless
otherwise indicated, the proposed revisions to Schedule HC-R discussed
below would take effect March 31, 2019, (or the first quarter-end
report date thereafter following the effective date on any final rule)
and would apply to those institutions that have adopted CECL.
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\8\ See 83 FR 22313 (May 14, 2018).
---------------------------------------------------------------------------
The CECL NPR would introduce a newly defined regulatory capital
term, allowance for credit losses (ACL), which would replace allowance
for loan and lease losses (ALLL), as defined under the capital rules,
for holding companies that adopt CECL. The CECL NPR also proposes that
credit loss allowances for PCD assets held by these holding companies
would be netted when determining the carrying value, as defined in the
CECL NPR, and, therefore, only the resulting net amount would be
subject to risk-weighting. In addition, under the CECL NPR, the
agencies are proposing to provide institutions the option to phase in
over a three-year period beginning with the institution's CECL
effective date the day-one regulatory capital effects that may result
from the adoption of ASU 2016-13.\9\
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\9\ A non-PBE with a calendar year fiscal year that does not
early adopt CECL would first report under CECL as of December 31,
2021, even though the non-PBE's CECL effective date is January 1,
2021. Thus, under the CECL NPR, such a non-PBE would use the phase-
in percentage applicable to the first year of the three-year
transition period only for the December 31, 2021, report date (i.e.,
one quarter), not the four quarters that begin with the first report
under CECL. The non-PBE may use the applicable phase-in percentages
for all four quarters of the second and third years after the CECL
effective date (i.e., 2022 and 2023). The same principle would apply
to the optional phase-in by a non-PBE with a non-calendar fiscal
year.
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Allowances for Credit Losses Definition and Treatment of Purchase
Credit Deteriorated Assets
In general, under the CECL NPR, holding companies that have adopted
CECL would report ACL amounts in Schedule HC-R items instead of ALLL
amounts that are currently reported. Effective December 31, 2022, the
Board is proposing to remove references to ALLL and replace them with
references to ACL on the reporting form for Schedule HC-R. From March
31, 2019, through September 30, 2022, the Board is proposing to revise
the instructions to Schedule HC-R to direct institutions that have
adopted CECL to use ACL instead of ALLL in calculating regulatory
capital. The instructional revisions would affect Schedule HC-R, Part
I. Regulatory Capital Components and Ratios, item 30.a, ``Allowance for
loan and lease losses includable in tier 2 capital,'' and Schedule HC-
R, Part II. Risk-Weighted Assets, items 6, ``LESS: Allowance for loan
and lease losses,'' 26, ``Risk-weighted assets for purposes of
calculating the allowance for loan and lease losses 1.25 percent
threshold,'' 28, ``Risk-weighted assets before deductions for excess
allowance of loan and lease losses and allocated risk transfer risk
reserve,'' and 29, ``LESS: Excess allowance for loan and lease
losses.''
In addition, under the CECL NPR, assets and off-balance sheet
credit exposures for which any related credit loss allowances are
eligible for inclusion in regulatory capital would be calculated and
reported in Schedule HC-R Part II. Risk-Weighted Assets on a gross
basis. Therefore, the Board is proposing to revise the instructions for
Schedule HC-R, Part II. Risk-Weighted Assets, items 2.a, ``Held-to-
maturity securities''; 3.b., ``Securities purchased under agreements to
resell''; 5.a., ``Residential mortgage exposures'' held for investment;
5.b, ``High volatility commercial real estate exposures'' held for
investment; 5.c, Held-for-investment ``Exposures past 90 days or more
or on nonaccrual''; 5.d, ``All other exposures'' held for investment;
8, ``All other assets,'' and 9.a, ``On-balance sheet securitization
exposures: Held-to-maturity securities''; to explain that holding
companies that have adopted CECL should report and risk-weight their
loans and leases held for investment, HTM securities, and other
financial assets measured at amortized cost gross of their credit loss
allowances, but net of the associated allowances on PCD assets.\10\
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\10\ Amortized cost amounts to be reported by asset category in
Schedule RC-R, Part II, would exclude any accrued interest
receivable on assets in that category that is reported in ``Other
assets'' on the Call Report balance sheet.
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In addition, effective March 31, 2019, the Board proposes to add a
new Memorandum item 5 to, Schedule HC-R, Part II that would collect
data by asset category on the ``Amount of allowances for credit losses
on purchased credit-deteriorated assets.'' The amount of such
allowances for credit losses would be reported separately for ``Loans
and leases held for investment'' in Memorandum item 5.a, ``Held-to-
maturity debt securities'' in Memorandum item 5.b, and, ``Other
financial assets measured at amortized cost'' in Memorandum item 5.c.
The instructions for Schedule HC-R, Part II, Memorandum item 5, would
specify that these items should be completed only by holding companies
that have adopted ASU 2016-13.
The Board also would include footnotes for the affected items on
the forms to highlight the revised treatment of those items for
institutions that have adopted CECL.
CECL Transition Provision
Under the CECL NPR, a holding company that experiences a reduction
in retained earnings as of the effective date of CECL for the holding
company as a result of the holding company's adoption of CECL may elect
to phase in the regulatory capital impact of adopting CECL (electing
institution). As described in the CECL NPR, an electing
[[Page 63879]]
holding company would indicate in its FR Y-9C report whether it has
elected to use the CECL transition provision beginning in the quarter
that it first reports its credit loss allowances as measured under
CECL. To identify which holding companies are electing holding
companies, the Board is proposing to revise Schedule HC-R, Part I,
Regulatory Capital Components and Ratios, by adding a new item 2.a in
which a holding company that has adopted CECL would report whether it
has or does not have a CECL transition election in effect as of the
quarter-end report date. Each institution would complete item 2.a
beginning in the FR Y-9C for its first reporting under CECL and in each
subsequent FR Y-9C report thereafter until item 2.a is removed from the
report. Until an institution has adopted CECL, it would leave item 2.a
blank. Effective March 31, 2025, the Board proposes to remove item 2.a
from Schedule HC-R, Part I, because the optional three-year phase-in
period will have ended for all electing institutions by the end of the
prior calendar year. If an individual electing institution's three-year
phase-in period ends before item 2.a is removed (e.g., its phase-in
period ends December 31, 2022), the institution would change its
response to item 2.a and report that it does not have a CECL transition
election in effect as of the quarter-end report date.
During the CECL transition period, an electing institution would
need to make adjustments to its retained earnings, temporary difference
deferred tax assets (DTAs), ACL, and average total consolidated assets
for regulatory capital purposes. An advanced approaches institution
also would need to make an adjustment to its total leverage exposure.
These adjustments are described in detail in the CECL NPR.
The Board is proposing to revise the instructions to Schedule HC-R,
Part I, Regulatory Capital Components and Ratios, items 2, ``Retained
earnings''; 30.a, ``Allowance for loan and lease losses includable in
tier 2 capital''; and item 36, ``Average total consolidated assets,'';
as well as Schedule HC-R, Part II, Risk-Weighted Assets, item 8, ``All
other assets,'' consistent with the adjustments to these items for the
applicable transitional amounts as described in the CECL NPR for
electing institutions to report the adjusted amounts. The Board also
propose to include footnotes on the reporting forms to highlight the
proposed changes to these items for electing institutions.
Schedule HC-V
The Board proposes to clarify in the instructions effective March
31, 2019, that all assets of consolidated variable interest entities
should be reported net of applicable allowances for credit losses by
holding companies that have adopted ASU 2016-13. Net reporting on
Schedule HC-V by such holding companies is consistent with the proposed
changes to Schedules HC and HC-F. Similarly, effective March 31, 2019,
the reporting form for Schedule HC-V will also specify that holding
companies that have adopted ASU 2016-13 should report assets net of
applicable allowances.
FR 2248, FR 2314/S, FR 2320, FR 2644, FR 2886b, FR Y-7N/NS, FR Y-8, FR
Y-9LP, FR Y-9SP, and FR Y-11/S
The Board proposes to make changes to the FR 2248, FR 2314/S, FR
2320, FR 2644, FR 2886b, FR Y-7N/NS, FR Y-8, FR Y-9LP, FR Y-9SP, and
the FR Y-11/S report to mirror the FR Y-9C and Call report reporting
revisions related to ASU 2016-13. The report forms and instructions
will be revised to clearly indicate that HTM securities, Securities
purchased under agreements to resell, and Other assets should be
reported net of applicable allowance for credit losses for those
institutions that have adopted the standard. Additionally, the Board
proposes to indicate on the report form and instructions that
institutions that have adopted the ASU 2016-13 should report
``Allowance for credit losses on loans and leases'' and ``Provisions
for credit losses for all applicable financial assets.''
To further address the broader scope of financial assets for which
allowances will be calculated under ASU 2016-13, the Board proposes to
revise the FR 2314/S, FR 2886b, FR Y-7N/NS, and the FR Y-11/S report to
change the title caption from Changes in Allowance for Loan and Lease
Losses'' to ``Changes in Allowances for Credit Losses'' and add three
columns titled:
Column A: Loans and leases
Column B: Held-to-maturity debt securities
Column C: Available-for-sale debt securities
2. EGRRCPA Proposed FR Y-9C Report Revisions
On September 28, 2018, the Board, pursuant to its delegated
authority,\11\ temporarily approved certain revisions to the FR Y-9C
relating to statutory amendments enacted by EGRRCPA.\12\ Pursuant to
the requirements of the Board's delegated authority, the Board now
proposes to extend these revisions for three years through the normal
delegated clearance process.\13\
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\11\ 5 CFR Pt. 1320, Appx. A(a)(3)(i)(A).
\12\ See 83 FR 48990 (September 28, 2018).
\13\ See 5 CFR Pt. 1320, Appx. A(a)(3)(i)(B).
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Section 214 of EGRRCPA, which was enacted on May 24, 2018, added a
new section 51 to the Federal Deposit Insurance Act (FDI Act) governing
the risk-based capital requirements for certain acquisition,
development, or construction (ADC) loans. EGRRCPA provides that,
effective upon enactment, the federal banking agencies may only require
a depository institution to assign a heightened risk weight to an HVCRE
exposure if such exposure is an ``HVCRE ADC Loan,'' as defined in this
new law.
Section 202 of EGRRCPA amended section 29 of the FDI Act to exclude
a capped amount of reciprocal deposits from treatment as brokered
deposits for qualifying institutions, effective upon enactment. The
instructions for the FR Y-9C and the Call Report, consistent with the
law prior to the enactment of EGRRCPA, previously treated all
reciprocal deposits as brokered deposits. In amending section 29 of the
FDI Act to exclude a capped amount of reciprocal deposits from
treatment as brokered deposits for qualifying institutions, section 202
defines ``reciprocal deposits'' to mean ``deposits received by an agent
institution through a deposit placement network with the same maturity
(if any) and in the same aggregate amount as covered deposits placed by
the agent institution in other network member banks.'' The terms
``agent institution,'' ``deposit placement network,'' ``covered
deposit,'' and ``network member bank,'' all of which are used in the
definition of ``reciprocal deposit,'' also are defined in section 202.
In particular, an ``agent institution'' is an FDIC-insured
depository institution that meets at least one of the following
criteria:
The institution is well-capitalized and has a composite
condition of ``outstanding'' or ``good'' when most recently examined
under section 10(d) of the FDI Act (12 U.S.C. 1820(d));
The institution has obtained a waiver from the FDIC to
accept, renew, or roll over brokered deposits pursuant to section 29(c)
of the FDI Act (12 U.S.C. 1831f(c)); or
The institution does not receive reciprocal deposits in an
amount that is greater than a ``special cap'' (discussed below).
Under the ``general cap'' set forth in section 202, an agent
institution may classify reciprocal deposits up to the lesser of the
following amounts as non-brokered reciprocal deposits:
[[Page 63880]]
$5 billion or
An amount equal to 20 percent of the agent institution's
total liabilities.
Any amount of reciprocal deposits in excess of the ``general cap''
would be treated as, and should be reported as, brokered deposits.
A ``special cap'' applies if an agent institution is either not
``well-rated'' or not well-capitalized. In this situation, the
institution may classify reciprocal deposits as non-brokered in an
amount up to the lesser of the ``general cap'' or the average amount of
reciprocal deposits held at quarter-end during the last four quarters
the institution was well-capitalized and in ``outstanding'' or ``good''
condition.
To address the change in the treatment of HVCRE loans and certain
reciprocal deposits under EGRRCPA, the agencies have made a number of
revisions to the September 2018 Call instructions. In order to avoid
the regulatory burden associated with applying different definitions
for HVCRE exposures and reciprocal deposits within a single
organization, the Board temporarily revised the FR Y-9C instructions so
that they that are consistent with those changes to the Call Report. To
assist holding companies in preparing the FR Y-9C for that report date,
the revised FR Y-9C Supplemental Instructions include information
regarding the reporting of HVCRE exposures and reciprocal deposits.
Specifically, the temporary revisions to the FR Y-9C report provide
that (i) respondents are permitted to report brokered deposits (in
Schedule HC-E Memorandum items 1 and 2) in a manner consistent with the
provisions of EGRRCPA,\14\ but also may choose to continue to report
brokered deposits in a manner consistent with the current instructions
to the FR Y-9C and (ii) respondents are permitted to apply a heightened
risk weight only to those HVCRE exposures (in Schedule HC-R, Part II,
items 4.b, 5.b and 7) they believe meet the definition of HVCRE ADC
Loan, but also may choose to continue to report and risk weight HVCRE
exposures in a manner consistent with the previous instructions to the
FR Y-9C.
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\14\ Although the EGRRCPA provision relating to reciprocal
deposits and the risk-weighting of HVCRE applies only to depository
institutions, the Board proposes that the FR Y-9C be revised to
permit holding companies to report HVCRE in a manner consistent with
their subsidiary depository institutions.
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3. Other Proposed Revisions
Proposed Revisions To the FR Y-9C
On the Notes to the Income Statement--Predecessor Financial Items,
the Board is proposing to add a footnote to line item 6, Realized gains
(losses) on held-to-maturity and available-for-sale securities to
instruct holding companies to include realized and unrealized holding
gains and losses in this item in order to implement the accounting
change pertaining to equity securities under Accounting Standards
Update (ASU No. 2016-01, ``Recognition and Measurement of Financial
Assets and Financial Liabilities''). This change is consistent with the
changes to the Call Report\15\ and the FR Y-9C\16\ report that became
effective March 31, 2018. This change is effective March 31, 2019.
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\15\ See 83 FR 939 (February 7, 2018).
\16\ See 83 FR 12395 (March 21, 2018).
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Proposed Revisions To the FR 2886b
Effective March 31, 2019, the Board proposes to implement a number
of revisions to the FR 2886b reporting requirements, most of which are
proposed to align with changes implemented on the Call Report. The
proposed changes include:
Revisions to Schedule RC-R, Regulatory Capital, for
banking Edge corporations,
Revisions to the eligibility criteria for reporting
Schedule RC-D, Trading Assets and Liabilities,
Revisions to address changes in accounting for equity
investments not held for trading, and
Revisions to the reporting of equity investments accounted
for under the equity method of accounting.
Schedule RC-R, Regulatory Capital (for Banking Edge Corporations)
Effective January 1, 1993, banking Edge corporations became subject
to capital adequacy guidelines under section 211.12(c) of Regulation K,
International Banking Operations (12 CFR 211). According to Regulation
K, banking Edge corporations must maintain a minimum total capital to
total risk-weighted assets ratio of at least 10 percent, of which at
least 50 percent must consist of Tier 1 capital. In order to assess
compliance with the capital requirements of Regulation K, banking Edge
corporations file FR 2886b Schedule RC-R, which currently consists of
six items:
Tier 1 capital allowable under the risk-based capital
guidelines,
Tier 2 capital allowable under the risk-based capital
guidelines,
Subordinated debt allowable as Tier 2,
Total qualifying capital allowable under risk-based
capital guidelines,
Total risk-weighted assets and credit equivalent amounts
of off-balance sheet items and
Credit equivalent amounts of off-balance-sheet items.
In October of 2013, the Board and the OCC published the revised
capital rules in the Federal Register.\17\ (The FDIC published its own
identical rules). The revised capital rules updated Regulation Q--
Capital Adequacy of Bank Holding Companies, Savings and Loan Holding
Companies, and State Member Banks (12 CFR 217). As a result of this
update, the concept of risk-based capital rules in Regulation Q
replaced the concept of capital adequacy guidelines. Since banking Edge
corporations are subject to capital adequacy guidelines under
Regulation K, and the concept of capital adequacy guidelines in
Regulation K was replaced by the concept of risk-based capital rules in
Regulation Q, banking Edge corporations were now subject to risk-based
capital rules under Regulation Q.
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\17\ See 78 FR 62018 (October 11, 2013).
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From August of 2013 to February of 2015, the Board, in conjunction
with the OCC and the FDIC, published initial and final notices in the
Federal Register to revise Call Report Schedule RC-R, Regulatory
Capital, to align with the revised capital rules under Regulation
Q.\18\ As a result, Call Report Schedule RC-R, Part I, Regulatory
Capital Components and Ratios, and Part II, Risk-Weighted Assets, were
revised as of March 2014 and March 2015, respectively. The FR 2886b
Schedule RC-R was not updated at this time to reflect the revised
capital rules.
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\18\ See 78 FR 48934 (August 12, 2013), 79 FR 2527 (January 14,
2014), 79 FR 35634 (June 23, 2014), and 80 FR 5618 (February 2,
2015).
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The Board proposes to remove all six existing items on FR 2886b
Schedule RC-R, and replace them with four items that correspond to the
risk-based capital rules under Regulation Q. The proposed revisions are
similar to the revisions made on Call Report Schedule RC-R, albeit
concerning fewer items. The Board believes these four items
sufficiently assess risk-based capital adequacy for banking Edge
corporations, and better align with the risk-based capital rules under
Regulation Q. Specifically, the Board proposes to add the following
items to FR 2886b Schedule RC-R:
Tier 1 Capital allowable under Regulation Q,
Tier 2 Capital allowable under Regulation Q,
[[Page 63881]]
Total Capital allowable under Regulation Q and
Total risk-weighted assets.
Schedule RC-D, Trading Assets and Liabilities
The Board proposes to change the reporting threshold for filing
Schedule RC-D to Edges with total trading assets of $10 million or more
in any of the four preceding calendar quarters, from the current
threshold of $2 million. The Board no longer needs the information
reported in this schedule from Edges with a lesser amount of trading
assets.
Changes in Accounting for Equity Investments Not Held for Trading
In January 2016, the FASB issued ASU No. 2016-01, ``Recognition and
Measurement of Financial Assets and Financial Liabilities.'' The Board
proposes to revise the FR 2886b report form and instructions to account
for the changes to U.S. GAAP set forth in ASU 2016-01 that are
consistent with the changes made to the Call Report.\19\ These proposed
revised reporting requirements would become effective for different
sets of respondents as those respondents become subject to the ASU.
Institutions that are public business entities, as defined in U.S.
GAAP, are subject to ASU 2016-01 for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years.
As discussed below, interim guidance has been provided for purposes of
reporting by such an institution in accordance with the ASU in its FR
2886b beginning with the March 31, 2018, report date. For all other
institutions, the ASU is effective for fiscal years beginning after
December 15, 2018, and interim periods within fiscal years beginning
after December 15, 2019. The period over which institutions will be
implementing this ASU ranges from the first quarter of 2019 through the
fourth quarter of 2020. December 31, 2020, will be the first quarter-
end FR 2886b report date as of which all institutions would be required
to prepare their FR 2886b in accordance with ASU 2016-01 and the
proposed revised reporting requirements.
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\19\ See 83 FR 939 (January 8, 2018).
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The changes to the accounting for equity investments under ASU
2016-01 will affect several existing data items in the FR 2886b. One
outcome of the change in accounting for equity investments under ASU
2016-01 is the elimination of the concept of available-for-sale (AFS)
equity securities, which are measured at fair value on the balance
sheet with changes in fair value recognized through other comprehensive
income. At present, the historical cost and fair value of AFS equity
securities, i.e., investments in mutual funds and other equity
securities with readily determinable fair values that are not held for
trading, are reported in FR 2886b Schedule RC-B (Securities), item 3,
columns C and D, respectively. The total fair value of AFS securities,
which includes both debt and equity securities, is then carried forward
to the FR 2886b balance sheet and reported in Schedule RC, item 2.
At present, the accumulated balance of the unrealized gains
(losses) on AFS equity securities, net of applicable income taxes, that
have been recognized through other comprehensive income is included in
accumulated other comprehensive income (AOCI), which is reported in the
equity capital section of the FR 2886b balance sheet in Schedule RC,
item 24. With the elimination of AFS equity securities on the effective
date of ASU 2016-01, the net unrealized gains (losses) on these
securities that had been included in AOCI will be reclassified
(transferred) from AOCI into the retained earnings component of equity
capital, which is reported on the FR 2886b balance sheet in Schedule
RC, item 23. After the effective date, changes in the fair value of
(i.e., the unrealized gains and losses on) an institution's equity
securities that would have been classified as AFS had the previously
applicable accounting standards remained in effect will be recognized
through net income rather than other comprehensive income.
The effect of the elimination of AFS equity securities as a
distinct asset category upon institutions' implementation of ASU 2016-
01 carries over to the agencies' regulatory capital rules. Under these
rules, institutions that are eligible to and have elected to make the
AOCI opt-out election deduct net unrealized losses on AFS equity
securities from common equity tier 1 capital and include 45 percent of
pretax net unrealized gains on AFS equity securities in tier 2 capital.
When ASU 2016-01 takes effect and the classification of equity
securities as AFS is eliminated for accounting and reporting purposes
under U.S. GAAP, the concept of unrealized gains and losses on AFS
equity securities will likewise cease to exist.
Another outcome of the change in accounting for equity investments
under ASU 2016-01 is that equity securities and other equity
investments without readily determinable fair values that are within
the scope of ASU 2016-01 and are not held for trading must be measured
at fair value through net income, rather than at cost (less impairment,
if any), unless the measurement election described above is applied to
individual equity investments. In general, institutions currently
report their holdings of such equity securities without readily
determinable fair values as a category of other assets in FR 2886b
Schedule RC, item 8 (item 8 is the total amount of an institution's
other assets).
At present, AFS equity securities and equity investments without
readily determinable fair values are included in the quarterly averages
reported in Schedule RC-K. Institutions report the quarterly average of
its total securities in item 7 of this schedule and this average
reflects AFS equity securities at fair value and equity investments
without readily determinable fair values at historical cost (item 7 is
total assets; there is no breakout for securities on Schedule RC-K on
the FR 2886b).
The Board has considered the changes to the accounting for equity
investments under ASU 2016-01 and the effect of these changes on the
manner in which data on equity securities and other equity investments
are currently reported in the FR 2886b, which has been described above.
Accordingly, the proposed revisions to the FR 2886b report form and
instructions to address the equity securities accounting changes are as
follows:
Schedule RI
To provide transparency to the effect of unrealized gains and
losses on equity securities not held for trading on an institution's
net income during the year-to-date reporting period in Schedule RI,
Income Statement, and to clearly distinguish these gains and losses
from the rest of an institution's income (loss) from its continuing
operations, Schedule RI, item 8, would be revised effective March 31,
2019, by creating new items 8.a, ``Income (loss) before unrealized
holding gains (losses) on equity securities not held for trading,
applicable income taxes, and discontinued operations,'' and 8.b,
``Unrealized holding gains (losses) on equity securities not held for
trading.'' In addition to unrealized holding gains (losses) during the
year-to-date reporting period on such equity securities with readily
determinable fair values, institutions would also report in proposed
new item 8.b the year-to-date changes in the carrying amounts of equity
investments without readily determinable fair values not held for
trading (i.e., unrealized holding gains (losses) for those measured at
fair value through earnings; impairment, if any, plus or minus changes
resulting from observable price changes for those
[[Page 63882]]
equity investments for which this measurement election is made).
Existing Schedule RI, item 8, ``Income (loss) before applicable income
taxes and discontinued operations,'' would be renumbered as item 8.c,
and would be the sum of items 8.a and 8.b. From March 31, 2019, through
September 30, 2020, the instructions for item 8.b and the reporting
form for Schedule RI would include guidance stating that item 8.b is to
be completed only by institutions that have adopted ASU 2016-01.
Institutions that have not adopted ASU 2016-01 would leave item 8.b
blank when completing Schedule RI. Finally, from March 31, 2019,
through September 30, 2020, the instructions for Schedule RI, item 6,
``Realized gains (losses) on securities not held in trading accounts,''
and the reporting form for Schedule RI would include guidance stating
that, for institutions that have adopted ASU 2016-01, item 6 includes
realized gains (losses) only on AFS debt securities. Effective December
31, 2020, the caption for item 6 would be revised to ``Realized gains
(losses) on available-for-sale debt securities.''
Schedule RC
In Schedule RC, Balance Sheet, item 2, ``Securities,'' would be
split into three items: Item 2.a: ``Held-to-maturity securities, net of
allowance for credit losses,'' item 2.b: ``Available-for-sale
securities not held for trading,'' and 2.c: ``Equity securities with
readily determinable fair values not held for trading,'' effective
March 31, 2019. From March 31, 2019, through September 30, 2020, the
instructions for item 2.c and the reporting form for Schedule RC would
include guidance stating that item 2.c is to be completed only by
institutions that have adopted ASU 2016-01. Institutions that have not
adopted ASU 2016-01 would leave item 2.c blank. During this period, the
instructions for items 2.a and 2.b would explain that institutions that
have adopted ASU 2016-01 should include only debt securities in these
items. Effective December 30, 2020, the caption for item 2.a would be
revised to ``Held-to-maturity debt securities, net of allowance for
credit losses,'' and the caption for item 2.b would be revised to
``Available-for-sale debt securities not held for trading.'' All
institutions would report their holdings of equity securities with
readily determinable fair values not held for trading in item 2.c.
In Schedule RC, item 8, Other Assets, the instructions would be
revised to add language stating institutions that have adopted ASU
2016-01 should report ``equity investments without readily determinable
fair values'' at fair value, effective March 31, 2019. Institutions
that have not adopted ASU 2016-01 would continue to report ``equity
securities that do not have readily determinable fair values'' at
historical cost. The types of equity securities and other equity
investments currently reported in item 8 would continue to be reported
in this item. However, after the effective date of ASU 2016-01 for an
institution, the securities the institution reports in item 8 would be
measured in accordance with the ASU.
Schedule RC-B
In Schedule RC-B, item 3, ``Equity interest in nonrelated
organizations,'' would be removed effective December 30, 2020. From
March 31, 2019, through September 30, 2020, the instructions for item 3
and the reporting form for Schedule RC-B would include guidance stating
that item 3 is to be completed only by institutions that have not
adopted ASU 2016-01. Institutions that have adopted ASU 2016-01 would
leave item 3 blank.
Interim Guidance
Institutions that applied ASU 2016-01 in the first quarter of 2018
will need to report their holdings of equity securities and other
equity investments in accordance with this accounting standard within
the existing structure of the FR 2886b beginning with the March 31,
2018, report date. As a result, the Board provided interim guidance for
the March 31, 2018, report date advising institutions that have adopted
ASU 2016-01 to (1) report realized and unrealized holding gains
(losses) on equity securities not held for trading in the appropriate
subitem of either item 5 (noninterest income) or item 7 (noninterest
expense) of Schedule RI (Income Statement), as applicable. In addition
to realized and unrealized holding gains (losses) during the year-to-
date reporting period on such equity investments with readily
determinable fair values, institutions should also report in Schedule
RI, item 5 or 7, as applicable, the year-to-date carrying amounts of
equity investments without readily determinable fair values not held
for trading (i.e., unrealized holding gains (losses) for those measured
at fair value through earnings, impairment, if any, plus or minus
changes resulting from observable price changes for those equity
investments for which this measurement election is made). For
institutions that have adopted ASU 2016-01, Schedule RI, item 6
(realized gains (losses) on securities not held in trading accounts)
would only include realized gains (losses) on available-for-sale debt
securities, (2) measure their holdings of equity securities and other
equity investments without readily determinable fair values not held
for trading in accordance with the ASU and continue to report them in
Schedule RC (Balance Sheet), item 8 (Other assets), and (3) continue to
report the historical cost and fair value of their holdings of equity
securities with readily determinable fair values not held for trading
(which were reportable as available-for-sale equity securities prior to
the adoption of ASU 2016-01) in Schedule RC-B, item 3 (Equity interest
in nonrelated organizations), columns C and D, respectively.
Investments Accounted for Uunder the Equity Method of Accounting
The instructions for Schedule RC-B, item 3, ``Equity interest in
nonrelated organizations,'' currently state to include investments that
represent 20 percent to 50 percent of the voting shares of an
organization accounted for under the equity method of accounting, and
these investments are reported as either held-to-maturity or available-
for-sale. Upon review, it was determined this treatment is not in
compliance with U.S. GAAP, as investments accounted for under the
equity method of accounting should not be classified as either held-to-
maturity or available-for-sale. Guidance on securities accounted for
under the equity method is provided in ASC Subtopic 323-10,
Investments--Equity Method and Joint Ventures- Overall. To become U.S.
GAAP compliant and to align with the reporting on the Call Report, the
Board proposes to revise the instructions to indicate investments that
represent 20 percent to 50 percent of the voting shares of an
organization accounted for under the equity method of accounting should
no longer be included in Schedule RC-B, item 3, but rather included in
Schedule RC, item 8, ``Other assets.''
In addition, Schedule RC-B, item 3, columns A and B, Amortized Cost
and Fair Value of Held-to-maturity equity interest in nonrelated
organizations, respectively, would be discontinued effective March 31,
2019, as these items are no longer needed by the Board. Columns C and
D, Amortized Cost and Fair value of Available-for-sale securities,
would remain on the form and continue to be collected until December
31, 2020, when all institutions must comply with ASU 2016-01 (see
description of proposed revisions due to ASU 2016-01 for more
information).
Legal authorization and confidentiality (FR Y-9 family of reports):
The FR Y-9 family of reports
[[Page 63883]]
is authorized by section 5(c) of the Bank Holding Company Act (BHC Act)
(12 U.S.C. 1844(c)), section 10 of Home Owners' Loan Act (12 U.S.C.
1467a(b)) and section 618 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) (12 U.S.C. 1850a(c)(1)), and
section 165 of the Dodd-Frank Act (12 U.S.C. 5365). These reports are
mandatory.
With respect to the FR Y-9LP, FR Y-9SP, FR Y-9ES, FR Y-9CS, as well
as most items on the FR Y-9C, the information collected would generally
not be accorded confidential treatment. If confidential treatment is
requested by a respondent, the Board will review the request to
determine if confidential treatment is appropriate.
With respect to the FR Y-9C, Schedule HI's item 7(g) ``FDIC deposit
insurance assessments,'' Schedule HC-P's item 7(a) ``Representation and
warranty reserves for 1-4 family residential mortgage loans sold to
U.S. government agencies and government sponsored agencies,'' and
Schedule HC-P's item 7(b) ``Representation and warranty reserves for 1-
4 family residential mortgage loans sold to other parties'' are
considered confidential. Such treatment is appropriate because the data
is not publicly available and could cause substantial harm to the
competitive position of the respondent. The public release of this
confidential data may impair the Board's future ability to collect
similarly confidential data. Thus, this information may be kept
confidential under exemptions (b)(4) of the Freedom of Information Act
(FOIA), which exempts from disclosure ``trade secrets and commercial or
financial information obtained from a person and privileged or
confidential'' (5 U.S.C. 552(b)(4)), and (b)(8) of the Freedom of
Information Act, which exempts from disclosure information related to
examination, operating, or condition reports prepared by, on behalf of,
or for the use of an agency responsible for the regulation or
supervision of financial institutions (5 U.S.C. 552(b)(8)). If
confidential treatment is requested by a respondent for other items in
the FR Y-9C, the Board will review the request to determine if
confidential treatment is appropriate.
Legal authorization and confidentiality (FR Y-7 family of reports).
With respect to FBOs and their subsidiary IHCs, section 5(c) of the BHC
Act, in conjunction with section 8 of the International Banking Act (12
U.S.C. 3106), authorizes the board to require FBOs and any subsidiary
thereof to file the FR Y-7N reports, and the FR Y-7Q.
Information collected in these reports generally is not considered
confidential. However, because the information is collected as part of
the Board's supervisory process, certain information may be afforded
confidential treatment pursuant to exemption 8 of FOIA (5 U.S.C.
552(b)(8)). Individual respondents may request that certain data be
afforded confidential treatment pursuant to exemption 4 of FOIA if the
data has not previously been publically disclosed and the release of
the data would likely cause substantial harm to the competitive
position of the respondent (5 U.S.C. 552(b)(4)). Additionally,
individual respondents may request that personally identifiable
information be afforded confidential treatment pursuant to exemption 6
of FOIA if the release of the information would constitute a clearly
unwarranted invasion of personal privacy (5 U.S.C. 552(b)(6)). The
applicability of FOIA exemptions 4 and 6 would be determined on a case-
by-case basis.
Legal authorization and confidentiality (FR Y-8). The FR Y-8 is
mandatory for respondents that control an insured depository
institution that has engaged in covered transactions with an affiliate
during the reporting period. Section 5(c) of the BHC Act authorizes the
Board to require BHCs to file the FR Y-8 reporting form with the Board
(12 U.S.C. 1844(c)). Section 10(b)(2) of the Home Owners' Loan Act
authorizes the Board to require SLHCs to file the FR Y-8 reporting form
with the Board (12 U.S.C. 1467a(b)(2)). The release of data collected
on this form includes financial information that is not normally
disclosed by respondents, the release of which would likely cause
substantial harm to the competitive position of the respondent if made
publicly available. The data collected on this form, therefore, would
be kept confidential under exemption 4 of FOIA which protects from
disclosure trade secrets and commercial or financial information (5
U.S.C. 552(b)(4)).
Legal authorization and confidentiality (FR Y-11). The Board has
the authority to require BHCs and any subsidiary thereof, savings and
loan holding companies and any subsidiary thereof, and securities
holding companies and any affiliate thereof to file the FR Y-11
pursuant to, respectively, section 5(c) of the BHC Act (12 U.S.C.
1844(c)), section 10(b) of the Homeowners' Loan Act (12 U.S.C.
1467a(b)), and section 618 of the Dodd-Frank Act (12 U.S.C. 1850a).
With respect to FBOs and their subsidiary IHCs, section 5(c) of the BHC
Act, in conjunction with section 8 of the International Banking Act (12
U.S.C. 3106), authorizes the board to require FBOs and any subsidiary
thereof to file the FR Y-11 reports. These reports are mandatory.
Information collected in these reports generally is not considered
confidential. However, because the information is collected as part of
the Board's supervisory process, certain information may be afforded
confidential treatment pursuant to exemption 8 of FOIA (5 U.S.C.
552(b)(8)). Individual respondents may request that certain data be
afforded confidential treatment pursuant to exemption 4 of FOIA if the
data has not previously been publically disclosed and the release of
the data would likely cause substantial harm to the competitive
position of the respondent (5 U.S.C. 552(b)(4)). Additionally,
individual respondents may request that personally identifiable
information be afforded confidential treatment pursuant to exemption 6
of FOIA if the release of the information would constitute a clearly
unwarranted invasion of personal privacy (5 U.S.C. 552(b)(6)). The
applicability of FOIA exemptions 4 and 6 would be determined on a case-
by-case basis.
Legal authorization and confidentiality (FR 2248). The Board has
determined that the FR 2248 is authorized by law pursuant to section 2A
of the Federal Reserve Act (12 U.S.C. 225a). The obligation to respond
is voluntary. Individual respondent data are confidential under section
(b)(4) of FOIA (5 U.S.C. 552).
Legal authorization and confidentiality (FR 2314). The Board has
the authority to require BHCs and any subsidiary thereof, savings and
loan holding companies and any subsidiary thereof, and securities
holding companies and any affiliate thereof to file the FR 2314
pursuant to, respectively, section 5(c) of the BHC Act (12 U.S.C.
1844(c)), section 10(b) of the Homeowners' Loan Act (12 U.S.C.
1467a(b)), and section 618 of the Dodd-Frank Act (12 U.S.C. 1850a). The
Board has the authority to require SMBs, agreement corporations, and
Edge corporations to file the FR 2314 pursuant to, respectively,
sections 9(6), 25(7), and 25A(17) of the Federal Reserve Act (12 U.S.C.
324, 602, and 625). With respect to FBOs and their subsidiary IHCs,
section 5(c) of the BHC Act, in conjunction with section 8 of the
International Banking Act (12 U.S.C. 3106), authorizes the board to
require FBOs and any subsidiary thereof to file the FR 2314 reports.
These reports are mandatory.
Information collected in these reports generally is not considered
confidential. However, because the information is collected as part of
the Board's supervisory process, certain information
[[Page 63884]]
may be afforded confidential treatment pursuant to exemption 8 of FOIA
(5 U.S.C. 552(b)(8)). Individual respondents may request that certain
data be afforded confidential treatment pursuant to exemption 4 of FOIA
if the data has not previously been publically disclosed and the
release of the data would likely cause substantial harm to the
competitive position of the respondent (5 U.S.C. 552(b)(4)).
Additionally, individual respondents may request that personally
identifiable information be afforded confidential treatment pursuant to
exemption 6 of FOIA if the release of the information would constitute
a clearly unwarranted invasion of personal privacy (5 U.S.C.
552(b)(6)). The applicability of FOIA exemptions 4 and 6 would be
determined on a case-by-case basis.
Legal authorization and confidentiality (FR 2320). The Board has
the authority to require SLHCs to file the FR 2320 pursuant to the Home
Owners' Loan Act (12 U.S.C. 1467a(b)(2)). The FR 2320 is mandatory for
exempt SLHCs. In some cases, lower-tier SLHCs may voluntarily file the
FR 2320. In other cases lower-tier SLHCs may be required to file (in
addition to the top-tier SLHC) for safety and soundness purposes at the
discretion of the appropriate Federal Reserve Bank.
The Board also has determined that data items C572, C573, and C574
(line items 24, 25, and 26) may be protected from disclosure under
exemption 4 of FOIA. Commercial or financial information may be
protected from disclosure under exemption 4 if disclosure of such
information is likely to cause substantial competitive harm to the
provider of the information (5 U.S.C. 552(b)(4)). The data items listed
above pertain to new or changed pledges, or capital stock of any
subsidiary savings association that secures short-term or long-term
debt or other borrowings of the SLHC; changes to any class of
securities of the SLHC or any of its subsidiaries that would negatively
impact investors; and defaults of the SLHC or any of its subsidiaries
during the quarter. Disclosure of this type of information is likely to
cause substantial competitive harm to the SLHC providing the
information and thus this information may be protected from disclosure
under FOIA exemption 4.
With regard to the remaining data items on the FR 2320, the Board
has determined that institutions may request confidential treatment for
any FR 2320 data item or for all FR 2320 data items, and that
confidential treatment will be reviewed on a case-by-case basis.
Legal authorization and confidentiality (FR 2644). The FR 2644 is
authorized by section 2A and 11(a)(2) of the Federal Reserve Act (12
U.S.C. 225(a) and 248(a)(2)) and by section 7(c)(2) of the
International Banking Act (12 U.S.C. 3105(c)(2)) and is voluntary.
Individual respondent data are regarded as confidential under FOIA (5
U.S.C. 552(b)(4)).
Legal authorization and confidentiality (FR 2886b). Sections 25 and
25A of the Federal Reserve Act authorize the Board to collect the FR
2886b (12 U.S.C. 602, 625). The FR 2886b is mandatory. The information
collected on this report is generally not considered confidential.
However, information provided on Schedule RC-M (with the exception for
item 3) and on Schedule RC-V, both of which pertain to claims on and
liabilities to related organizations, may be exempt from disclosure
pursuant to exemption (b)(4) of FOIA (5 U.S.C. 552(b)(4)). The
information provided in the Patriot Act Contact Information section of
the reporting form may be exempt from disclosure pursuant to exemption
(b)(7)(C) of FOIA (5 U.S.C. 552(b)(7)(C)).
Board of Governors of the Federal Reserve System, December 4,
2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
Appendix A
Effective Dates for ASU 2016-13
------------------------------------------------------------------------
Regulatory
U.S. GAAP effective report effective
date date *
------------------------------------------------------------------------
PBEs That Are SEC Filers...... Fiscal years beginning 03/31/2020.
after 12/15/2019,
including interim
periods within those
fiscal years.
Other PBEs (Non-SEC Filers)... Fiscal years beginning 03/31/2021.
after 12/15/2020,
including interim
periods within those
fiscal years.
Non-PBEs...................... Fiscal years beginning 12/31/2021.\21\
after 12/15/2020, and
interim periods for
fiscal years
beginning after 12/15/
2021 \20\.
Early Application............. Early application First calendar
permitted for fiscal quarter-end
years beginning after after effective
12/15/2018, including date of early
interim periods application of
within those fiscal the ASU.
years.
------------------------------------------------------------------------
* For institutions with calendar fiscal year-ends and reports with
quarterly report dates.
For additional information on key elements of the new accounting
standard and initial supervisory views with respect to measurement
methods, use of vendors, portfolio segmentation, data needs,
qualitative adjustments, and allowance processes, refer to the
agencies' Joint Statement on the New Accounting Standard on
Financial Instruments--Credit Losses issued on June 17, 2016, and
Frequently Asked Questions on the New Accounting Standard on
Financial Instruments--Credit Losses (CECL FAQs), which were last
updated on September 6, 2017.\22\
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\20\ See Footnote 23.
\21\ See Footnote 24.
\22\ The CECL FAQs and a related link to the joint statement can
be found on the Board's website: https://www.federalreserve.gov/supervisionreg/srletters/sr1708a1.pdf.
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For institutions that are PBEs and also are SEC filers, as both
terms are defined in U.S. GAAP, the new credit losses standard is
effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. Thus, for an
SEC filer that has a calendar year fiscal year, the standard is
effective January 1, 2020, and institutions must first apply the new
credit losses standard in its FR 2314, FR 2320, FR 2886b, FR Y-7N,
FR Y-8, FR Y-9C, FR Y-9LP and the FR Y-11 report for the quarter
ended March 31, 2020. For the FR 2248, FR 2644 and the FR Y-9SP
reporters must first apply the new credit losses standard January
31, 2020, January 1, 2020 and June 30, 2020, respectively.
For a PBE that is not an SEC filer, the credit losses standard
is effective for fiscal years beginning after December 15, 2020,
including interim periods within those fiscal years. Thus, for a PBE
that is not an SEC filer and has a calendar year fiscal year, the
standard is effective January 1, 2021, and the institution must
first apply the new credit losses standard in its FR 2314, FR 2320,
FR 2886b, FR Y-7N, FR Y-8, FR Y-9C, FR Y-9LP and the FR Y-11 for the
quarter ended March 31, 2021. For the FR 2248, FR 2644 and the FR Y-
9SP reporters must first apply the new credit losses standard,
January 31, 2021, January 6, 2021, and June 30, 2021, respectively.
For an institution that is not a PBE, the credit losses standard
is effective for fiscal years beginning after December 15, 2020, and
for interim period financial statements for
[[Page 63885]]
fiscal years beginning after December 15, 2021.\23\ Thus, an
institution with a calendar year fiscal year that is not a PBE must
first apply the new credit losses standard in its FR 2248, FR 2314,
FR 2320, FR 2886b, FR Y-7N, FR Y-8, FR Y-9C, FR Y-9LP, FR Y-9SP, and
FR Y-11 for December 31, 2021, if the institution is required to
file such form.\24\ The FR 2644 reporters must first apply the new
credit losses standard January 5, 2022. However, where applicable,
institutions would include the CECL provision for expected credit
losses for the entire year ended December 31, 2021, in the income
statement in its report for year-end 2021. The institution would
also recognize in its year-end 2021 report a cumulative-effect
adjustment to the beginning balance of retained earnings as of
January 1, 2021, resulting from the adoption of the new standard as
of the beginning of the 2021 fiscal year.
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\23\ On August 20, 2018, FASB issued a proposed ASU that would
amend the transition and effective date provisions in ASU 2016-13
for entities that are not PBEs (non-PBEs) so that the credit losses
standard would be effective for non-PBEs for fiscal years beginning
after December 15, 2021, including interim periods within those
fiscal years.
\24\ If the FASB issues a final Accounting Standards Update
amending the transition and effective date provisions in ASU 2016-13
as described in footnote 23, a non-PBE with a calendar year fiscal
year would first apply the new credit losses standard in its reports
for March 31, 2022, if an institution is required to file these
report forms.
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For regulatory reporting purposes, early application of the new
credit losses standard will be permitted for all institutions for
fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years.
Appendix B--U.S. GAAP Changes as a Result of CECL
Introduction of a New Credit Loss Methodology
The new accounting standard developed by the FASB has been
designed to replace the existing incurred loss methodology in U.S.
GAAP. Under CECL, the allowance for credit losses is an estimate of
the expected credit losses on financial assets measured at amortized
cost, which is measured using relevant information about past
events, including historical credit loss experience on financial
assets with similar risk characteristics, current conditions, and
reasonable and supportable forecasts that affect the collectability
of the remaining cash flows over the contractual term of the
financial assets. In concept, an allowance will be created upon the
origination or acquisition of a financial asset measured at
amortized cost. At subsequent reporting dates, the allowance will be
reassessed for a level that is appropriate as determined in
accordance with CECL. The allowance for credit losses under CECL is
a valuation account, measured as the difference between the
financial assets' amortized cost basis and the amount expected to be
collected on the financial assets, i.e., lifetime expected credit
losses.
Reduction in the Number of Credit Impairment Models
Impairment measurement under existing U.S. GAAP has often been
considered complex because it encompasses five credit impairment
models for different financial assets.\25\ In contrast, CECL
introduces a single measurement objective to be applied to all
financial assets carried at amortized cost, including loans held-
for-investment (HFI) and held-to-maturity (HTM) debt securities.
That said, CECL does not specify a single method for measuring
expected credit losses; rather, it allows any reasonable approach,
as long as the estimate of expected credit losses achieves the
objective of the FASB's new accounting standard. Under the existing
incurred loss methodology, institutions use various methods,
including historical loss rate methods, roll-rate methods, and
discounted cash flow methods, to estimate credit losses. CECL allows
the continued use of these methods; however, certain changes to
these methods will need to be made in order to estimate lifetime
expected credit losses.
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\25\ Current U.S. GAAP includes five different credit impairment
models for instruments within the scope of CECL: ASC Subtopic 310-
10, Receivables-Overall; ASC Subtopic 450-20, Contingencies-Loss
Contingencies; ASC Subtopic 310-30, Receivables-Loans and Debt
Securities Acquired with Deteriorated Credit Quality; ASC Subtopic
320-10, Investments-Debt and Equity Securities--Overall; and ASC
Subtopic 325-40, Investments-Other-Beneficial Interests in
Securitized Financial Assets.
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Purchased Credit-Deteriorated (PCD) Financial Assets
CECL introduces the concept of PCD financial assets, which
replaces purchased credit-impaired (PCI) assets under existing U.S.
GAAP. The differences in the PCD criteria compared to the existing
PCI criteria will result in more purchased loans HFI, HTM debt
securities, and available-for-sale (AFS) debt securities being
accounted for as PCD financial assets. In contrast to the existing
accounting for PCI assets, the new standard requires the estimate of
expected credit losses embedded in the purchase price of PCD assets
to be estimated and separately recognized as an allowance as of the
date of acquisition. This is accomplished by grossing up the
purchase price by the amount of expected credit losses at
acquisition, rather than being reported as a credit loss expense. As
a result, as of acquisition date, the amortized cost basis of a PCD
financial asset is equal to the principal balance of the asset less
the non-credit discount, rather than equal to the purchase price as
is currently recorded for PCI loans.
AFS Debt Securities
The new accounting standard also modifies the existing
accounting practices for impairment on AFS debt securities. Under
this new standard, institutions will recognize a credit loss on an
AFS debt security through an allowance for credit losses, rather
than a direct write-down as is required by current U.S. GAAP. The
recognized credit loss is limited to the amount by which the
amortized cost of the security exceeds fair value. A write-down of
an AFS debt security's amortized cost basis to fair value, with any
incremental impairment reported in earnings, would be required only
if the fair value of an AFS debt security is less than its amortized
cost basis and either (1) the institution intends to sell the debt
security, or (2) it is more likely than not that the institution
will be required to sell the security before recovery of its
amortized cost basis.
Although the measurement of credit loss allowances is changing
under CECL, the FASB's new accounting standard does not address when
a financial asset should be placed in nonaccrual status. Therefore,
institutions should continue to apply the agencies' nonaccrual
policies that are currently in place. In addition, the FASB retained
the existing write-off guidance in U.S. GAAP, which requires an
institution to write off a financial asset in the period the asset
is deemed uncollectible.
[FR Doc. 2018-26818 Filed 12-11-18; 8:45 am]
BILLING CODE 6210-01-P