Proposed Agency Information Collection Activities; Comment

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION

Proposed Agency Information Collection Activities; Comment

AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;

Board of Governors of the Federal Reserve System (Board); and Federal

Deposit Insurance Corporation (FDIC).

ACTION: Notice and request for comment.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction

Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the FDIC

(the ``agencies'') may not conduct or sponsor, and the respondent is

not required to respond to, an information collection that has been

extended, revised, or implemented on or after October 1, 1995, unless

it displays a currently valid Office of Management and Budget (OMB)

control number. The Federal Financial Institutions Examination Council

(FFIEC), of which the agencies are members, has recently approved the

agencies' publication for public comment of proposed revisions to the

Consolidated Reports of Condition and Income (Call Report), which are

currently approved collections of information. At the end of the

comment period, the comments and recommendations received will be

analyzed to determine the extent to which the FFIEC should modify the

proposed revisions prior to giving its final approval. The agencies

will then submit the revisions to OMB for review and approval. Comments

are invited on: (a) Whether the proposed revisions to the following

collections of information are necessary for the proper performance of

the agencies' functions, including whether the information has

practical utility; (b) the accuracy of the agencies' estimate of the

burden of the information collections as they are proposed to be

revised, including the validity of the methodology and assumptions

used; (c) ways to enhance the quality, utility, and clarity of the

information to be collected; and (d)

[[Page 48688]]

ways to minimize the burden of information collection on respondents,

including through the use of automated collection techniques or other

forms of information technology.

DATES: Comments must be submitted on or before November 15, 1996.

ADDRESSES: Interested parties are invited to submit written comments to

any or all of the agencies. All comments, which should refer to the OMB

control number(s), will be shared among the agencies.

OCC: Written comments should be submitted to the Communications

Division, Ninth Floor, Office of the Comptroller of the Currency, 250 E

Street, S.W., Washington, D.C. 20219; Attention: Paperwork Docket No.

1557-0081 [FAX number (202) 874-5274; Internet address:

[email protected]]. Comments will be available for inspection

and photocopying at that address.

Board: Written comments should be addressed to Mr. William W.

Wiles, Secretary, Board of Governors of the Federal Reserve System,

20th and C Streets, N.W., Washington, D.C. 20551, or delivered to the

Board's mail room between 8:45 a.m. and 5:15 p.m., and to the security

control room outside of those hours. Both the mail room and the

security control room are accessible from the courtyard entrance on

20th Street between Constitution Avenue and C Street, N.W. Comments

received may be inspected in room M-P-500 between 9:00 a.m. and 5:00

p.m., except as provided in section 261.8 of the Board's Rules

Regarding Availability of Information, 12 CFR 261.8(a).

FDIC: Written comments should be addressed to the Office of the

Executive Secretary, Federal Deposit Insurance Corporation, 550 17th

Street, N.W., Washington, D.C. 20429. Comments may be hand-delivered to

Room F-402, 1776 F Street, N.W., Washington, D.C. 20429, on business

days between 8:30 a.m. and 5:00 p.m. Comments may be sent through

facsimile to: (202) 898-3838 or by the Internet to: [email protected].

Comments will be available for inspection at the FDIC Public

Information Center, room 100, 801 17th Street, N.W., Washington, D.C.,

between 9:00 a.m. and 4:30 p.m. on business days.

A copy of the comments may also be submitted to the OMB desk

officer for the agencies: Alexander Hunt, Office of Information and

Regulatory Affairs, Office of Management and Budget, New Executive

Office Building, room 3208, Washington, D.C. 20503.

FOR FURTHER INFORMATION CONTACT: A copy of the proposed revisions to

the collections of information may be requested from any of the agency

clearance officers whose names appear below.

OCC: Jessie Gates, OCC Clearance Officer, (202) 874-5090, Office of

the Comptroller of the Currency, 250 E Street, S.W., Washington, D.C.

20219.

Board: Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829,

Division of Research and Statistics, Board of Governors of the Federal

Reserve System, 20th and C Streets, N.W., Washington, D.C. 20551. For

the hearing impaired only, Telecommunications Device for the Deaf

(TDD), Dorothea Thompson, (202) 452-3544, Board of Governors of the

Federal Reserve System, 20th and C Streets, N.W., Washington, D.C.

20551.

FDIC: Steven F. Hanft, FDIC Clearance Officer, (202) 898-3907,

Office of the Executive Secretary, Federal Deposit Insurance

Corporation, 550 17th Street N.W., Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

Proposal To Revise the Following Currently Approved Collections of

Information

Title: Consolidated Reports of Condition and Income

Form Number: FFIEC 031, 032, 033, 034.\1\

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\1\ The FFIEC 031 report form is filed by banks with domestic

and foreign offices. The FFIEC 032 report form is filed by banks

with domestic offices only and total assets of $300 million or more.

The FFIEC 033 report form is filed by banks with domestic offices

only and total assets of $100 million or more but less than $300

million. The FFIEC 034 report form is filed by banks with domestic

offices only and total assets of less than $100 million.

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For OCC:

OMB Number: 1557-0081.

Frequency of Response: Quarterly.

Affected Public: National Banks.

Estimated Number of Respondents: 2,800 national banks.

Estimated Time per Response: 39.62 burden hours.

Estimated Total Annual Burden: 443,744 burden hours.

For Board:

OMB Number: 7100-0036.

Frequency of Response: Quarterly.

Affected Public: State Member Banks.

Estimated Number of Respondents: 1,002 state member banks.

Estimated Time per Response: 45.70 burden hours.

Estimated Total Annual Burden: 183,166 burden hours.

For FDIC:

OMB Number: 3064-0052.

Frequency of Response: Quarterly.

Affected Public: Insured State Nonmember Commercial and Savings

Banks.

Estimated Number of Respondents: 6,668 insured state nonmember

commercial and savings banks.

Estimated Time per Response: 28.72 burden hours.

Estimated Total Annual Burden: 765,900 burden hours.

The estimated time per response varies by agency because of

differences in the composition of the banks under each agency's

supervision (e.g., size distribution of banks, types of activities in

which they are engaged, and number of banks with foreign offices).

General Description of Report: This information collection is

mandatory: 12 U.S.C. 161 (for national banks), 12 U.S.C. 324 (for state

member banks), and 12 U.S.C. 1817 (for insured state nonmember

commercial and savings banks). Except for select sensitive items, this

information collection is not given confidential treatment. Small

businesses (i.e., small banks) are affected.

Abstract: Consolidated Reports of Condition and Income are filed

quarterly with the agencies for their use in monitoring the condition

and performance of reporting banks and the industry as a whole. The

reports are also used to calculate banks' deposit insurance assessments

and for monetary policy and other public policy purposes.

Current Actions: A number of existing items would be consolidated

or deleted. The Call Report instructions would be revised by

eliminating instructions that differ from generally accepted accounting

principles (GAAP) and a small number of new items would be added to

meet supervisory data needs resulting from this move to GAAP. Other new

items would be added to the Call Report that are necessary to enhance

the agencies' ability to monitor interest rate risk, to identify bank

usage of credit derivatives, and to support the FDIC's calculation of

deposit insurance assessments.

Type of Review: Revision.

The proposed revisions to the Consolidated Reports of Condition and

Income (Call Report) that are the subject of this notice have been

approved for publication by the FFIEC. Implementation of these

revisions would take place as of the March 31, 1997, report date. The

proposed changes to the Call Report affect several existing schedules.

Unless otherwise indicated, the Call Report changes apply to all four

sets of report forms (FFIEC 031, 032, 033, and 034). Nonetheless, as is

customary for Call Report changes, banks are advised that, for the

March 31,

[[Page 48689]]

1997, report date, reasonable estimates may be provided for any new or

revised item for which the requested information is not readily

available. The specific wording of the captions for the new or revised

Call Report items discussed below should be regarded as preliminary.

The proposed revisions are summarized as follows:

Deletions and Reductions in Detail

Based on their review of the current content of the Call Report,

the agencies are proposing that several deletions and reductions in

detail be made to the Call Report, generally because the existing items

or current levels of detail are no longer considered sufficiently

useful to warrant their continued collection. These and certain related

modifications to the Call Report would affect the following schedules:

(1) Schedule RC--Balance Sheet:

(a) Items 3.a and 3.b, ``Federal funds sold'' and ``Securities

purchased under agreements to resell,'' would be combined into a single

item (item 3). In addition, on the FFIEC 031 report form, this single

Schedule RC item would begin to be reported on a fully consolidated

basis, rather than including only the domestic offices of the bank, the

domestic offices of the bank's Edge and Agreement subsidiaries, and

IBFs, and corresponding changes would be made to Schedule RC-K--

Quarterly Averages, item 5, and Schedule RI--Income Statement, item

1.f.

(b) Items 14.a and 14.b, ``Federal funds purchased'' and

``Securities sold under agreements to repurchase,'' would be combined

into a single item (item 14). In addition, on the FFIEC 031 report

form, this single Schedule RC item would begin to be reported on a

fully consolidated basis, rather than including only the domestic

offices of the bank, the domestic offices of the bank's Edge and

Agreement subsidiaries, and IBFs, and corresponding changes would be

made to Schedule RC-K--Quarterly Averages, item 13, and Schedule RI--

Income Statement, item 2.b.

(c) Item 17, ``Mortgage indebtedness and obligations under

capitalized leases,'' would be combined with existing item 16, ``Other

borrowed money.'' In addition, on the FFIEC 031, 032, and 033 report

forms, a corresponding change in definition would be made to Schedule

RC-K--Quarterly Averages, item 14, ``Other borrowed money.''

(d) Item 22, ``Limited-life preferred stock and related surplus,''

would be combined with existing item 19, ``Subordinated notes and

debentures.''

(2) Schedule RC-B--Securities:

(a) Items 6.a and 6.b, ``Investments in mutual funds'' and ``Other

equity securities with readily determinable fair values,'' would be

combined into a single item (item 6.a). In addition, on the FFIEC 031

report forms, the corresponding items (items 16.a and 16.b) would be

combined into a single item (item 16.a) on Schedule RC-H--Selected

Balance Sheet Items for Domestic Offices.

(b) Memorandum item 4, ``Held-to-maturity debt securities

restructured and in compliance with modified terms,'' would be deleted.

(3) Schedule RC-C, Part I--Loans and Leases: Memorandum item 1,

``Commercial paper included in Schedule RC-C, part I, above,''

(completed only by banks filing the FFIEC 031, 032, and 033 report

forms) would be deleted. In addition, the instructions would be revised

to indicate that commercial paper should no longer be reported as a

loan in Schedule RC-C, but should be reported as a security in Call

Report Schedule RC-B, normally in item 5, ``Other debt securities.''

(4) Schedule RC-E--Deposit Liabilities: Memorandum item 2.d,

``Open-account time deposits of $100,000 or more'' (in domestic

offices), would be combined with existing Memorandum item 2.c, ``Time

certificates of deposit of $100,000 or more'' (in domestic offices).

Memorandum item 2.c would be recaptioned ``Total time deposits of

$100,000 or more.'' As a result of this change, the coverage of the

existing items for interest expense on and the quarterly averages for

``Time certificates of deposit of $100,000 or more'' and ``All other

time deposits'' in Schedules RI 2 and RC-K,3 respectively,

would be revised by moving open-account time deposits of $100,000 or

more from the latter item to the former item in each of these

schedules. The caption for the latter item in each schedule would refer

to ``Time deposits of less than $100,000'' and the caption for the

former item would refer to ``Time deposits of $100,000 or more.''

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\2\ Items 2.a.(1)(b)(3) and 2.a.(1)(b)(4) on the FFIEC 031

report forms; items 2.a.(2)(c) and 2.a.(2)(d) on the FFIEC 032, 033,

and 034 report forms.

\3\ Items 11.c and 11.d on the FFIEC 031, 032, and 033 report

forms; items 9.c and 9.d on the FFIEC 034 report forms.

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(5) Schedule RC-L--Off-Balance Sheet Items:

(a) Item 1.d, ``Securities underwriting,'' would be combined with

existing item 1.e, ``Other unused commitments.''

(b) Items 10.a and 10.b, ``Gross commitments to purchase'' and

``Gross commitments to sell'' when-issued securities, would be

eliminated as separate items and would begin to be reported as off-

balance sheet derivative contracts in items 14 through 17. The notional

amount of these commitments would be included in item 14.b, ``Forward

contracts,'' generally in column A, ``Interest rate contracts,'' and in

items 15 and 16 based on their purpose. On the FFIEC 031, 032, and 033

report forms, the fair values of these commitments would be reported in

item 17. The Glossary entry for ``when-issued securities transactions''

would be revised accordingly.

(6) Schedule RC-M--Memoranda:

(a) Item 8.c, ``Total assets of unconsolidated subsidiaries and

associated companies,'' would be deleted.

(b) Memorandum item 1.b, ``Nonreciprocal holdings of banking

organizations' capital instruments,'' which is collected in the

December report only, would be deleted.

(7) Schedule RC-R--Regulatory Capital:

(a) The separate maturity distributions for ``Subordinated debt and

intermediate term preferred stock'' in items 2.a through 2.f, column A,

and ``Other Limited-Life Capital Instruments'' in items 2.a through

2.f, column B, would be replaced by two single separate items (new

items 2.a and 2.b) for the qualifying portion of each of these two

types of capital components that is includible in Tier 2 capital.

(b) Item 4.a.(1), ``Securities issued by, other claims on, and

claims unconditionally guaranteed by, the U.S. Government and its

agencies and other OECD central governments,'' and item 4.a.(2), ``All

other'' assets assigned to the zero percent risk category,'' would be

combined into a single revised item 4.a for all zero percent risk

weight assets recorded on the balance sheet.

(c) Item 5.a.(1), ``Claims conditionally guaranteed by the U.S.

Government and its agencies and other OECD central governments,'' item

5.a.(2), ``Claims collateralized by securities issued by the U.S.

Government and its agencies and other OECD central governments; by

securities issued by U.S. Government-sponsored agencies; and by cash on

deposit,'' and item 5.a.(3), ``All other'' assets assigned to the 20

percent risk category,'' would be combined into a single revised item

5.a for all 20 percent risk weight assets recorded on the balance

sheet.

(8) Schedule RI--Income Statement:

[[Page 48690]]

(a) Consistent with the proposed revision to Schedule RC noted

above, item 2.d, ``Interest on mortgage indebtedness and obligations

under capitalized leases,'' would be combined with existing item 2.c,

``Interest on demand notes issued to the U.S., trading liabilities, and

other borrowed money.''

(b) On the FFIEC 031, 032, and 033 report forms, item 5.d, ``Other

foreign transaction gains (losses),'' would be combined with existing

item 5.f.(2), ``All other noninterest income.'' If the amount of

``Other foreign transaction gains (losses)'' is among the three largest

amounts exceeding ten percent of the amount reported in item 5.f.(2),

it would be itemized and described in Schedule RI-E, item 1.

(c) Items 11.a and 11.b, ``Extraordinary items and other

adjustments, gross of income taxes,'' and ``Applicable income taxes (on

item 11.a),'' would be deleted. Only the amount of ``Extraordinary

items and other adjustments, net of income taxes'' (item 11.c), would

continue to be reported in Schedule RI. All extraordinary items and

their related tax effects would continue to be separately itemized and

described in Schedule RI-E, item 3.

(9) Schedule RI-C--Applicable Income Taxes by Taxing Authority:

This schedule, which is completed only for the December report, would

be eliminated, except for the item for the ``deferred portion'' of

total applicable income taxes (item 5 on the FFIEC 031, 032, and 033

report forms; item 4 on the FFIEC 034 report form). The ``deferred

portion'' item would be moved to the Memorandum section of the income

statement (Schedule RI) and would continue to be collected with the

December report only.

(10) Savings Bank Supplemental Schedule RC-J--Repricing

Opportunities for Selected Balance Sheet Categories: This supplemental

schedule, which is completed only by FDIC-supervised savings banks,

would be eliminated. Savings banks would begin to complete certain

Memorandum items providing maturity and repricing data in Schedules RC-

B--Securities, RC-C, part I--Loans and Leases, and RC-E--Deposit

Liabilities that have previously been applicable only to insured

commercial banks. (Proposed revisions to the maturity and repricing

data items in these three schedules are discussed below.)

Elimination of Instructions That Differ From GAAP and Related New Items

In November 1995, the FFIEC announced that it had approved the

adoption of GAAP as the reporting basis for the balance sheet, income

statement, and related schedules in the Call Report, effective with the

March 1997 report date. Adopting GAAP as the reporting basis in the

basic schedules of the Call Report will eliminate existing differences

between bank regulatory reporting standards and GAAP, thereby producing

greater consistency in the information collected in regulatory reports

and general purpose financial statements and reducing reporting burden.

Although Call Report instructions that depart from GAAP will be

eliminated, the instructions will continue to contain and the FFIEC and

the agencies will continue when necessary to issue specific reporting

guidance that falls within the range of acceptable practice under GAAP.

Each agency also will retain existing authority to require an

institution to report a transaction in the Call Report in accordance

with that agency's interpretation of GAAP. Furthermore, bank regulatory

capital ratios will continue to be calculated in accordance with the

agencies' capital standards (for national banks, 12 CFR 3; for state

member banks, 12 CFR 208, Appendices A and B; for insured state

nonmember commercial and savings banks, 12 CFR 325).

In connection with this move to GAAP, the section of the Call

Report's General Instructions on ``Applicability of Generally Accepted

Accounting Principles to Regulatory Reporting Requirements'' would be

revised. The revised section would remind banks that the Call Report is

prepared on a separate entity basis. In addition, changes would be made

to the following Call Report instructions to bring them into conformity

with GAAP:

(1) The treatment of assets sold with recourse in the Glossary

entry for ``Sales of Assets'' and the section of the Glossary entry for

``Participations in Pools of Residential Mortgages'' on ``Privately-

issued certificates of participation in pools of residential

mortgages.''

(2) The treatment of excess servicing fees (as that term is used in

the accounting standards that are currently in effect) in the Glossary

entry for ``Sales of Assets'' and in the instruction to Schedule RC-F,

item 3, ``Excess residential mortgage servicing fees receivable.'' (The

accounting for excess servicing fees under GAAP will change on January

1, 1997, when Financial Accounting Standards Board (FASB) Statement No.

125, ``Accounting for Transfers and Servicing of Financial Assets and

Extinguishments of Liabilities,'' takes effect.)

(3) The treatment of futures, forward, and option contracts in the

Glossary entry for ``Futures, Forward, and Standby Contracts.''

(4) The general prohibition on the netting of assets and

liabilities in the Call Report set forth in the Glossary entry for

``Offsetting'' and in the General Instructions.

(5) The initial valuation of foreclosed assets in the Glossary

entries for ``Foreclosed Assets'' and ``Troubled Debt Restructurings''

and in the instructions to Schedule RC-M, item 8.a.(2), ``All other

real estate owned.''

(6) The maximum amortization period for intangible assets set forth

in the section of the Glossary entry for ``Business Combinations'' on

``Purchase acquisition'' and in the instructions to Schedule RC-M, item

6, ``Intangible assets.'' Consistent with the views expressed by the

Securities and Exchange Commission in Staff Accounting Bulletins, the

revised instructions would indicate that amortization periods in excess

of 25 years generally would not be appropriate for Call Report

purposes.

(7) The prohibition on the consolidation of domestic depository

institution subsidiaries of the reporting bank contained in the section

of the General Instructions on ``Scope of the 'Consolidated Bank

Required to be Reported in the Submitted Reports.''

(8) The treatment of third party credit card solicitation costs in

the Glossary entry for ``Loan Fees.''

(9) The maximum interest rate for capitalizing interest on

internally financed projects set forth in the Glossary entry for

``Capitalization of Interest Costs.''

(10) The treatment of repurchase agreements to maturity and long-

term repurchase agreements in the Glossary entry for ``Repurchase/

Resale Agreements.''

(11) The treatment of loan fees charged in connection with

international loans in the Glossary entry for ``Loan Fees.''

(12) The treatment of reciprocal balances in the Glossary entry for

``Reciprocal Balances,'' in the instructions to Schedule RC-A, item 2,

``Balances due from depository institutions in the U.S.,'' for the

FFIEC 031, 032, and 033 report forms, and in the instructions to

Schedule RC, item 1.a, ``Noninterest-bearing balances and currency and

coin,'' for the FFIEC 034 report forms.

(13) The treatment of securities transactions with settlement

periods exceeding regular way settlement time limits that have been

reported as forward contracts according to the

[[Page 48691]]

instructions to Schedule RC-L, item 14, ``Gross amounts (e.g., notional

amounts) of off-balance sheet derivatives.''

Banks that have engaged in any of the preceding types of

transactions or activities prior to January 1, 1997, and have reported

them in the Call Report in accordance with the existing instructions

that differ from GAAP would be permitted to report them in accordance

with GAAP beginning in 1997. The effect of this retroactive application

of GAAP on the amount of a bank's undivided profits as of January 1,

1997, net of applicable income taxes, (i.e., the amount of the ``catch-

up'' adjustment) would be reported as a direct adjustment to equity

capital in Schedule RI-A, item 9, and itemized and described in

Schedule RI-E, item 5.

For some of the preceding types of transactions or activities which

will be affected by the elimination of Call Report instructions that

differ from GAAP, the potential impact of these transactions and

activities on the safety and soundness of banks is of concern to the

agencies. In other cases, the instructional changes may affect the

reported amount of a bank's deposits and, thereby, its assessment base

for deposit insurance purposes. In order to identify the extent of bank

involvement in these areas or the effect on reported deposits, the

FFIEC is proposing to add certain new items to the Call Report and to

modify a number of existing Call Report items, as follows:

(1) In Schedule RC-F--Other Assets, the caption to item 3, ``Excess

residential mortgage servicing fees receivable,'' would be revised in

response to FASB Statement No. 125 to refer to interest-only strips

receivable. This item would be renumbered as item 3.a and continue to

apply only to first lien 1-to-4 family residential mortgages. A new

item 3.b would be added for interest-only strips receivable on other

financial assets. Consistent with Statement No. 125, these strips

receivable would be measured at fair value like available-for-sale

securities.

(2) In Schedule RC-L--Off-Balance Sheet Items, items 9.a through

9.c on residential mortgage loans and agricultural mortgage loans

transferred with recourse in transactions that have been treated as

sales for Call Report purposes would be replaced. Banks would begin to

report the outstanding principal balance and the amount of retained

recourse exposure on (a) first lien 1-to-4 family residential mortgages

and on (b) other financial assets (excluding small business

obligations) that have been transferred with recourse in transactions

reported as sales. Existing item 9.d on small business obligations

transferred with recourse would be retained.

(3) New items would be added to Schedule RC-M--Memoranda (or

another schedule if more appropriate) for:

(a) ``Net unamortized realized deferred gains (losses) on off-

balance sheet derivative contracts included in assets and liabilities

reported in Schedule RC.'' Although available-for-sale securities are

reported on the balance sheet at fair value, this item would include

any deferred gains (losses) that are part of the amortized cost basis

of such securities.

(b) ``Amount of assets netted against nondeposit liabilities (and

deposits in foreign offices other than insured branches) on the balance

sheet (Schedule RC) in accordance with generally accepted accounting

principles.'' This item would include securities purchased under

agreements to resell that have been netted against securities sold

under agreements to repurchase under FASB Interpretation No. 41, back-

to-back loans involving deposits in foreign offices, receivables and

payables arising from unsettled trades, in-substance defeasance

transactions grandfathered under FASB Statement No. 125, and any other

assets netted against nondeposit liabilities (and deposits in foreign

offices other than insured branches) under FASB Interpretation No. 39.

However, the item would exclude netted on-balance sheet amounts

associated with off-balance sheet derivative contracts, deferred tax

assets netted against deferred tax liabilities, and assets netted in

accounting for pensions.

(4) New items would be added to Schedule RC-O--Other Data for

Deposit Insurance Assessments for:

(a) ``Amount of assets netted against deposit liabilities in

domestic offices (and in insured branches in Puerto Rico and U.S.

territories and possessions) on the balance sheet (Schedule RC) in

accordance with generally accepted accounting principles.'' Amounts

would be reported separately for assets netted against demand deposits

and assets netted against time and savings deposits. These items would

exclude data on net reciprocal demand balances and related adjustments

reported in Schedule RC-O, item 11.

(b) A ``yes''/''no'' question asking whether the reporting bank has

any domestic depository institution subsidiaries that have been

consolidated in the Reports of Condition and Income. Any bank answering

``yes'' to this question would be required to report the legal title

and FDIC Certificate Number of each such consolidated subsidiary.

As indicated above, the existing Call Report instructions on

reciprocal balances will be revised to conform with GAAP. At present,

the instructions require banks to report reciprocal demand balances

with commercial banks in the U.S. on a net basis on the balance sheet

(Schedule RC) and in the deposit schedule (Schedule RC-E). All other

reciprocal deposit relationships are to be reported gross. Because this

netting instruction differs from the reciprocal deposit netting

provisions in Section 7(a)(4) of the Federal Deposit Insurance Act, the

insurance assessments schedule contains three netting-related items

used to adjust reported deposits so they conform with the statute

(Schedule RC-O, items 11.a through 11.c). The Call Report instructions

on reciprocal balances, once they are revised in accordance with GAAP,

will still differ from Section 7(a)(4), but in a different manner than

at present. Thus, items 11.a through 11.c of Schedule RC-O must be

modified to ensure that bank assessment bases continue to be properly

measured. As revised, items 11.a through 11.c would be as follows:

(a) ``Amount by which demand deposits would be reduced if the

reporting bank's reciprocal demand balances with the domestic offices

of U.S. banks and savings associations (and insured branches in Puerto

Rico and U.S. territories and possessions) that were reported on a

gross basis in Schedule RC-E had been reported on a net basis.''

(b) ``Amount by which demand deposits would be increased if the

reporting bank's reciprocal demand balances with foreign banks and

foreign offices off U.S. banks (other than insured branches in Puerto

Rico and U.S. territories and possessions) that were reported on a net

basis in Schedule RC-E had been reported on a gross basis.''

(c) ``Amount by which demand deposits would be reduced if cash

items in process of collection were included in the calculation of the

reporting bank's net reciprocal demand balances with the domestic

offices of U.S. banks and savings associations (and insured branches in

Puerto Rico and U.S. territories and possessions) in Schedule RC-E.''

In addition, the coverage of these items would be expanded to

include adjustments to demand deposits in insured branches in Puerto

Rico and U.S. territories and possessions, rather than demand deposits

in domestic offices only.

Although the treatment of assets sold with recourse will be brought

into

[[Page 48692]]

conformity with GAAP for purposes of the Call Report balance sheet and

income statement, the agencies' risk-based capital standards refer to

the existing Call Report instructions as the source for the definition

of asset sales with recourse. The relevant Call Report instructions are

the Glossary entry for ``Sales of Assets'' with its general rule for

determining whether an asset transfer must be reported as a sale or as

a financing transaction. Thus, the Call Report instructions' ``Sales of

Assets'' general rule would remain applicable for purposes of

identifying those asset sales with recourse that are not already

included on the balance sheet whose credit equivalent amounts must be

reported by risk weight category in Call Report Schedule RC-R--

Regulatory Capital.

In particular, as a result of the aforementioned change, banks may

be able to reflect as an asset previously nonrecognized (for Call

Report purposes) excess servicing fees receivable (as the term is used

in the accounting standards that are currently in effect) that act as

credit enhancements for assets (typically credit card receivables) that

have been transferred and securitized. Generally, these fees are used

to fund so-called ``spread accounts.'' 4 Under the existing

``Sales of Assets'' general rule, because the excess servicing fees

were not booked as an asset on the Call Report balance sheet, the asset

transfers were considered to be ``without recourse'' (assuming there

were no other features of the asset transfer that constituted a

retention of risk of loss or obligation for payment) and qualified for

sale treatment.5

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\4\ As noted earlier, the accounting for excess servicing fees

under GAAP will change on January 1, 1997, when FASB Statement No.

125 takes effect. Under this new accounting standard, amounts that

would be deemed excess servicing fees receivable under current

accounting standards would be reported instead as either servicing

assets or interest-only strips receivable, depending upon the

circumstances. The discussion in this paragraph would also be

applicable to these types of assets if they act as credit

enhancements.

\5\ See the FFIEC's November 21, 1986, release on the bank Call

Report treatment of a retained residual interest in an escrow

account established to absorb losses on loans transferred without

recourse.

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In conjunction with the move to GAAP, asset transfers that qualify

for sale treatment under GAAP, but which use excess servicing fees

receivable as credit enhancements, would have to be reported as an off-

balance sheet sale with recourse on Schedule RC-L because the bank has

retained risk of loss. For this same reason, the bank will have to hold

risk-based capital against the full amount of assets transferred with

recourse. However, such transfers may qualify for low-level recourse

capital treatment which would limit the amount of capital required to

the amount of excess servicing fees receivable net of any noncapital

GAAP recourse liability account associated with the asset transfer. The

Call Report instructions would be clarified to address these matters.

The agencies also note that an interagency recourse working group is

reviewing the risk-based capital treatment of all asset transfers,

including transfers that use excess servicing fees as credit

enhancements, to determine whether any changes should be proposed in

the capital treatment for these transactions.

The agencies' adoption of GAAP as the reporting basis for the

balance sheet, income statement, and related schedules in the Call

Report in the first quarter of 1997 coincides with the first reporting

period in which FASB Statement No. 125 will be in effect both for

financial statements prepared in accordance with GAAP and the Call

Report. Comment is requested on whether there are Call Report changes

other than those described above that the FFIEC and the agencies should

consider making in response to FASB Statement No. 125.

Call Report Changes To Improve the Monitoring of Interest Rate Risk

Exposures

On June 26, 1996, the agencies published a Joint Agency Policy

Statement on Interest Rate Risk (61 FR 33166). The agencies stated that

the risk assessment approach that they use to evaluate a bank's capital

adequacy for interest rate risk relies on a combination of quantitative

and qualitative factors. The agencies will use various quantitative

screens and filters as tools to identify banks that may have high

exposures or complex risk profiles, to allocate resources, and to set

examination priorities. These tools rely on Call Report data and

various economic indicators and data.

The agencies have determined that the existing Call Report data

that has been collected for interest rate risk analysis needs is not

adequate for the quantitative screens and filters that they will use.

The agencies are therefore proposing a set of revisions to the Call

Report data collected for interest rate risk monitoring purposes that

will improve their ability to screen for significant levels of interest

rate risk. In summary, the agencies propose to:

combine maturity and repricing data where possible,

break out residential mortgage assets from other types of

assets,

break out mortgage derivative securities from other

securities and have them reported based on their expected life,

add two time bands for maturity/repricing data for loans

and securities,

add one time band for time deposits of less than $100,000

and conform time deposits of $100,000 or more to these time bands,

add one time band for other borrowed money, and

add items for longer term commercial and commercial real

estate loans, off-balance sheet derivatives exposed to rising interest

rates, the fair value of mortgage servicing assets, residential

mortgage loans serviced by others, and loans other than residential

mortgages serviced for others.

Because of the combining of maturity and repricing data, some

revisions also need to be made to certain short-term asset and

liability items collected for liquidity analysis purposes.

The specific proposed changes are as follows:

(1) Schedule RC--Balance Sheet: Item 16.b, ``Other borrowed money

with a remaining maturity of more than one year,'' would be split into

two separate items for borrowings with remaining maturities of more

than one year through three years (new item 16.b) and more than three

years (new item 16.c).

(2) Schedule RC-B--Securities:

(a) Memorandum item 2, ``Maturity and repricing data for debt

securities,'' would be revised and would begin to be completed by FDIC-

supervised savings banks.

(i) Revised Memorandum items 2.a and 2.b would cover maturity and

repricing data for ``Non-mortgage debt securities'' and ``Mortgage

pass-through securities,'' with fixed rate and floating rate

instruments reported on a combined basis. Fixed rate instruments would

continue to be reported based on their remaining contractual maturity.

Floating rate instruments would continue to be reported based on their

repricing frequency. The existing ``Over one year through five years''

time band would be split into two separate bands: ``Over one year

through three years'' and ``Over three years through five years.'' The

existing ``Over five years'' time band would also be split into two

separate bands: ``Over five years through fifteen years'' and ``Over

fifteen years.''

(ii) Memorandum item 2.c would cover mortgage-backed securities

other than pass-through securities, e.g., CMOs, REMICs, and stripped

mortgage-backed securities. A two-way breakdown of these instruments by

expected average life would be reported: those with an expected average

life of

[[Page 48693]]

``Three years or less'' and those with an expected average life of

``Over three years.''

(b) Because fixed rate debt securities would no longer be reported

separately by remaining maturity, Memorandum item 6, ``Floating rate

debt securities with a remaining life of one year or less,'' would be

expanded to cover all debt securities, and would begin to be completed

by FDIC-supervised savings banks.

(3) Schedule RC-C, Part I--Loans and Leases:

(a) The Memorandum item for ``Maturity and repricing data for loans

and leases'' (Memorandum item 3 on the FFIEC 031, 032, and 033 report

forms; Memorandum item 2 on the FFIEC 034 report forms) would be

revised and would begin to be completed by FDIC-supervised savings

banks. Revised subitems a. and b. would cover maturity and repricing

data for ``Loans secured by real estate'' and ``Other loans and

leases,'' with fixed rate and floating rate instruments reported on a

combined basis. Fixed rate instruments would continue to be reported

based on their remaining contractual maturity. Floating rate

instruments would continue to be reported based on their repricing

frequency. The same changes in time bands would be made as were

described above under Schedule RC-B.

(b) Because fixed rate loans and leases would no longer be reported

separately by remaining maturity, the Memorandum item for ``Floating

rate loans with a remaining maturity of one year or less'' (Memorandum

item 3.d on the FFIEC 031, 032, and 033 report forms; Memorandum item

2.d on the FFIEC 034 report forms) would be expanded to cover all loans

and leases, and would begin to be completed by FDIC-supervised savings

banks.

(c) New Memorandum items would be added for ``Commercial and

industrial loans with a remaining maturity or repricing frequency of

over three years'' and ``Loans secured by nonfarm nonresidential real

estate with a remaining maturity or repricing frequency of over five

years'' (Memorandum items 3.e and 3.f on the FFIEC 031, 032, and 033

report forms; Memorandum items 2.e and 2.f on the FFIEC 034 report

forms).

(4) Schedule RC-E--Deposit Liabilities: Memorandum items 5 and 6,

``Maturity and repricing data for time deposits of less than $100,000''

and ``Maturity and repricing data for time deposits of $100,000 or

more,'' would be revised and would begin to be completed by FDIC-

supervised savings banks:

(a) Memorandum item 5.a for fixed rate deposits of less than

$100,000 and Memorandum item 5.b for floating rate deposits of less

than $100,000 would be reported on a combined basis in revised

Memorandum item 5.a. Memorandum items 6.a and 6.b covering time

deposits of $100,000 or more would be combined in the same manner in

revised Memorandum item 6.a. Fixed rate instruments would continue to

be reported based on their remaining contractual maturity. Floating

rate instruments would continue to be reported based on their repricing

frequency.

(b) For time deposits of less than $100,000 (reported in revised

Memorandum item 5.a), the existing ``Over one year'' time band would be

split into two separate time bands: ``Over one year through three

years'' and ``Over three years.'' For time deposits of $100,000 or more

(reported in revised Memorandum item 6.a), the existing ``Over one year

through five years'' and ``Over five years'' time bands would be

changed to ``Over one year through three years'' and ``Over three

years.''

(c) Because fixed rate time deposits would no longer be reported

separately by remaining maturity, Memorandum items 5.c and 6.c,

``Floating rate time deposits of less than $100,000 with a remaining

life of one year or less'' and ``Floating rate time deposits of

$100,000 or more with a remaining life of one year or less,'' would

each be expanded to cover all time deposits of that respective size.

(5) Schedule RC-L--Off-Balance Sheet Items: New items would be

added for the total gross notional amount of certain interest rate

contracts held for purposes other than trading. There would be separate

items for ``Interest rate swaps where the bank has undertaken a

floating rate obligation,'' ``Long positions in interest rate futures

and forward contracts,'' and ``Short positions in interest rate

options.''

(6) Schedule RC-M--Memoranda: New items would be added for the

``Fair value of mortgage servicing rights,'' the carrying value of

which is currently reported in item 6.a of this schedule, the

``Outstanding principal balance of 1-to-4 family residential mortgage

loans held in portfolio that are serviced by others,'' and the

``Outstanding principal balance of loans other than 1-to-4 family

residential mortgage loans that are serviced for others.''

Reporting of Adjusted Attributable Deposit Amounts by Oakar

Institutions

On July 3, 1996, the FDIC proposed to amend certain provisions of

its assessment regulations that pertain to so-called Oakar

institutions, i.e., institutions that belong to one insurance fund

(primary fund), but hold deposits that are treated as insured by the

other insurance fund (secondary fund) (61 FR 34751). The FDIC currently

requires all institutions that assume secondary-fund deposits in an

Oakar transaction to complete and submit an FDIC-supplied Oakar

transaction worksheet for the transaction. Such institutions report the

total deposits acquired and the value of the Adjusted Attributable

Deposit Amount (AADA) thereby generated. In addition, Oakar

institutions must complete a growth adjustment worksheet to recalculate

their AADA as of December 31 of each year and must report the value of

their AADA on a quarterly basis in their Call Reports.

As part of the FDIC's proposal, the FDIC would relieve Oakar

institutions of the burden of calculating their AADA by assuming this

calculation responsibility itself. This would eliminate the annual

growth adjustment worksheet entirely and Oakar institutions would no

longer have to report their AADAs in their Call Reports. The FDIC would

calculate AADAs during the current quarterly insurance premium payment

process. To do so, however, Oakar institutions would have to report

three items on a quarterly basis in their Call Reports. Oakar

institutions already report two of these items as part of their annual

growth adjustment worksheets: total deposits acquired during the

quarter, and secondary-fund deposits acquired during the quarter. Oakar

institutions would therefore have to supply one new item: total

deposits sold during the quarter. These items will be zero in most

quarters for most Oakar institutions. Even in quarters in which some

transactions have occurred, the information requested in these items

should be readily available and easy to report. Thus, Oakar

institutions should see a net reduction in reporting burden from the

proposed reporting changes related to AADAs.

The agencies are therefore proposing to revise Call Report Schedule

RC-O--Other Data for Deposit Insurance Assessments, by deleting

existing item 8, ``Total `Adjusted Attributable Deposits' of all

institutions acquired under Section 5(d)(3) of the Federal Deposit

Insurance Act,'' which must be completed only by banks with Oakar

deposits, and replacing it with three new items for these same banks

only. These items would be ``Total deposits purchased or acquired from

other FDIC-insured institutions during the quarter'' (item 8.a.(1)),

``Amount of purchased or acquired deposits reported in item 8.a.(1)

above attributable to a secondary

[[Page 48694]]

fund'' (item 8.a.(2)), and ``Total deposits sold or transferred during

the quarter'' (item 8.b). These items would exclude transactions

involving deposits in foreign offices.

Comment is requested on whether the elimination of the current Call

Report item in which Oakar banks disclose the amount of their AADAs

would present any difficulties to Call Report users, such as

institutions who are considering potential acquisitions of Oakar

institutions.

Credit Derivatives

Credit derivatives are off-balance sheet arrangements that allow

one party, the beneficiary, to transfer the credit risk of a

``reference asset'' to another party, the guarantor. The market for

this new type of instrument is expected to grow significantly over the

next few years. In order to identify the extent of bank involvement

with these instruments, both on an individual institution basis and for

the industry, the agencies are proposing to add two new items to

Schedule RC-L--Off-Balance Sheet Items. The first item would be for the

notional amount of all credit derivatives on which the reporting bank

is the guarantor. The second would be for the notional amount of all

credit derivatives on which the reporting bank is the beneficiary.

Banks would include the notional amounts of credit default swaps, total

rate of return swaps, and other credit derivative instruments.

In addition, the Call Report instructions would explain that banks

that are guarantors should report the credit equivalent amounts of

these credit derivative contracts in Call Report Schedule RC-R, items 4

through 7, column B, according to the risk category of the reference

asset obligor or any guarantor, whichever is lower. The notional amount

of these contracts would not be reported as interest rate, foreign

exchange, commodity, or equity derivative transactions in Schedule RC-

R, Memorandum item 2. For banks that are beneficiaries, an asset for

which credit protection has been obtained through a credit derivative

should be reported in the Call Report without regard to the existence

of the credit derivative, including its reporting as past due or

nonaccrual in Schedule RC-N, except in Schedule RC-R where an asset

that has been effectively guaranteed may be assigned to the risk

category of the obligor or guarantor, whichever is lower.

Other Instructional Changes

In addition to those previously mentioned, the following changes,

which may affect how some banks report certain information in the Call

Report, would be made to the instructions.

(1) Reporting of assets that are deducted when measuring regulatory

capital--At present, those banks that are required to complete Schedule

RC-R--Regulatory Capital, in its entirety must report as 100 percent

risk-weight assets in item 7, column A, those on-balance sheet assets

that are deducted from their assets and capital as part of their

regulatory capital calculations. These assets include goodwill, core

deposit intangibles, disallowed mortgage servicing rights, disallowed

deferred tax assets, and reciprocal holdings of bank capital

instruments and banks have to identify these amounts in order to report

their risk-weighted assets, Tier 1 capital, and total risk-based

capital which are reported in Schedule RC-R, items 3.e, 3.a, and 3.c.

The agencies believe it is misleading to report these assets as if they

were subject to a 100 percent risk weight and that it would be more

appropriate for these assets to be reported in item 8 of the regulatory

capital schedule along with the asset amounts that are excluded from

the risk-based capital calculation. Furthermore, the agencies' optional

regulatory capital worksheet treats these deducted assets in this

manner. Therefore, the instructions for items 7 and 8 of Schedule RC-R

and the caption for item 8 would be revised accordingly.

(2) Residential mortgage loan commitments--Six categories of unused

commitments are currently reported in the subitems of Schedule RC-L,

item 1. Banks currently report their revolving, open-end lines of

credit secured by 1-to-4 family residential properties (e.g., home

equity lines) in item 1.a. Because there is no separate subitem

specifically designed for the reporting of other commitments secured by

1-to-4 family residential mortgages, these commitments are reportable

in a catch-all category, ``Other unused commitments,'' item 1.e. Due to

questions as to where such other residential mortgage loan commitments

should be reported in Schedule RC-L, the instructions to item 1.e will

be clarified by stating that the item also includes commitments to

extend credit (other than revolving, open-end lines) secured by 1-to-4

family residential properties for which the bank has charged a

commitment fee or other consideration, or otherwise has a legally

binding commitment to extend credit.

(3) Firm commitments to sell residential mortgage loans--The

instructions to Schedule RC-L, item 14.b, column A, ``Interest rate

forwards,'' direct banks to report forward contracts committing the

bank to purchase or sell financial instruments and whose predominant

risk characteristic is interest rate risk. Questions have been raised

about whether firm commitments to sell loans secured by 1-to-4 family

residential properties should be reported as interest rate forwards.

The agencies believe that commitments that have a specific interest

rate, delivery date, and dollar amount should be considered forward

contracts and plan to revise this item instruction accordingly.

(4) Reporting the number of full-time equivalent employees and

their compensation expense--Banks report the number of their full-time

equivalent employees in an income statement memorandum item (Schedule

RI, Memorandum item 4 on the FFIEC 031, 032, and 033; Memorandum item 5

on the FFIEC 034). At some banking organizations, some or all of the

operations of each bank in the organization are conducted by persons

who are ostensibly employees of the parent holding company or a holding

company subsidiary rather than the bank. Because the agencies consider

these persons in substance to be employees of the bank, they must be

included in the determination of the number of full-time equivalent

employees to be reported in the memorandum item. In addition, the

salaries and employee benefits of these persons should be reported as

such in Schedule RI, item 7.a. If the reporting bank does not have to

pay the amount of these persons' compensation to the affiliated entity

which, in form, is their employer, this in substance represents a

capital contribution to the bank which must be reported in Schedule RI-

A--Changes in Equity Capital, item 12 (item 13 on the FFIEC 031),

``Other transactions with parent holding company.'' Due to ongoing

questions from banks, the agencies plan to clarify these instructions

to reflect their longstanding view about the reporting treatment for

these employment arrangements, including removing the phrase ``on the

payroll of the bank'' from the instructions for the memorandum item on

full-time equivalent employees to eliminate ambiguity.

(5) Loans and leases held for sale--Memorandum item 5, ``Loans and

leases held for sale,'' was added to Call Report Schedule RC-C, part

I--Loans and Leases, in 1991. In prior years, banks were given the

option to include loans and leases held for sale either in their loan

and lease portfolio or in their trading assets depending upon how they

[[Page 48695]]

were reported for other financial reporting purposes. When the FFIEC

announced the addition of the specific memorandum item to the loan

schedule for ``Loans and leases held for sale'' in February 1991, the

announcement also indicated that this option was being eliminated. The

instructions for trading assets were revised at that time to indicate

that loans and leases held for sale were to be reported as part of the

loan and lease portfolio. However, the General Instructions to Schedule

RC-C, part I, were not also revised and continue to include a reference

to this now nonexistent option. These General Instructions would now be

corrected.

(6) Assets indirectly representing premises and fixed assets--The

instructions to Schedule RC--Balance Sheet, item 6, ``Premises and

fixed assets,'' direct banks to include loans and advances to

individuals, partnerships, and nonmajority-owned corporations for the

purpose of purchasing or holding land, buildings, or fixtures occupied

or used by the bank in that asset category rather than in loans. The

requirement to reclassify these loans on the balance sheet would be

eliminated.

Request for Comment

Comments submitted in response to this Notice will be shared among

the agencies and will be summarized or included in the agencies'

requests for OMB approval. All comments will become a matter of public

record. Written comments should address the accuracy of the burden

estimates and ways to minimize burden including the use of automated

collection techniques or the use of other forms of information

technology as well as other relevant aspects of the information

collection request.

Dated: September 6, 1996.

Karen Solomon,

Director, Legislative and Regulatory Activities Division, Office of the

Comptroller of the Currency.

Board of Governors of the Federal Reserve System, September 4,

1996.

William W. Wiles,

Secretary of the Board.

Dated at Washington, D.C., this 10th day of September, 1996.

Federal Deposit Insurance Corporation

Jerry L. Langley,

Executive Secretary.

[FR Doc. 96-23623 Filed 9-13-96; 8:45 am]

BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P