6086 Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

Submission for OMB Review; 

Comment Request—Thrift Financial 

Report: Schedules SC, SO, VA, PD, LD, 

CC, CF, DI, SI, FV, FS, HC, CSS, and 

CCR 

AGENCY: Office of Thrift Supervision 

(OTS), Treasury. 

ACTION: Notice and request for comment. 

SUMMARY: In accordance with the 

requirements of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507), 

OTS may not conduct or sponsor, and 

the respondent is not required to 

respond to, an information collection 

unless it displays a currently valid OMB 

control number. On October 1, 2008, 

OTS requested public comment for 60 

days (73 FR 57205) on a proposal to 

extend, with revisions, the Thrift 

Financial Report (TFR), which is 

currently an approved collection of 

information. The notice described 

regulatory reporting revisions proposed 

for the TFR, Schedule SC—Consolidated 

Statement of Condition, Schedule SO— 

Consolidated Statement of Operations, 

Schedule VA—Consolidated Valuation 

Allowances and Related Data, Schedule 

PD—Consolidated Past Due and 

Nonaccrual, Schedule LD—Loan Data, 

Schedule CC—Consolidated 

Commitments and Contingencies, 

Schedule CF—Consolidated Cash Flow 

Information, Schedule DI—Consolidated 

Deposit Information, Schedule SI— 

Supplemental Information, Schedule 

FS—Fiduciary and Related Services, 

Schedule HC—Thrift Holding Company, 

Schedule CSS—Subordinate 

Organization Schedule, and Schedule 

CCR—Consolidated Capital 

Requirement, and on a proposed new 

schedule, Schedule FV—Consolidated 

Assets and Liabilities Measured at Fair 

Value on a Recurring Basis. The changes 

were proposed on a phased-in basis over 

2009. 

The revisions would eliminate 3 lines 

from the TFR, eliminate Schedule CSS 

in its entirety, revise 24 existing items, 

add 240 new items (including a new 

Schedule FV), and eliminate 

confidential treatment of Schedule FS 

and Schedule HC data. 

After considering the comments 

received on the proposal, OTS has 

adopted most of the proposed revisions, 

with limited exceptions in response to 

certain comments, on the phased-in 

basis that had been proposed. OTS 

continues to evaluate certain other 

proposed revisions in light of the 

comments received thereon and will not 

implement these revisions on their 

proposed effective dates. OTS is 

submitting the adopted revisions to 

OMB for review and approval. 

DATES: Submit written comments on or 

before March 6, 2009. The regulatory 

reporting revisions described herein 

take effect on a phased-in basis on 

March 31, 2009, June 30, 2009, and 

December 31, 2009. 

ADDRESSES: Send comments, referring to 

the collection by ‘‘1550–0023 (TFR 

Revisions—2009)’’, to OMB and OTS at 

these addresses: Office of Information 

and Regulatory Affairs, Attention: Desk 

Officer for OTS, U.S. Office of 

Management and Budget, 725—17th 

Street, NW., Room 10235, Washington, 

DC 20503, or by fax to (202) 395–6974; 

and Information Collection Comments, 

Chief Counsel’s Office, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552, by fax to (202) 

906–6518, or by e-mail to 

infocollection.comments@ots.treas.gov. 

OTS will post comments and the related 

index on the OTS Internet Site at 

http://www.ots.treas.gov/ 

?p=LawsRegulations. In addition, 

interested persons may inspect 

comments at the Public Reading Room, 

1700 G Street, NW., Washington, DC, by 

appointment. To make an appointment, 

call (202) 906–5922, send an e-mail to 

public.info@ots.treas.gov, or send a 

facsimile transmission to (202) 906– 

7755. 

FOR FURTHER INFORMATION CONTACT: For 

further information or to obtain a copy 

of the submission to OMB, please 

contact Ira L. Mills, OTS Clearance 

Officer, at ira.mills@ots.treas.gov, (202) 

906–6531, or facsimile number (202) 

906–6518, Litigation Division, Chief 

Counsel’s Office, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552. 

You can obtain a copy of the 2009 

Thrift Financial Report forms from the 

OTS Web site at http:// 

www.ots.treas.gov/ 

?p=ReportFormsBulletins or you may 

request it by electronic mail from 

tfr.instructions@ots.treas.gov. You can 

request additional information about 

this proposed information collection 

from James Caton, Director, Financial 

Monitoring and Analysis Division, (202) 

906–5680, Office of Thrift Supervision, 

1700 G Street, NW., Washington, DC 

20552. 

SUPPLEMENTARY INFORMATION: The effect 

of the proposed revisions to the 

reporting requirements of these 

information collections will vary from 

institution to institution, depending on 

the institution’s involvement with the 

types of activities or transactions to 

which the proposed changes apply. OTS 

estimates that implementation of these 

reporting changes will result in a small 

increase in the current reporting burden 

imposed by the TFR. The following 

burden estimates include the effect of 

the proposed revisions. 

Title: Thrift Financial Report. 

OMB Number: 1550–0023. 

Form Number: OTS 1313. 

Statutory Requirement: 12 U.S.C. 

1464(v) imposes reporting requirements 

for savings associations. Except for 

selected items, these information 

collections are not given confidential 

treatment. 

Type of Review: Revision of currently 

approved collections. 

Affected Public: Savings associations. 

Estimated Number of Respondents 

and Recordkeepers: 811. 

Estimated Burden Hours per 

Respondent: 54.68 burden hours on 

average. 

Estimated Frequency of Response: 

Quarterly. 

Estimated Total Annual Burden: 

177,398 burden hours. 

Abstract: All OTS-regulated savings 

associations must comply with the 

information collections described in this 

notice. OTS collects this information 

each calendar quarter or less frequently 

if so stated. OTS uses this information 

to monitor the condition, performance, 

and risk profile of individual 

institutions and systemic risk among 

groups of institutions and the industry 

as a whole. Except for selected items, 

these information collections are not 

given confidential treatment. 

I. Background 

OTS last revised the form and content 

of the TFR in a manner that significantly 

affected a substantial percentage of 

institutions in March 2007. Revisions 

since March 2007 focused on specific 

activities and were primarily made in 

response to changes in generally 

accepted accounting principles (GAAP). 

These focused revisions meant that the 

new or revised TFR items were minor or 

applicable to only a small percentage of 

institutions. 

During the past year OTS has 

evaluated its ongoing information 

needs. OTS recognizes that the TFR 

imposes reporting requirements, which 

are a component of the regulatory 

burden facing institutions. Another 

contributor to this regulatory burden is 

the examination process, particularly 

on-site examinations during which 

institution staff spend time and effort 

responding to inquiries and requests for 

information designed to assist 

examiners in evaluating the condition 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6087 

1 In addition, on November 26, 2008, OMB 

approved the Federal banking agencies’ joint 

emergency clearance requests to add two items to 

Call Report Schedule RC–O, Other Data for Deposit 

Insurance and FICO Assessments, and to TFR 

Schedule DI—Consolidated Deposit Information— 

that are effective December 31, 2008, and that are 

applicable to all institutions participating in the 

FDIC’s Transaction Account Guarantee Program. A 

participating institution must report the amount 

and number of its noninterest-bearing transaction 

accounts, as defined in the FDIC’s regulations 

governing the program, of more than $250,000 in 

Call Report Schedule RC–O, Memorandum items 

4.a and 4.b, or in TFR Schedule DI, lines DI570 and 

DI575. The FDIC will use this information to 

calculate assessments for participants in the 

Transaction Account Guarantee Program. Because 

OMB’s approval of the agencies’ emergency 

clearance request expires on May 31, 2009, the 

agencies proposed on December 23, 2008, under 

OMB’s normal clearance procedures to collect these 

two items each quarter until the Transaction 

Account Guarantee Program ends. See 73 FR 78794. 

2The trade group also recommended that 

‘‘reciprocal deposit’’ be defined as a deposit 

‘‘obtained when an insured depository institution 

exchanges funds, dollar-for-dollar, with members of 

a network of other insured depository institutions, 

where each member of the network sets the interest 

rate to be paid on the entire amount of funds it 

places with other network members, and all funds 

placed through the network are fully insured by the 

FDIC.’’ 

and risk profile of the institution. The 

amount of attention that examiners 

direct to risk areas of the institution 

under examination is, in large part, 

determined from TFR data. These data, 

and analytical reports including the 

Uniform Thrift Performance Report, 

assist examiners in scoping and making 

their preliminary assessments of risks 

during the planning phase of the 

examination. 

A risk-focused review of the 

information from an institution’s TFR 

allows examiners to make preliminary 

risk assessments prior to on-site work. 

The degree of perceived risk determines 

the extent of the examination 

procedures that examiners initially plan 

for each risk area. If the outcome of 

these procedures reveals a higher level 

of risk in a particular area, the examiner 

adjusts the examination scope and 

procedures accordingly. 

TFR data are also a vital source of 

information for the monitoring and 

regulatory activities of OTS. Among 

their benefits, these activities aid in 

determining whether the frequency of 

an institution’s examination cycle 

should remain at maximum allowed 

time intervals, thereby lessening overall 

regulatory burden. More risk-focused 

TFR data enhance the ability of OTS to 

assess whether an institution is 

experiencing changes in its risk profile 

that warrant immediate follow-up, 

which may include accelerating the 

timing of an on-site examination. 

In developing this proposal, OTS 

considered a range of potential 

information needs, particularly in the 

areas of credit risk, liquidity, and 

liabilities, and identified those 

additions to the TFR that are most 

critical and relevant to OTS in fulfilling 

its supervisory responsibilities. At the 

same time, OTS identified certain 

existing TFR line items that are no 

longer sufficiently critical or useful to 

warrant their continued collection. OTS 

recognizes that the reporting burden 

that would result from the addition to 

the TFR of the new items discussed in 

this proposal would not be fully offset 

by the proposed elimination of, or 

establishment of reporting thresholds 

for, a limited number of other TFR 

items, thereby resulting in a net increase 

in reporting burden. After savings 

associations make any necessary 

changes to their systems and records, 

OTS estimated that these reporting 

changes would produce an average net 

increase of 2.0 hours per institution per 

year in the ongoing reporting burden of 

the TFR. Nevertheless, when viewing 

these proposed revisions to the TFR 

within a larger context, they are 

intended to maintain the effectiveness 

of the on- and off-site supervision 

activities of the OTS, which should help 

to control the overall regulatory burden 

on institutions. 

II. Current Actions 

On October 1, 2008, OTS requested 

comment on proposed revisions to the 

Thrift Financial Report (73 FR 57205). 

The proposed changes were to be 

implemented on a phased-in basis 

during 2009. A limited group of changes 

was proposed to take effect March 31, 

2009; most revisions were proposed to 

take effect June 30, 2009; and a final 

group of revisions was proposed to take 

effect December 31, 2009.1

OTS received one comment letter on 

the proposed revisions from a trade 

group representing banks and savings 

associations of all sizes. The trade group 

noted the added burden the proposed 

revisions would place on institutions 

filing the TFR and asked that OTS adopt 

only those changes essential to its 

mission. The trade group commented on 

a reporting issue that was not addressed 

in the original proposal and 

recommended a revision requiring 

institutions to report ‘‘reciprocal 

deposits’’ 2 separately from brokered 

deposits. OTS will consider this 

recommendation concerning reciprocal 

deposits when it next assesses the need 

and basis for possible future revisions to 

the TFR. This commenter also 

commented on the reporting of sweep 

accounts from other institutions, 

including affiliated institutions, noting 

that the TFR may need to be revised 

depending on the resolution of how 

such accounts are treated for deposit 

insurance assessment purposes. 

After considering the comments 

received on the proposal, OTS has 

decided to move forward with most of 

the reporting changes, with limited 

modifications in response to certain 

comments, on the phased-in basis that 

had been proposed. Sections III, IV, and 

V of this notice identify the changes 

proposed to take effect March 31, June 

30, and December 31, 2009, 

respectively; and discuss the comments 

received on the proposed TFR revisions 

that OTS has decided to implement, as 

modified. 

OTS recognizes institutions’ need for 

lead time to prepare for reporting 

changes, and thus proposed the phasedin implementation schedule for 2009. 

TFR items that will be new or revised 

effective March 31, 2009, are limited in 

number and most are linked to changes 

in generally accepted accounting 

principles taking effect at the same time. 

For the March 31, 2009, report date, 

thrifts may provide reasonable estimates 

for any new or revised TFR item 

initially required to be reported as of 

that date for which the requested 

information is not readily available. 

This same policy on the use of 

reasonable estimates will apply to the 

reporting of other new or revised items 

when they are first implemented 

effective June 30 and December 31, 

2009. The specific wording of the 

captions for the new or revised TFR line 

items discussed in this notice and the 

numbering of these items should be 

regarded as preliminary. 

III. TFR Revisions Proposed for March 

2009 

OTS received no comments on 

revisions proposed in response to 

accounting changes applicable to 

noncontrolling (minority) interests in 

consolidated subsidiaries; and to a 

reporting addition for other-thantemporary impairment charges on debt 

and equity securities. Therefore, these 

revisions will be implemented in March 

2009 as proposed. 

A. Background 

In December 2007, the Financial 

Accounting Standards Board issued 

Statement of Financial Accounting 

Standards No. 160, ‘‘Noncontrolling 

Interests in Consolidated Financial 

Statements’’ (FAS 160). Under this 

Statement, a noncontrolling interest, 

formerly referred to as a minority 

interest, is that portion of total 

stockholders’ equity and total net 

income or loss that is not attributable, 

directly or indirectly, to the parent; that 

6088 Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 

is, to the controlling interest. FAS 160 

changes the placement of the 

noncontrolling interest on the balance 

sheet and income statement. For savings 

associations and holding companies 

with a calendar year-end, the Statement 

becomes effective in the first quarter of 

2009. Accordingly, OTS proposes to 

make certain changes to Schedules SC, 

SO, HC, and CCR. 

B. Elimination of Existing Items 

1. As a result of the issuance of FAS 

160 (see Background above), OTS will 

eliminate line CCR190, Minority Interest 

in Includable Subsidiaries. 

C. Revision of Existing Items 

1. As a result of the issuance of FAS 

160 (see Background above), OTS will 

revise the captions of lines SC80 from 

‘‘Total Equity Capital’’ to ‘‘Total Savings 

Association Equity Capital’’, SC800 

from ‘‘Minority Interest’’ to 

‘‘Noncontrolling Interests in 

Consolidated Subsidiaries’’, SC90 from 

‘‘Total Liabilities, Minority Interest, and 

Equity Capital’’ to ‘‘Total Liabilities and 

Equity Capital’’, SO 91 from ‘‘Net 

Income (Loss)’’ to ‘‘Net Income (Loss) 

Attributable to Savings Association’’, 

HC620 from ‘‘Minority Interest’’ to 

‘‘Noncontrolling Interests in 

Consolidated Subsidiaries’’, HC640 from 

‘‘Consolidated Net Income for the 

Quarter’’ to ‘‘Consolidated Net Income 

(Loss) Attributable to Holding 

Company’’, CCR100 from ‘‘Total Equity 

Capital (SC80)’’ to ‘‘Total Equity Capital 

(SC84)’’, and CCR105 from ‘‘Minority 

Interest in Nonincludable Subsidiaries’’ 

to ‘‘Investments in, Advances to, and 

Noncontrolling Interests in 

Nonincludable Subsidiaries’’. 

D. New Items 

1. As a result of the issuance of FAS 

160 (see Background above), OTS 

proposes to add lines SC84, Total Equity 

Capital; SO88, Net Income (Loss) 

Attributable to Savings Association and 

Noncontrolling Interests; SO880, Net 

Income (Loss) Attributable to 

Noncontrolling Interests; and HC635, 

Consolidated Net Income (Loss) 

Attributable to Holding Company and 

Noncontrolling Interests. 

2. To separately capture impairment 

charges on debt and equity securities, 

OTS proposes to add line SO441, Otherthan-Temporary Impairment Charges on 

Debt and Equity Securities. 

E. Eliminating Confidential Treatment 

of Schedule FS and Schedule HC Data 

OTS has, to this point, provided 

confidential treatment to some of the 

information that certain institutions 

report in Schedule FS—Fiduciary and 

Related Services, on fiduciary and 

related services income, settlements, 

surcharges and other losses reported on 

lines FS310 through FS35, and FS710 

through FS70. OTS also accords 

confidential treatment to all of the 

information that certain institutions 

report in Schedule HC—Thrift Holding 

Company. 

An important public policy issue for 

the federal banking regulatory agencies 

has been how to use market discipline 

to complement supervisory resources. 

Market discipline relies on market 

participants having sufficient 

appropriate information about the 

financial condition and risks of banks, 

thrifts, and their holding companies. 

The TFR is widely used by securities 

analysts, rating agencies, and large 

institutional investors as sources of 

thrift-specific data. Disclosure that 

increases transparency should lead to 

more accurate market assessments of 

individual banks’ performance and 

risks. This, in turn, should result in 

more effective market discipline on 

thrifts. For these reasons, we proposed 

eliminating the confidential treatment of 

data reported on schedules FS and HC. 

1. Eliminating Confidential Treatment of 

Schedule FS Data 

The trade group commenting on the 

proposed revisions opposed eliminating 

the confidential treatment of fiduciary 

income and loss data, stating that the 

agencies’ original reason for according 

confidential treatment to these data, i.e., 

that these data generally pertain to only 

a portion of a reporting institution’s 

total operations and not to the 

institution as a whole, still holds true. 

This commenter also cited significant 

competitive concerns with the proposed 

elimination of confidential treatment 

because making income and loss data 

publicly available ‘‘may make it 

possible for competitors to deduce’’ an 

individual institution’s fee schedules. In 

addition, this commenter believed that 

these publicly disclosed data may be 

subject to misinterpretation by market 

participants who would lack a proper 

understanding of the scope of the 

income and loss data reported in 

Schedule FS because fiduciary income 

and loss data are presented differently 

in institutions’ audited financial 

statements prepared in accordance with 

GAAP. Therefore, this commenter 

believes that institutions’ financial 

statements can satisfy market 

participants’ needs for fiduciary income 

and loss data. Finally, this commenter 

stated that market participants may be 

confused or misled by the fiduciary 

income and loss information because 

they would be unable to determine the 

source or specific fiduciary activity 

giving rise to the income or loss. 

Data on fiduciary and related services 

income and losses is treated as 

confidential on an individual institution 

basis. Nevertheless, OTS publishes 

aggregate data derived from these 

confidential items. OTS does not 

preclude institutions from publicly 

disclosing the fiduciary and related 

services income and loss data that the 

agencies treat as confidential. 

In addition, under the Uniform 

Interagency Trust Rating System, the 

agencies assign a rating to the earnings 

of an institution’s fiduciary activities at 

those institutions with fiduciary assets 

of more than $100 million, which are 

also the institutions that report their 

fiduciary and related services income 

and losses in Call Report Schedule RC– 

T and TFR Schedule FS. The agencies’ 

evaluation of an institution’s trust 

earnings considers such factors as the 

profitability of fiduciary activities in 

relation to the size and scope of those 

activities and the institution’s overall 

business, taking this into account by 

functions and product lines. Although 

the agencies’ ratings for individual 

institutions are not publicly available, 

the reason for rating the trust earnings 

of institutions with more than $100 

million in fiduciary assets—its effect on 

the financial condition of the 

institution—means that fiduciary and 

related services income and loss 

information for these institutions is also 

relevant to market participants and 

others in the public as they seek to 

evaluate the financial condition and 

performance of individual institutions. 

Increasing the transparency of 

institutions’ fiduciary activities by 

making individual institutions’ 

fiduciary income and loss data available 

to the public should improve the 

market’s ability to assess these 

institutions’ performance and risks and 

thereby enhance market discipline. 

Although the fiduciary income and 

loss data currently reported in Schedule 

FS and afforded confidential treatment 

apply only to a portion of an institution 

rather than an entire institution, all 

other data collected in Schedule FS of 

the TFR is publicly available, even 

when the data relates only to portions 

of an institution’s activities. 

OTS continues to believe that the 

benefit of increased transparency from 

the full disclosure of fiduciary income 

and loss data will improve market 

discipline by enhancing the market’s 

ability to assess institution-specific 

performance and risks. After carefully 

considering the comments on the public 

availability of fiduciary income and loss 

data reported in Schedule FS, OTS is 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6089 

adopting the proposal to eliminate the 

confidential treatment of such data 

beginning with the data reported as of 

March 31, 2009. 

2. Eliminating Confidential Treatment of 

Schedule HC Data 

The trade group commenting on the 

proposed revisions recommended a 

bifurcated approach to eliminating the 

confidential treatment of Schedule HC 

data filed by holding companies. The 

commenter felt that eliminating 

confidential treatment of Schedule HC 

data is appropriate for publicly-held 

thrift holding companies, but should not 

be eliminated for privately-held thrift 

holding companies. However, many 

public requests are received for these 

data. In addition, some rating agencies 

have indicated thrift holding company 

debt ratings suffer due to the lack of 

publicly available data. Additionally, 

Federal Reserve Board Schedule Y–9 

filed by bank holding companies is 

publicly available on consolidated and 

unconsolidated bases for both publicly 

and privately owned bank holding 

companies. It is reasonable that OTS 

should be consistent with the FRB’s 

treatment of holding company financial 

information. 

Thus, after carefully considering the 

comments on the public availability of 

Schedule HC data, OTS is adopting the 

proposal to eliminate the confidential 

treatment of such data beginning with 

the data reported as of March 31, 2009. 

IV. TFR Revisions Proposed for June 

2009 

OTS received no comments related to 

the following revisions proposed to be 

effective as of June 2009. Accordingly, 

these revisions are adopted as proposed. 

A. Elimination of Existing Items 

1. Schedule SI—Consolidated 

Supplemental Information 

SI805, Do you sell private-label or 

third-party mutual funds and 

annuities?; and 

SI860, Fee Income from the Sale and 

Servicing of Mutual Funds and 

Annuities. 

Line SI805 is a yes/no question 

regarding the sale of private label or 

third party mutual funds and annuities. 

Line SI860 reports the amount of fee 

income from the sale and servicing of 

mutual funds and annuities. Institutions 

that provided a yes response to line 

SI805 will now provide the same 

response to new line SI910. OTS 

believes the data reported in line SI860 

can be collected independently of the 

TFR reporting system during the 

examination process. 

B. Revisions of Existing Items 

1. Revising the caption for line SO430 

from ‘‘Noninterest Income—Net Income 

(Loss) from Other—Sale of Assets Held 

for Sale and Available-for-Sale 

Securities’’ to ‘‘Noninterest Income— 

Net Income (Loss) from Other—Sale of 

Available-for-Sale Securities’’ to 

separately report gains and losses on the 

sale of available-for-sale securities from 

gains and losses on loans and leases 

held for sale and on other assets held for 

sale. Gains and losses on loans and 

leases held for sale and on other assets 

held for sale would be reported in new 

lines SO431 and SO432 described 

below; and 

2. Revising the language for question 

HC840 from ‘‘Is the holding company or 

any of its subsidiaries regulated by a 

foreign financial services regulator?’’ to 

‘‘Is the holding company or any of its 

affiliates conducting operations outside 

of the U.S. through a foreign branch or 

subsidiary?’’ This line is being revised 

to more fully identify holding 

companies with foreign operations, 

including parallel banking operations. A 

parallel banking organization exists 

when at least one U.S. bank and one 

foreign financial institution are 

controlled either directly or indirectly 

by the same person or group of persons 

who are closely associated in their 

business dealings or otherwise acting 

together, but are not subject to 

consolidated supervision by a single 

home country supervisor. A foreign 

financial institution includes a holding 

company of the foreign bank and any 

U.S. or foreign affiliates of the foreign 

bank. 

C. New Items 

1. Noninterest Income 

OTS proposes to add two lines related 

to gains and losses on the sale of loans 

and leases held for sale and on other 

assets held for sale: 

SO431, Noninterest Income—Net 

Income (Loss) from Other—Sale of 

Loans and Leases Held for Sale; and 

SO432, Noninterest Income—Net 

Income (Loss) from Other—Sale of 

Other Assets Held for Sale. 

These new lines, in conjunction with 

the revised line SO430 described above, 

will allow thrifts to separately report 

gains and losses on the sale of availablefor-sale securities, on loans and leases 

held for sale, and on other assets held 

for sale. 

2. Loans in Process of Foreclosure 

OTS proposes to add a series of eight 

lines to Schedule PD related to loans in 

the process of foreclosure: 

PD40, Total Loans in Process of 

Foreclosure; 

PD415, Construction Loans in Process 

of Foreclosure; 

PD421, 1–4 Dwelling Units Secured 

by Revolving Open-End Loans in 

Process of Foreclosure; 

PD423, 1–4 Dwelling Units Secured 

by First Liens in Process of Foreclosure; 

PD424, 1–4 Dwelling Units Secured 

by Junior Liens in Process of 

Foreclosure; 

PD425, Multifamily (5 or more) 

Dwelling Units in Process of 

Foreclosure; 

PD435, Nonresidential Property 

(Except Land) in Process of Foreclosure; 

and 

PD438, Land Loans in Process of 

Foreclosure. 

OTS believes these new line items 

will provide additional detail on the 

various types of real estate loans in the 

process of foreclosure. With these new 

data items, OTS will be better able to 

monitor the asset quality and risk 

profiles of thrifts. 

Thrifts would report total unpaid 

principal balance of loans secured by 

the various types of real estate for which 

formal foreclosure proceedings to seize 

the real estate collateral have started 

and are ongoing as of quarter-end, 

regardless of the date the foreclosure 

procedure was initiated. Loans would 

be classified as in process of foreclosure 

according to local requirements. 

3. Construction Loans With Capitalized 

Interest 

OTS proposes to add a series of six 

lines to Schedule LD related to 

construction loans with capitalized 

interest: 

LD710, Construction Loans on 1—4 

Dwelling Units with Capitalized 

Interest; 

LD715, Capitalized Interest on 

Construction Loans on 1—4 Dwelling 

Units Included in Current Quarter 

Income; 

LD720, Construction Loans on 

Multifamily (5 or More) Dwelling Units 

with Capitalized Interest; 

LD725, Capitalized Interest on 

Construction Loans on Multifamily (5 or 

More) Dwelling Units Included in 

Current Quarter Income; 

LD730, Construction Loans on 

Nonresidential Property (Except Land) 

with Capitalized Interest; and 

LD735, Capitalized Interest on 

Construction Loans on Nonresidential 

Property (Except Land) Included in 

Current Quarter Income. 

OTS believes these new line items 

will provide additional detail on the use 

of capitalized interest in connection 

with various types of construction 

6090 Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 

loans. With these new data items, OTS 

will be better able to monitor the risk 

profiles of thrifts with concentrations of 

construction loans. 

4. Collateralized Debt Obligations, 

Collateralized Loan Obligations, and 

Commercial Mortgage-Backed Securities 

(CMBSs) 

OTS proposes to add a series of six 

lines to Schedule LD to provide 

additional reporting detail on 

collateralized debt obligations (CDOs), 

collateralized loan obligations (CLOs), 

and commercial mortgage-backed 

securities (CMBSs): 

LD750, Collateralized Debt 

Obligations: Carrying Value; 

LD755, Collateralized Debt 

Obligations: Market Value; 

LD760, Collateralized Loan 

Obligations: Carrying Value; 

LD765, Collateralized Loan 

Obligations: Market Value; 

LD770, Commercial Mortgage-Backed 

Securities: Carrying Value; and 

LD775, Commercial Mortgage-Backed 

Securities: Market Value. 

CDOs are a type of asset-backed 

security and structured credit product. 

CDOs are constructed from a portfolio of 

fixed-income assets that are pooled 

together and passed on to different 

classes of owners. 

CLOs are a type of asset-backed 

security and structured credit product. 

CLOs are structured from a portfolio of 

nonmortgage business loans that are 

pooled together and passed on to 

different classes of owners. 

CMBSs are a type of asset-backed 

security and structured credit product. 

CMBSs are structured from a portfolio of 

commercial mortgage loans that are 

pooled together and passed on to 

different classes of owners. 

5. Recourse Obligations on Loans in 

Line CC468 

OTS proposes to add two lines to 

Schedule CC related to recourse 

obligations on loans in CC468, Amount 

of Recourse Obligations on Assets in 

CC455 (Line CC455 is the Total 

Principal Amount of Assets Covered by 

Recourse Obligations or Direct Credit 

Substitutes): 

CC469, Amount of Recourse 

Obligations on Loans in CC468 where 

Recourse Is Limited to 120 Days or Less; 

and 

CC471, Amount of Recourse 

Obligations on Loans in CC468 where 

Recourse Extends Beyond 120 Days. 

OTS believes these new line items 

will provide additional detail on the 

amount of assets with recourse 

obligations held by thrifts. 

6. Loans Sold With Recourse 

OTS proposes to add two lines to 

Schedule CF related to loans sold 

during the current reporting period with 

recourse obligations: 

CF365, Memo—Loans Sold with 

Recourse of 120 Days or Less; and 

CF366, Memo—Loans Sold with 

Recourse Greater Than 120 Days. 

OTS believes these new line items 

will provide additional detail on the 

quarterly amount of loans sold with 

recourse obligations held by thrifts. 

7. Additions for Deposit AssessmentRelated Purposes 

At the request of the Federal Deposit 

Insurance Corporation for deposit 

assessment-related purposes, the OTS 

proposes to add the following seven 

lines to Schedule DI: 

DI630, Unsecured Federal Funds 

Purchased; 

DI635, Secured Federal Funds 

Purchased; 

DI641, Securities Sold Under 

Agreements to Repurchase; 

DI645, Unsecured ‘‘Other 

Borrowings’’—With a Remaining 

Maturity of One Year or Less; 

DI651, Unsecured ‘‘Other 

Borrowings’’—With a Remaining 

Maturity of Over One Year; 

DI655, Subordinated Debentures— 

With a Remaining Maturity of One Year 

or Less; and 

DI660, Subordinated Debentures— 

With a Remaining Maturity of Over One 

Year. 

The additional reporting detail by 

maturity is proposed as the FDIC plans 

to provide a reduction in assessment 

rates to institutions with longer-term 

unsecured borrowings and subordinated 

debt. The FDIC believes that such 

borrowing and debt will likely remain 

when an institution fails, thus providing 

a cushion to help protect the Deposit 

Insurance Fund. 

The trade group commenting on the 

proposed revisions expressed support 

for the reporting of maturity 

distributions of unsecured other 

borrowings and subordinated debt on 

Schedule DI, stating that the data would 

enable the FDIC to implement an 

adjustment to the risk-based assessment 

system so that insured depository 

institutions with greater amounts of 

general unsecured long-term liabilities 

could be rewarded with a lower 

assessment rate. 

8. Pledged Loans and Securities 

OTS proposes to add two lines to 

Schedule SI related to loans and 

securities pledged as collateral for loans: 

SI394, Pledged Loans; and 

SI395, Pledged Trading Assets. 

OTS believes these new line items 

will provide additional detail on the 

amount of loans and securities pledged 

by thrifts as collateral for loans. These 

data items will permit OTS to better 

monitor the risk profiles of thrifts with 

concentrations of pledged loans and 

securities and are consistent with 

reporting being added to the Call Report 

in 2009. 

9. Questions Relating to Thrift Activities 

OTS proposes to add the following 

four new questions to Schedule SI: 

SI900, ‘‘Does the institution, without 

trust powers, act as trustee or custodian 

for Individual Retirement Accounts, 

Health Savings Accounts, and other 

similar accounts that are invested in 

non-deposit products?’’; 

SI905, ‘‘Does the institution provide 

custody, safekeeping or other services 

involving the acceptance of orders for 

the sale or purchase of securities?’’; 

SI910, ‘‘Does the institution engage in 

third party broker arrangements, 

commonly referred to as ‘‘networking’’, 

to sell securities products or services to 

thrift customers?’’; and 

SI915, ‘‘Does the institution sweep 

deposit funds into any open-end 

investment management company 

registered under the Investment 

Company Act of 1940 that holds itself 

out as a money market fund?’’. 

The questions relate to certain 

brokerage activities such as whether a 

thrift is a trustee or custodian for certain 

types of accounts or provides certain 

services in connection with orders for 

securities transactions regardless of 

whether the thrift exercises trust 

powers. 

10. Holding Company Data 

OTS proposes to add a series of 30 

lines to Schedule HC to provide 

additional detailed data on the thrift 

holding company parent and on a 

consolidated basis: 

HC221, Parent Only Perpetual 

Preferred Stock: Cumulative; 

HC222, Parent Only Perpetual 

Preferred Stock: Noncumulative; 

HC223, Parent Only Common Stock: 

Par Value; 

HC224, Parent Only Common Stock: 

Paid in Excess of Par; 

HC225, Parent Only Accumulated 

Other Comprehensive Income: 

Unrealized Gains (Losses) on Availablefor-Sale Securities; 

HC226, Parent Only Accumulated 

Other Comprehensive Income: Gains 

(Losses) on Cash Flow Hedges; 

HC227, Parent Only Accumulated 

Other Comprehensive Income: Other; 

HC228, Parent Only Retained 

Earnings; 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6091 

HC229, Parent Only Other 

Components of Equity Capital; 

HC301, Parent Only Cash, Deposits, 

and Investment Securities; 

HC505, Parent Only Interest Income; 

HC509, Parent Only Total Income; 

HC570, Parent Only Total Expense; 

HC571, Parent Only Total Income 

Taxes; 

HC575, Parent Only Dividends Paid; 

HC601, Consolidated Cash, Deposits, 

and Investment Securities; 

HC621, Consolidated Perpetual 

Preferred Stock: Cumulative; 

HC622, Consolidated Perpetual 

Preferred Stock: Noncumulative; 

HC623, Consolidated Common Stock: 

Par Value; 

HC624, Consolidated Common Stock: 

Paid in Excess of Par; 

HC625, Consolidated Accumulated 

Other Comprehensive Income: 

Unrealized Gains (Losses) on Availablefor-Sale Securities; 

HC626, Consolidated Accumulated 

Other Comprehensive Income: Gains 

(Losses) on Cash Flow Hedges; 

HC627, Consolidated Accumulated 

Other Comprehensive Income: Other; 

HC628, Consolidated Only Retained 

Earnings; 

HC629, Consolidated Only Other 

Components of Equity Capital. 

HC705, Consolidated Interest Income; 

HC709, Consolidated Total Income; 

HC770, Consolidated Total Expense; 

HC771, Consolidated Total Income 

Taxes; and 

HC775, Consolidated Dividends Paid. 

OTS believes these new line items 

will provide additional detail on thrift 

holding companies. With these new 

data items, OTS will be better able to 

monitor the risk profiles of thrift 

holding companies. 

D. Comments Addressing June 30, 2009, 

Proposed Revisions 

OTS received comments addressing 

each of the following proposed June 30, 

2009, revisions: 

1. Credit Card Charge-Offs Related to 

Accrued Interest 

OTS proposes to add a line, VA979, 

Credit Card Charge-Offs Related to 

Accrued Interest, to capture data on the 

amount of credit card charge-offs that 

are due to accrued interest. This change 

is being made at the request of the FDIC 

to improve their deposit insurance 

premium assessment process. 

The commenter noted that 

compliance with this new line item 

would be difficult for those thrift 

institutions (including those that use a 

third-party processor for servicing credit 

cards) that do not presently capture data 

on the amount of credit card charge-offs 

that are due to accrued interest. Since 

that specific charge-off data is not 

currently required to be reported on the 

TFR, the accrued interest is sometimes 

added to the credit card loan amount 

and is not tracked as a separate line 

item. Not all thrift institutions that offer 

credit cards to their customers have the 

proposed data readily available within 

the thrift institution or from their thirdparty processor to separately report the 

accrued interest portion of the chargeoff. 

The commenter expressed concern 

that third-party credit card processors 

may not be able to readily provide the 

new data on the amount of credit card 

charge-offs that are due to accrued 

interest. 

After considering these comments, 

OTS has decided to move forward with 

the addition as proposed. OTS believes 

that the data to be added should 

presently be available within an 

institution’s accounting systems. 

2. High Loan-to-Value Loans Secured by 

Multifamily Properties Without PMI or 

Government Guarantee 

The commenter noted generally the 

need for OTS to provide clear 

instructions for the revisions to be 

implemented in 2009. Specifically, the 

commenter recommended that OTS 

provide clear instructions for the 16 

new line items presented below being 

added to Schedule LD related to high 

loan-to-value loans secured by 

multifamily properties without private 

mortgage insurance (PMI) or 

government guarantee: 

LD111, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Balances at Quarter-End: 90% up to 

100% LTV; 

LD121, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Balances at Quarter-End: 100% and 

greater LTV; 

LD211, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: Past 

Due and Still Accruing: 30–89 Days: 

90% up to 100% LTV; 

LD221, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: Past 

Due and Still Accruing: 30–89 Days: 

100% and greater LTV; 

LD231, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: Past 

Due and Still Accruing: 90 Days or 

More: 90% up to 100% LTV; 

LD241, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: Past 

Due and Still Accruing: 90 Days or 

More: 100% and greater LTV; 

LD251, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: 

Nonaccrual: 90% up to 100% LTV; 

LD261, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Past Due and Nonaccrual Balances: 

Nonaccrual: 100% and greater LTV; 

LD311, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Charge-offs and Recoveries: Net Chargeoffs (including Specific Valuation 

Allowance Provisions & Transfers from 

General to Specific Allowances): 90% 

up to 100% LTV; 

LD321, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Charge-offs and Recoveries: Net Chargeoffs (including Specific Valuation 

Allowance Provisions & Transfers From 

General to Specific Allowances): 100% 

and greater LTV; 

LD411, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Purchases: 90% up to 100% LTV; 

LD421, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Purchases: 100% and greater LTV; 

LD431, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Originations: 90% up to 100% LTV; 

LD441, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Originations: 100% and greater LTV; 

LD451, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Sales: 90% up to 100% LTV; and 

LD461, High Loan-to-Value Loans 

Secured by Multifamily Properties 

without PMI or Government Guarantee: 

Sales: 100% and greater LTV. 

OTS has decided to add these lines as 

proposed. OTS believes these new line 

items will provide additional detail on 

high loan-to-value loans secured by 

multifamily properties held by thrifts, 

including detail on delinquencies, 

nonaccruals, and net charge-offs, and 

data on such loans originated, 

purchased, or sold during the reporting 

period. With these new data items, OTS 

will be better able to monitor the risk 

profiles of thrifts with concentrations of 

6092 Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 

high loan-to-value multifamily mortgage 

loans. 

3. Deposits Gathered Through CDARS 

OTS proposes to add a line to 

Schedule DI related to deposits gathered 

through the Certificate of Deposit 

Account Registry Service (CDARS): 

DI230, Deposits Gathered through 

CDARS. 

CDARS member institutions accept 

depositor funds and place these into 

certificates of deposit issued by 

financial institutions in the network. 

This occurs in amounts that ensure that 

both principal and interest are eligible 

for full FDIC insurance. OTS believes 

this new line item will provide 

additional detail on the deposit funding 

sources used by thrifts. 

The commenter recommended that 

the TFR be amended to break out 

‘‘reciprocal’’ deposits in a separate line 

item from broker-originated deposits 

that are currently reported on Schedule 

DI. A reciprocal deposit is obtained 

when an insured depository institution 

exchanges funds, dollar-for-dollar, with 

members of a network of other insured 

depository institutions, where each 

member of the network sets the interest 

rate to be paid on the entire amount of 

funds it places with other network 

members, and all funds placed through 

the network are fully insured by the 

FDIC. Such an arrangement enables a 

member of the network to offer its 

customers a convenient means to obtain 

access to FDIC insurance on large 

deposits by working solely with the 

bank or thrift with which the customer 

has a relationship. As a result, the bank 

or thrift is able to accept the large 

deposits without having to post 

collateral, which in turn makes more 

funds available to meet the credit needs 

of the community. 

OTS will consider this 

recommendation concerning reciprocal 

deposits when it next assesses the need 

and basis for possible future revisions to 

the TFR. OTS has decided to add this 

line as proposed. 

V. TFR Revisions Proposed for 

December 2009 

OTS received no comments related to 

the following revisions proposed to be 

effective as of December 2009. 

Accordingly, these revisions are 

adopted as proposed. 

A. Burden-Reducing Revision 

1. Eliminating Schedule CSS— 

Subordinate Organization Schedule 

OTS proposes to eliminate Schedule 

CSS from the TFR. Twenty-three line 

items are presently collected annually 

as of December 31, for each and every 

required subordinate organization 

owned directly or indirectly by the 

savings association. OTS believes these 

data can be collected independently of 

the TFR reporting system during the 

normal onsite or offsite examination 

process. In the most recent Schedule 

CSS filing for the reporting period 

ending December 31, 2007, 337 thrifts 

reported data for 666 subsidiary 

organizations and 492 thrifts reported 

no Schedule CSS data. 

B. New Items 

1. Schedule FV—Consolidated Assets 

and Liabilities Measured at Fair Value 

on a Recurring Basis 

Effective for the March 31, 2007, 

report date, OTS began collecting 

information on certain assets and 

liabilities measured at fair value in 

Schedule SI. The data collected on 

Schedule SI are intended to be 

consistent with the fair value 

disclosures and other requirements in 

FASB Statement No. 157, Fair Value 

Measurements (FAS 157). 

Based on the OTS’s ongoing review of 

industry reporting and disclosure 

practices since the inception of this 

standard, and the reporting of items at 

fair value on Schedule SI, OTS is 

proposing to expand the data collected 

from thrifts with total assets greater than 

$10 billion. 

To improve the consistency of data 

collected with the FAS 157 disclosure 

requirements and industry disclosure 

practices, OTS is proposing to add a 

new Schedule FV for thrifts with total 

assets greater than $10 billion to the 

TFR to expand the detail of fair value 

data collected on Schedule SI in a 

manner consistent with the asset and 

liability breakdowns on Schedule RC, 

Balance Sheet, as proposed by the 

banking agencies for the Call Report. 

OTS has determined that the 

proposed information is necessary to 

more accurately assess the impact of fair 

value accounting and fair value 

measurements for safety and soundness 

purposes at the largest thrifts. The 

collection of the information as 

proposed will facilitate and enhance 

OTS’s ability to monitor the extent of 

fair value accounting in thrifts’ Reports 

of Condition pursuant to the disclosure 

requirements of FAS 157. The 

information to be collected is consistent 

with the disclosures required by FAS 

157 and consistent with industry 

practice for reporting fair value 

measurements and should, therefore, 

not impose significant incremental 

burden on thrifts with total assets 

greater than $10 billion. The following 

75 new line items are proposed for 

Schedule FV: 

FV110, Federal Funds Sold and 

Securities Purchased Under Agreements 

to Resell—Total Fair Value Reported; 

FV111, Federal Funds Sold and 

Securities Purchased Under Agreements 

to Resell—Amounts Netted in the 

Determination of Fair Value; 

FV112, Federal Funds Sold and 

Securities Purchased Under Agreements 

to Resell—Level 1 Fair Value 

Measurements; 

FV113, Federal Funds Sold and 

Securities Purchased Under Agreements 

to Resell—Level 2 Fair Value 

Measurements; 

FV114, Federal Funds Sold and 

Securities Purchased Under Agreements 

to Resell—Level 3 Fair Value 

Measurements; 

FV120, Trading Securities—Total Fair 

Value Reported; 

FV121, Trading Securities—Amounts 

Netted in the Determination of Fair 

Value; 

FV122, Trading Securities—Level 1 

Fair Value Measurements; 

FV123, Trading Securities—Level 2 

Fair Value Measurements; 

FV124, Trading Securities—Level 3 

Fair Value Measurements; 

FV130, Available-for-Sale Securities— 

Total Fair Value Reported; 

FV131, Available-for-Sale Securities— 

Amounts Netted in the Determination of 

Fair Value; 

FV132, Available-for-Sale Securities— 

Level 1 Fair Value Measurements; 

FV133, Available-for-Sale Securities— 

Level 2 Fair Value Measurements; 

FV134, Available-for-Sale Securities— 

Level 3 Fair Value Measurements; 

FV210, Loans and Leases—Total Fair 

Value Reported; 

FV211, Loans and Leases—Amounts 

Netted in the Determination of Fair 

Value; 

FV212, Loans and Leases—Level 1 

Fair Value Measurements; 

FV213, Loans and Leases—Level 2 

Fair Value Measurements; 

FV214, Loans and Leases—Level 3 

Fair Value Measurements; 

FV240, Mortgage Servicing Rights— 

Total Fair Value Reported; 

FV241, Mortgage Servicing Rights— 

Amounts Netted in the Determination of 

Fair Value; 

FV242, Mortgage Servicing Rights— 

Level 1 Fair Value Measurements; 

FV243, Mortgage Servicing Rights— 

Level 2 Fair Value Measurements; 

FV244, Mortgage Servicing Rights— 

Level 3 Fair Value Measurements; 

FV250, Derivative Assets—Total Fair 

Value Reported; 

FV251, Derivative Assets—Amounts 

Netted in the Determination of Fair 

Value; 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6093 

FV252, Derivative Assets—Level 1 

Fair Value Measurements; 

FV253, Derivative Assets—Level 2 

Fair Value Measurements; 

FV254, Derivative Assets—Level 3 

Fair Value Measurements; 

FV310, All Other Financial Assets— 

Total Fair Value Reported; 

FV311, All Other Financial Assets— 

Amounts Netted in the Determination of 

Fair Value; 

FV312, All Other Financial Assets— 

Level 1 Fair Value Measurements; 

FV313, All Other Financial Assets— 

Level 2 Fair Value Measurements; 

FV314, All Other Financial Assets— 

Level 3 Fair Value Measurements; 

FV360, Total Assets Measured at Fair 

Value on a Recurring Basis—Total Fair 

Value Reported; 

FV361, Total Assets Measured at Fair 

Value on a Recurring Basis—Amounts 

Netted in the Determination of Fair 

Value; 

FV362, Total Assets Measured at Fair 

Value on a Recurring Basis—Level 1 

Fair Value Measurements; 

FV363, Total Assets Measured at Fair 

Value on a Recurring Basis—Level 2 

Fair Value Measurements; 

FV364, Total Assets Measured at Fair 

Value on a Recurring Basis—Level 3 

Fair Value Measurements; 

FV410, Federal Funds Purchased and 

Securities Sold Under Agreements to 

Repurchase—Total Fair Value Reported; 

FV411, Federal Funds Purchased and 

Securities Sold Under Agreements to 

Repurchase—Amounts Netted in the 

Determination of Fair Value; 

FV412, Federal Funds Purchased and 

Securities Sold Under Agreements to 

Repurchase—Level 1 Fair Value 

Measurements; 

FV413, Federal Funds Purchased and 

Securities Sold Under Agreements to 

Repurchase—Level 2 Fair Value 

Measurements; 

FV414, Federal Funds Purchased and 

Securities Sold Under Agreements to 

Repurchase—Level 3 Fair Value 

Measurements; 

FV420, Deposits—Total Fair Value 

Reported; 

FV421, Deposits—Amounts Netted in 

the Determination of Fair Value; 

FV422, Deposits—Level 1 Fair Value 

Measurements; 

FV423, Deposits—Level 2 Fair Value 

Measurements; 

FV424, Deposits—Level 3 Fair Value 

Measurements; 

FV440, Subordinated Debentures— 

Total Fair Value Reported; 

FV441, Subordinated Debentures— 

Amounts Netted in the Determination of 

Fair Value; 

FV442, Subordinated Debentures— 

Level 1 Fair Value Measurements; 

FV443, Subordinated Debentures— 

Level 2 Fair Value Measurements; 

FV444, Subordinated Debentures— 

Level 3 Fair Value Measurements; 

FV460, Other Borrowings—Total Fair 

Value Reported; 

FV461, Other Borrowings—Amounts 

Netted in the Determination of Fair 

Value; 

FV462, Other Borrowings—Level 1 

Fair Value Measurements; 

FV463, Other Borrowings—Level 2 

Fair Value Measurements; 

FV464, Other Borrowings—Level 3 

Fair Value Measurements; 

FV470, Derivative Liabilities—Total 

Fair Value Reported; 

FV471, Derivative Liabilities— 

Amounts Netted in the Determination of 

Fair Value; 

FV472, Derivative Liabilities—Level 1 

Fair Value Measurements; 

FV473, Derivative Liabilities—Level 2 

Fair Value Measurements; 

FV474, Derivative Liabilities—Level 3 

Fair Value Measurements; 

FV490, All Other Financial 

Liabilities—Total Fair Value Reported; 

FV491, All Other Financial 

Liabilities—Amounts Netted in the 

Determination of Fair Value; 

FV492, All Other Financial 

Liabilities—Level 1 Fair Value 

Measurements; 

FV493, All Other Financial 

Liabilities—Level 2 Fair Value 

Measurements; 

FV494, All Other Financial 

Liabilities—Level 3 Fair Value 

Measurements; 

FV510, Total Liabilities Measured at 

Fair Value on a Recurring Basis—Total 

Fair Value Reported; 

FV511, Total Liabilities Measured at 

Fair Value on a Recurring Basis— 

Amounts Netted in the Determination of 

Fair Value; 

FV512, Total Liabilities Measured at 

Fair Value on a Recurring Basis—Level 

1 Fair Value Measurements; 

FV513, Total Liabilities Measured at 

Fair Value on a Recurring Basis—Level 

2 Fair Value Measurements; and 

FV514, Total Liabilities Measured at 

Fair Value on a Recurring Basis—Level 

3 Fair Value Measurements. 

C. Comments Addressing December 31, 

2009, Proposed Revisions to Schedule 

FS 

OTS received comments addressing 

the following proposed December 31, 

2009, revisions to Schedule FS: 

1. Fiduciary and Related Services Data 

The revisions to Schedule FS include 

breaking out foundations and 

endowments as well as investment 

advisory agency accounts as separate 

types of fiduciary accounts in the 

schedule’s sections for reporting 

fiduciary and related assets and income; 

adding items for Individual Retirement 

Accounts and similar accounts included 

in fiduciary and related assets; 

expanding the breakdown of managed 

assets by type of asset to cover all types 

of fiduciary accounts; revising the 

manner in which discretionary 

investments in common trust funds and 

collective investment funds are reported 

in the breakdown of managed assets by 

type of asset and adding new asset types 

to this breakdown of managed assets; 

adding items for the market value of 

discretionary investments in proprietary 

mutual funds and the number of 

managed accounts holding such 

investments; and adding items for the 

number and principal amount 

outstanding of debt issues in substantive 

default for which the institution serves 

as indenture trustee. 

The following 14 line items would be 

revised in Schedule FS: 

Revising the caption for line FS260 

from ‘‘Investment Management Agency 

Accounts—Amount of Managed Assets’’ 

to ‘‘Investment Management and 

Investment Advisory Accounts— 

Amount of Managed Assets’’; 

Revising the caption for line FS262 

from ‘‘Investment Management Agency 

Accounts—Number of Managed 

Accounts’’ to ‘‘Investment Management 

and Investment Advisory Accounts— 

Number of Managed Accounts’’; 

Revising the caption for line FS360 

from ‘‘Investment Management Agency 

Accounts’’ to ‘‘Investment Management 

& Investment Advisory Accounts’’; 

Revising line FS410 to NoninterestBearing Deposits—Personal Trust and 

Agency, Investment Management 

Agency Accounts; 

Revising line FS415 to InterestBearing Deposits—Personal Trust and 

Agency, Investment Management 

Agency Accounts; 

Revising line FS420 to U.S. Treasury 

and U.S. Government Agency 

Obligations—Personal Trust and 

Agency, Investment Management 

Agency Accounts; 

Revising line FS425 to State, County, 

and Municipal Obligations—Personal 

Trust and Agency, Investment 

Management Agency Accounts; 

Revising line FS430 to Common Trust 

Funds and Collective Investment 

Funds—Personal Trust and Agency, 

Investment Management Agency 

Accounts; 

Revising line FS435 to Mutual 

Funds—Equity—Employee Benefit and 

Other Individual Retirement Accounts; 

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Revising line FS440 to Mutual 

Funds—Money Market—All Other 

Accounts; 

Revising line FS445 to Mutual 

Funds—Other—Total; 

Revising line FS450 to Short-Term 

Obligations—Personal Trust and 

Agency, Investment Management 

Agency Accounts; 

Revising line FS455 to Other Notes 

and Bonds—Personal Trust and Agency, 

Investment Management Agency 

Accounts; and 

Revising line FS460 to Common and 

Preferred Stocks—Personal Trust and 

Agency, Investment Management 

Agency Accounts. 

The following 74 line items would be 

added to Schedule FS: 

FS234, IRAs, HSAs, and Similar 

Accounts—Amount of Managed Assets; 

FS235, IRAs, HSAs, and Similar 

Accounts—Amount of Nonmanaged 

Assets; 

FS236, IRAs, HSAs, and Similar 

Accounts—Number of Managed 

Accounts; 

FS237, IRAs, HSAs, and Similar 

Accounts—Number of Nonmanaged 

Accounts; 

FS261, Investment Management and 

Investment Advisory Accounts— 

Amount of Nonmanaged Assets; 

FS263, Investment Management and 

Investment Advisory Accounts— 

Number of Nonmanaged Accounts; 

FS264, Foundations and 

Endowments—Amount of Managed 

Assets; 

FS265, Foundations and 

Endowments—Amount of Nonmanaged 

Assets; 

FS266, Foundations and 

Endowments—Number of Managed 

Accounts; 

FS267, Foundations and 

Endowments—Number of Nonmanaged 

Accounts; 

FS411, Noninterest-Bearing 

Deposits—Employee Benefit and Other 

Individual Retirement Accounts; 

FS412, Noninterest-Bearing 

Deposits—All Other Accounts; 

FS413, Noninterest-Bearing 

Deposits—Total; 

FS416, Interest-Bearing Deposits— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS417, Interest-Bearing Deposits—All 

Other Accounts; 

FS418, Interest-Bearing Deposits— 

Total; 

FS421, U.S. Treasury and U.S. 

Government Agency Obligations— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS422, U.S. Treasury and U.S. 

Government Agency Obligations—All 

Other Accounts; 

FS423, U.S. Treasury and U.S. 

Government Agency Obligations—Total; 

FS426, State, County, and Municipal 

Obligations—Employee Benefit and 

Other Individual Retirement Accounts; 

FS427, State, County, and Municipal 

Obligations—All Other Accounts; 

FS428, State, County, and Municipal 

Obligations—Total; 

FS430, Common Trust Funds and 

Collective Investment Funds—Personal 

Trust and Agency, Investment 

Management Agency Accounts; 

FS431, Common Trust Funds and 

Collective Investment Funds— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS432, Common Trust Funds and 

Collective Investment Funds—All Other 

Accounts; 

FS433, Common Trust Funds and 

Collective Investment Funds—Total; 

FS434, Mutual Funds—Equity— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS435, Mutual Funds—Equity— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS436, Mutual Funds—Equity—All 

Other Accounts; 

FS437, Mutual Funds—Equity—Total; 

FS438, Mutual Funds—Money 

Market—Personal Trust and Agency, 

Investment Management Agency 

Accounts; 

FS439, Mutual Funds—Money 

Market—Employee Benefit and Other 

Individual Retirement Accounts; 

FS440, Mutual Funds—Money 

Market—All Other Accounts; 

FS441, Mutual Funds—Money 

Market—Total; 

FS442, Mutual Funds—Other— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS443, Mutual Funds—Other— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS444, Mutual Funds—Other—All 

Other Accounts; 

FS445, Mutual Funds—Other—Total; 

FS450, Short-Term Obligations— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS451, Short-Term Obligations— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS452, Short-Term Obligations—All 

Other Accounts; 

FS453, Short-Term Obligations— 

Total; 

FS455, Other Notes and Bonds— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS456, Other Notes and Bonds— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS457, Other Notes and Bonds—All 

Other Accounts; 

FS458, Other Notes and Bonds— 

Total; 

FS460, Common and Preferred 

Stocks—Personal Trust and Agency, 

Investment Management Agency 

Accounts; 

FS461, Common and Preferred 

Stocks—Employee Benefit and Other 

Individual Retirement Accounts; 

FS462, Common and Preferred 

Stocks—All Other Accounts; 

FS463, Common and Preferred 

Stocks—Total; 

FS465, Real Estate Mortgages— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS466, Real Estate Mortgages— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS467, Real Estate Mortgages—All 

Other Accounts; 

FS468, Real Estate Mortgages—Total; 

FS470, Real Estate—Personal Trust 

and Agency, Investment Management 

Agency Accounts; 

FS471, Real Estate—Employee Benefit 

and Other Individual Retirement 

Accounts; 

FS472, Real Estate—All Other 

Accounts; 

FS473, Real Estate—Total; 

FS475, Miscellaneous Assets— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS476, Miscellaneous Assets— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS477, Miscellaneous Assets—All 

Other Accounts; 

FS478, Miscellaneous Assets—Total; 

FS480, Investments in Unregistered 

Funds and Private Equity Investments— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS481, Investments in Unregistered 

Funds and Private Equity Investments— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS482, Investments in Unregistered 

Funds and Private Equity Investments— 

All Other Accounts; 

FS483, Investments in Unregistered 

Funds and Private Equity Investments— 

Total; 

FS490, Total Managed Assets— 

Personal Trust and Agency, Investment 

Management Agency Accounts; 

FS491, Total Managed Assets— 

Employee Benefit and Other Individual 

Retirement Accounts; 

FS492, Total Managed Assets—All 

Other Accounts; 

FS493, Total Managed Assets—Total; 

FS495, Investments of Managed 

Fiduciary Accounts in Advised or 

Sponsored Mutual Funds—Market 

Value of Discretionary Investments in 

Proprietary Mutual Funds; 

FS496, Investments of Managed 

Fiduciary Accounts in Advised or 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6095 

Sponsored Mutual Funds—Number of 

Managed Assets Holding Investments in 

Proprietary Mutual Funds; 

FS516, Corporate and Municipal 

Trusteeships—Issues Reported in FS520 

and FS515 that are in Default—Number 

of Issues; and 

FS517, Corporate and Municipal 

Trusteeships—Issues Reported in FS520 

and FS515 that are in Default—Principal 

Amount Outstanding. 

One trade association submitted 

comments on the proposed changes to 

Schedule FS. This commenter requested 

that the effective date for the proposed 

changes to Schedule FS be extended 

from December 31, 2009, to December 

31, 2010, in order to provide vendors 

whose systems track the data reported 

in this schedule additional time for 

system programming revisions. The 

commenter indicated that vendors are 

currently devoting programming 

resources to changes necessitated by the 

joint Securities and Exchange 

Commission and Federal Reserve Board 

Regulation R—Exceptions for Banks 

from the Definition of Broker in the 

Securities Exchange Act of 1934. This 

commenter also stated that some banks 

use multiple systems to track the default 

status of debt issues under corporate 

trusteeships and that moving to a single 

system of record for tracking these debt 

issues would impose significant costs 

and require a longer implementation 

period than proposed. 

After carefully considering these 

comments, OTS has decided to retain 

the December 31, 2009, effective date for 

the proposed changes. OTS is not 

requiring that trust institutions change 

from their use of multiple systems for 

corporate trusteeships or that they 

develop a single system of record for 

such trusteeships. In addition, OTS 

notes that institutions are to start 

complying with Regulation R beginning 

the first day of their fiscal year 

commencing after September 30, 2008 

(i.e., January 1, 2009, for most 

institutions), which implies that 

programming changes should be 

complete or nearing completion. 

Furthermore, as previously stated, the 

agencies’ policy is to permit institutions 

to provide reasonable estimates for any 

new or revised TFR item as of the report 

date for which the new or revised item 

is initially required to be reported. The 

ability to report reasonable estimates 

applies to the Schedule FS revisions 

that will be implemented as of 

December 31, 2009, which will afford 

trust institutions and their vendors 

additional time—either one quarter or 

one year, depending on the item and 

frequency with which a particular 

institution must submit Schedule FS— 

to complete any necessary system 

changes. 

A. IRAs, HSAs, and Other Similar 

Accounts 

IRAs, HSAs, and other similar 

accounts represent a large category of 

individual benefit and retirementrelated accounts administered by trust 

institutions for which OTS does not 

collect specific data. At present, data for 

retirement-related accounts is included 

in the totals reported for ‘‘Other 

retirement accounts’’ and ‘‘Custody and 

safekeeping accounts’’ in the Fiduciary 

and Related Assets section of Schedule 

FS (FS240 through 243 and FS280 and 

281). Significant growth in IRAs and 

HSAs administered by trust institutions 

is expected. IRAs, HSAs, and other 

similar accounts for individuals have 

risk characteristics that differ from 

employee benefit plans covered by the 

Employee Retirement Income Security 

Act (ERISA). To identify trust 

institutions experiencing significant 

changes in the number of and market 

value of assets in these types of 

accounts for supervisory follow-up and 

to monitor both aggregate and 

individual trust institution growth 

trends involving these accounts, OTS 

proposes to add four new line items 

(FS234 through FS237, ‘‘IRAs, HSAs, 

and other similar accounts’’) to the 

Fiduciary and Related Assets section of 

Schedule FS to capture data on IRAs, 

HSAs, and other similar accounts. 

The commenter recommended that 

the data proposed to be reported in new 

lines FS234 through FS237 should be 

reported instead in a new separate 

subitem of Retirement-related Trust and 

Agency Accounts: Employee Benefits, in 

the Fiduciary and Related Assets section 

of Schedule FS. In addition, the 

commenter requested clarification of 

how IRAs, HSAs, and other similar 

accounts held outside the trust 

department on the retail side of an 

institution should be reported in 

Schedule FS, recommending that these 

accounts be excluded. 

At present, IRAs, HSAs, and similar 

accounts that are solely custody and 

safekeeping accounts are reported in 

existing items FS280 and FS281, 

‘‘Custody and safekeeping accounts.’’ 

Custody and safekeeping accounts are 

not considered fiduciary accounts per se 

and are excluded from ‘‘Total fiduciary 

accounts’’ reported in items FS20 

through FS23 of Schedule FS. For this 

reason, OTS does not believe that IRAs, 

HSAs, and similar accounts should be 

aggregated and reported in a new 

subitem of Retirement-related Trust and 

Agency Accounts: Employee Benefits, in 

the Fiduciary and Related Assets section 

of Schedule FS, which is reserved for 

fiduciary accounts. Therefore, OTS is 

implementing new item FS223 though 

FS237, ‘‘IRAs, HSAs, and other similar 

accounts,’’ as proposed. 

Regarding the reporting of IRAs, 

HSAs, and other similar accounts 

maintained outside the trust department 

in the retail side of the institution, OTS 

reiterates that only those activities 

offered through a fiduciary business 

unit should be reported on Schedule FS. 

Therefore, IRAs, HSAs, and other 

similar accounts not offered through a 

fiduciary business unit of an institution 

should not be reported on Schedule FS. 

These institutions should review new 

line item SI900 which inquires whether 

an institution, without trust powers, 

acts as trustee or custodian for 

individual retirement accounts, health 

savings accounts, and other similar 

accounts that are invested in nondeposit products. 

B. Changes to the Type of Assets 

Reported in the Breakdown of Managed 

Assets Held in Fiduciary Accounts by 

Asset Types 

OTS reviewed the types of managed 

assets for which trust institutions 

currently report a breakdown of such 

assets by market value in Memoranda— 

Managed Assets held in Personal Trust 

and Agency Accounts of Schedule FS. 

In this regard, discretionary investments 

in common trust funds (CTFs) and 

collective investment funds (CIFs) are 

not separately reported at present in this 

Memoranda section. Instead, trust 

institutions currently are required to 

allocate the underlying assets of each 

CTF and CIF attributable to managed 

accounts to the individual line items for 

the various types of assets reported in 

this Memorandum section. OTS has 

found this current method of reporting 

investments in CTFs and CIFs to be 

misleading, confusing, and burdensome 

for trust institutions. It requires 

institutions to segregate the underlying 

assets of each CTF and CIF by asset 

type, rather than following the more 

straightforward approach of reporting 

the total value of managed accounts’ 

holdings of investments in CTFs and 

CIFs. Therefore, OTS proposed to end 

the current method of reporting these 

investments in this Memorandum 

section by adding four new line items 

(FS430 through FS433) for investments 

in CTFs and CIFs. These new line items 

will enable OTS to collect data that 

actually reflects the investment choices 

of discretionary fiduciaries, i.e., 

investing in a fund rather than an 

individual asset, while simplifying the 

reporting of these investments. 

6096 Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 

In its comment on this proposed 

change, the commenter asked whether 

both the accounts holding units of CTFs 

and CIFs and the CTFs and CIFs 

themselves should be reported in the 

Fiduciary and Related Assets section of 

Schedule FS and whether double 

counting of CTF and CIF units and CTFs 

and CIFs will result. OTS notes that 

only the value of units in CTFs and CIFs 

held in fiduciary accounts should be 

reported in the Fiduciary and Related 

Assets section of Schedule FS. When 

such units are held by a managed 

fiduciary account, the value of the units 

will be reported in new line items 

FS430 through FS433. Look-through 

reporting of the underlying assets of 

CTFs and CIFs in this Memorandum 

section is being eliminated. Double 

counting of CTF and CIF assets will be 

avoided by limiting the reporting of the 

underlying assets of CTFs and CIFs to 

the existing Memorandum section on 

Collective Investment Funds and 

Common Trust Funds in Schedule FS. 

At present, the asset type for 

‘‘common and preferred stocks’’ in 

Memoranda-Managed Assets held in 

Personal Trust and Agency Accounts, 

includes not only these stocks, but also 

all investments in mutual funds (other 

than money market mutual funds, 

which are reported separately), private 

equity investments, and investments in 

unregistered and hedge funds. 

Investments in mutual funds (other than 

money market mutual funds) have long 

been reported with common and 

preferred stocks. However, over time, 

these investments have gone from being 

a relatively minor investment option for 

managed fiduciary accounts to being 

one of the most significant asset types 

for managed fiduciary accounts. 

As a consequence, OTS lacks specific 

data on discretionary investments in 

mutual funds (other than money market 

mutual funds) despite their distinctive 

differences from investments in 

individual common stocks. Given these 

differences and the growth in mutual 

fund holdings in managed fiduciary 

accounts, OTS proposed to add two new 

subitems in this Memorandum section 

to collect data on investments in equity 

mutual funds and in other (non-money 

market) mutual funds separately from 

common and preferred stocks. None of 

the comments OTS received specifically 

addressed the proposed new subitems 

for mutual funds in this Memorandum 

section. OTS will implement the 

changes as proposed. 

Investments in hedge funds and 

private equity have grown rapidly since 

the implementation of Schedule FS, 

with large institutional investors, e.g., 

large pension plans, increasing their 

allocation to these types of investments 

in order to increase portfolio returns 

and pursue absolute return strategies. 

As mentioned above, these types of 

investments are currently reported as 

‘‘common and preferred stocks’’ in 

Memoranda-Managed Assets Held in 

Personal Trust and Agency Accounts. 

However, given their unique 

characteristics and risks, the increasing 

role such investments are having in 

managed fiduciary portfolios, and the 

agencies’ need to monitor the volume of 

these investments across the trust 

industry and at individual trust 

institutions, OTS also proposed to 

modify this Memoranda section by 

adding four new line items (FS480 

through FS483) in which trust 

institutions would report investments in 

unregistered funds and private equity 

held in managed accounts. 

The commenter suggested that 

investments in unregistered funds and 

private equity and investments in 

common and preferred stocks be 

reported as separate components of 

‘‘Total managed assets held in fiduciary 

accounts,’’ which would eliminate the 

need for the former type of investments 

to be included in two subitems of this 

Memoranda section. OTS agrees with 

this suggestion and is revising this 

Memoranda section to exclude 

investments in unregistered funds and 

private equity from the subitems for 

investments in common and preferred 

stocks. Instead, each type of investment 

will be reported as a separate 

component of ‘‘Total managed assets 

held in fiduciary accounts.’’ 

The commenter also requested that 

OTS clarify the definition of ‘‘private 

equity investments’’ for purposes of 

reporting such investments within this 

Memoranda section and explain 

whether investments in closely-held 

family businesses should be reported as 

‘‘private equity investments.’’ In 

general, for the purposes of this 

Memoranda section, private equity 

investments is an asset class consisting 

of purchased equity securities in 

operating companies that are not 

publicly traded on a stock exchange or 

otherwise registered with the SEC under 

the federal securities laws. Investments 

in closely-held family businesses, 

however, would not be reported as 

‘‘private equity investments’’ if such 

investments represented in-kind 

transfers to a fiduciary account of 

securities in a closely-held family 

business or an increase in a fiduciary 

account’s percentage ownership of an 

existing closely-held family business 

whose securities are held in the 

account. Such investments in closelyheld family businesses would be 

reported in the subitem for 

miscellaneous assets within this 

Memoranda section. 

C. Corporate Trust and Agency 

Accounts 

Trust institutions currently report the 

number of corporate and municipal debt 

issues for which the institution serves as 

trustee and the outstanding principal 

amount of these debt issues in 

Memoranda—Corporate Trust and 

Agency Accounts. One of the major 

risks in the area of corporate trust 

administration involves debt issues that 

are in substantive default. A substantive 

default occurs when the issuer fails to 

make a required payment of interest or 

principal, defaults on a required 

payment into a sinking fund, files for 

bankruptcy, or is declared insolvent. 

The occurrence of a substantive 

default significantly raises the risk 

profile for an indenture trustee of a 

defaulted issue. Thus, to monitor and 

better understand the risk profile of 

trust institutions serving as an indenture 

trustee for debt securities and changes 

therein, OTS proposed to require trust 

institutions to report the number of such 

issues that are in substantive default 

and the principal amount outstanding 

for these issues. 

The commenter suggested 

clarifications to the scope of the 

proposed new reporting requirements 

for debt securities in substantive default 

for which an institution is serving as 

indenture trustee. The commenter 

recommended that the term 

‘‘substantive default’’ should mean than 

an event of default for an issue of 

securities has actually been declared by 

the trustee with notice to investors. In 

addition, the commenter recommended 

that events of default should include 

both technical and payment defaults. 

The commenter also proposed that 

issues in a cure period should not be 

reported as being in substantive default 

and, in the case of private placement 

leases, no substantive default should be 

reported when the trustee is required to 

delay or waive the declaration of an 

event of default unless requested to do 

so in writing and no such request has 

been made. The commenter further 

suggested that, once the trustee’s duty 

with respect to a defaulted issue is 

completed, the issue no longer should 

be reported as defaulted. Finally, the 

commenter requested that OTS confirm 

that ‘‘amount outstanding’’ means the 

unpaid principal balance or certificate 

balance. 

After considering these 

recommendations, OTS agrees that 

issues should not be reported as being 

in substantive default until such default 

Federal Register / Vol. 74, No. 22 / Wednesday, February 4, 2009 / Notices 6097 

has been declared by the trustee. 

Similarly, issues should not be reported 

as being in substantive default during a 

cure period, provided the bond 

indenture provides for a cure period. 

Private placement leases where the 

trustee is required to delay or waive the 

declaration of an event of default, unless 

requested in writing to make such 

declaration, should not be reported as 

being in substantive default, provided 

such written request has not been made. 

Once a trustee’s duties with respect to 

an issue in substantive default have 

been completed, the issue should no 

longer be reported as being in default. 

As for the meaning of the term ‘‘amount 

outstanding,’’ the instructions for this 

Memoranda section currently refer to 

the par value of outstanding debt 

securities, except for zero-coupon bonds 

for which ‘‘amount outstanding’’ is 

described as the maturity amount. As 

suggested by the commenter, the 

instructions for this Memorandum 

section will be revised to clarify that 

‘‘amount outstanding’’ for debt 

instruments means the unpaid principal 

balance. For trust preferred securities, 

the ‘‘amount outstanding’’ would be the 

redemption price. 

OTS, however, has decided not to 

treat events of technical default as 

falling within the scope of the proposed 

new line items (FS516 and FS517) on 

debt issues in default for which the 

institution serves as trustee. As 

previously stated, OTS believes that a 

substantive default significantly raises 

the risk profile for an indenture trustee 

of a defaulted issue. In such cases, every 

action or failure to act by the trustee is 

intensely scrutinized by bondholders of 

the defaulted issue. Moreover, an event 

of substantive default often results in 

the incurrence of significant expense 

and the distraction of managerial time. 

For these reasons, OTS proposed to 

collect data on substantive defaults on 

issues for which the reporting trust 

institution serves as trustee under a 

bond indenture. OTS does not believe 

that events of technical default 

necessarily entail the heightened degree 

of risk that substantive defaults do. 

Therefore, OTS does not consider it 

necessary to monitor such events on a 

system-wide basis. The agencies will 

continue to monitor the occurrence of 

events of technical default and an 

institution’s administration of such 

events during periodic on-site 

examinations. 

In addition, OTS proposed to revise 

the instructions for reporting on 

corporate trust accounts to state that 

issues of trust preferred stock for which 

the institution is trustee should be 

included in the amounts reported for 

corporate and municipal trusteeships. 

No comments were received on this 

aspect of the corporate trust reporting 

proposal and OTS will implement this 

instructional change as proposed. 

D. Instructional Clarifications 

OTS proposed to clarify the 

instructions for reporting: 

• The managed and non-managed 

assets and number of managed and nonmanaged accounts for defined 

contribution plans and defined benefit 

plans in items FS220 through FS233, by 

indicating that employee benefit 

accounts for which the trust institution 

serves as directed trustee should be 

reported as non-managed accounts; and 

• The number of, and market value of 

assets held in, collective investment 

funds and common trust funds in 

Memoranda—Collective Investment 

Funds and Common Trust Funds by 

stating that the number of funds should 

be reported, not the number of assets 

held by these funds, the number of 

participants, or the number of accounts 

invested in the funds. 

No comments were received on these 

proposed instructional clarifications, 

which will be implemented as 

proposed. 

However, the commenter requested 

clarification of the term ‘‘managed 

assets’’ used in Schedule FS. The 

commenter asked whether discretionary 

accounts in which the management of 

all or a portion of the account is 

delegated to a registered investment 

advisor, whether affiliated or 

unaffiliated with the reporting trust 

institution, should be considered 

managed or non-managed assets. The 

commenter also sought clarification as 

to whether non-discretionary accounts 

that are managed by a registered 

investment adviser would be reported as 

custody or non-managed accounts. 

The current instructions for Schedule 

FS state that an account is considered 

managed if the institution has 

investment discretion over the assets of 

the account. Investment discretion is 

defined as the sole or shared authority 

(whether or not that authority is 

exercised) to determine what securities 

or other assets to purchase or sell on 

behalf of a fiduciary related account. An 

institution that delegates its authority 

over investments and an institution that 

receives delegated authority over 

investments are both deemed to have 

investment discretion. Therefore, 

whether an account where investment 

discretion has been delegated to a 

registered investment adviser, whether 

affiliated or unaffiliated with the 

reporting institution, should be reported 

as a managed account depends on 

whether the delegation of investment 

authority to the registered investment 

adviser was made pursuant to the 

exercise of investment discretion by the 

reporting institution. If so, the account 

is deemed to be a managed account by 

the reporting institution. Otherwise, the 

account would be a non-managed 

account for purposes of Schedule FS. 

Dated: January 29, 2009. 

Deborah Dakin, 

Senior Deputy Chief Counsel, Regulations and 

Legislation Division. 

[FR Doc. E9–2274 Filed 2–3–09; 8:45 am] 

BILLING CODE 6720–01–P