40664 Federal Register / Vol. 65, No. 127 / Friday, June 30, 2000 / Notices

EXPORT-IMPORT BANK OF THE

UNITED STATES

[Public Notice 41]

Agency Information Collection

Activities; Proposed Collection;

Common Request

AGENCY: Export-Import Bank of the

United States (Ex-Im Bank).

ACTION: Notice and request for

comments.

SUMMARY: Ex-Im Bank as a part of its

continuing effort to reduce paperwork

and respondent burden, invites the

general public and other Federal

agencies to take this opportunity to

comment on the proposed information

collection, as required by the Paperwork

Reduction Act of 1995.

DATES: Written comments should be

received on or before August 28, 2000

to be assured of consideration.

ADDRESSES: Direct all written comments

and requests for additional information

to Carlista Robinson, 811 Vermont

Avenue, N.W., Room 764, Washington,

D.C. 20571, (202) 565-3351.

SUPPLEMENTARY INFORMATION:

Title: U.S. Small Business

Administration, Export-Import Bank of

the United States, Joint Application for

Working Capital Guarantee.

OMB Number: 3048–0003.

Form Number: EIB–SBA 84–1 (Rev. 8/

2000).

Type of Review: Revision.

Abstract: The proposed form is to be

used by commercial banks and other

lenders as well as U.S. Exporters in

applying for guarantees on working

capital loans advanced by the lenders to

U.S. exporters.

Frequency of use: Upon application

for guarantees on working capital loans

advanced by the lenders to U.S.

exporters.

Respondents: Commercial banks and

other lenders, as well as U.S. exporters

throughout the United States.

Estimated total number of annual

responses: 600.

Estimated time per respondent: 2

hours.

Estimated total number of hours

needed to fill out the form: 1200.

Request for comment: Comments are

invited on: (a) Whether the collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information shall have practical utility;

(b) the accuracy of the agency’s estimate

of the burden of the collection of

information; (c) ways to enhance the

quality, utility, and clarity of the

information to be collected; and (d)

ways to minimize the burden of the

collection of information on

respondents, including through the use

of automated collection techniques or

other forms of information technology.

Dated: June 26, 2000.

Carlista D. Robinson,

Agency Clearance Officer.

[FR Doc. 00–16590 Filed 6–29–00; 8:45 am]

BILLING CODE 6690–01–M

FEDERAL DEPOSIT INSURANCE

CORPORATION

Differences in Capital and Accounting

Standards Among the Federal Banking

and Thrift Agencies; Report to

Congressional Committees

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Report to the Committee on

Banking and Financial Services of the

U.S. House of Representatives and to the

Committee on Banking, Housing, and

Urban Affairs of the United States

Senate regarding differences in capital

and accounting standards among the

Federal banking and thrift agencies.

SUMMARY: This report has been prepared

by the FDIC pursuant to Section 37(c) of

the Federal Deposit Insurance Act (12

U.S.C. 1831n(c)). Section 37(c) requires

each federal banking agency to report to

the Committee on Banking and

Financial Services of the House of

Representatives and to the Committee

on Banking, Housing, and Urban Affairs

of the Senate any differences between

any accounting or capital standard used

by such agency and any accounting or

capital standard used by any other such

agency. The report must also contain an

explanation of the reasons for any

discrepancy in such accounting and

capital standards and must be published

in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Robert F. Storch, Chief, Accounting

Section, Division of Supervision,

Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, D.C.

20429, telephone (202) 898–8906.

SUPPLEMENTARY INFORMATION: The text of

the report follows:

Report to the Committee on Banking

and Financial Services of the U.S.

House of Representatives and to the

Committee on Banking, Housing, and

Urban Affairs of the United States

Senate Regarding Differences in Capital

and Accounting Standards Among the

Federal Banking and Thrift Agencies

A. Introduction

The Federal Deposit Insurance

Corporation (FDIC) has prepared this

report pursuant to Section 37(c) of the

Federal Deposit Insurance Act. Section

37(c) requires the agency to submit a

report to specified Congressional

Committees describing any differences

in regulatory capital and accounting

standards among the federal banking

and thrift agencies, including an

explanation of the reasons for these

differences. Section 37(c) also requires

the FDIC to publish this report in the

Federal Register. This report covers

differences existing during 1999 and

developments affecting these

differences.

The FDIC, the Board of Governors of

the Federal Reserve System (FRB), and

the Office of the Comptroller of the

Currency (OCC) (hereafter, the banking

agencies) have substantially similar

leverage and risk-based capital

standards. While the Office of Thrift

Supervision (OTS) employs a regulatory

capital framework that also includes

leverage and risk-based capital

requirements, it differs in some respects

from that of the banking agencies.

Nevertheless, the agencies view the

leverage and risk-based capital

requirements as minimum standards

and most institutions are expected to

operate with capital levels well above

the minimums, particularly those

institutions that are expanding or

experiencing unusual or high levels of

risk.

The banking agencies, under the

auspices of the Federal Financial

Institutions Examination Council

(FFIEC), have developed uniform

Reports of Condition and Income (Call

Reports) for all insured commercial

banks and FDIC-supervised savings

banks. The OTS requires each savings

association to file the Thrift Financial

Report (TFR). The reporting standards

for recognition and measurement in

both the Call Report and the TFR are

consistent with generally accepted

accounting principles (GAAP). Thus,

there are no significant differences in

reporting standards among the agencies.

However, two minor differences remain

between the standards of the banking

agencies and those of the OTS.

Section 303 of the Riegle Community

Development and Regulatory

Federal Register / Vol. 65, No. 127 / Friday, June 30, 2000 / Notices 40665

1For further information on these previous

differences in capital standards, please refer to the

FDIC’s Report Regarding Capital and Accounting

Differences Among the Federal Banking and Thrift

Agencies for 1998 (64 FR 26962).

2When assets are sold with limited recourse, the

banking and thrift agencies’ risk-based capital

standards limit the amount of capital that must be

maintained against this exposure to the less of the

amount of the recourse retained (e.g., through the

retention of a subordinated interest) or the amount

of risk-based capital that would otherwise be

required to be held against the assets that were sold,

i.e., the full effective risk-based capital charge. This

is known as the ‘‘low-level recourse’’ rule.

Improvement Act of 1994 (12 U.S.C.

4803) requires the banking agencies and

the OTS to conduct a systematic review

of their regulations and written policies

in order to improve efficiency, reduce

unnecessary costs, and eliminate

inconsistencies. It also directs the four

agencies to work jointly to make

uniform all regulations and guidelines

implementing common statutory or

supervisory policies. The results of

these efforts must be ‘‘consistent with

the principles of safety and soundness,

statutory law and policy, and the public

interest.’’

Effective April 1, 1999, the four

agencies amended their capital

standards to adopt a uniform minimum

leverage capital requirement and

uniform risk-based capital standards for

the treatment of presold residential

construction loans, junior liens on oneto-four family residential properties,

and investments in mutual funds.1 The

four agencies’ ongoing efforts to

eliminate other differences among their

regulatory capital standards are

discussed in the following section.

B. Differences in Capital Standards

Among the Federal Banking and Thrift

Agencies

B.1. Capital Requirements for Recourse

Arrangements

B.1.a. Senior-Subordinated

Structures—Some asset securitization

structures involve the creation of senior

and subordinated classes of securities or

other financial instruments. When a

bank originates such a transaction and

retains a subordinated interest, the

banking agencies generally require that

the bank maintain risk-based capital

against its subordinated interest plus all

more senior interests unless the lowlevel recourse rule applies.2 However,

when a bank purchases a subordinated

interest in a pool of assets that it did not

own, the banking agencies assign the

investment in the subordinated interest

to the 100 percent risk weight category.

In general, unless the low-level

recourse rule applies, the OTS requires

a thrift that holds the subordinated

interest in a senior-subordinated

structure to maintain capital against the

subordinated interest plus all more

senior interests regardless of whether

the subordinated interest has been

retained or has been purchased.

On March 8, 2000, the banking and

thrift agencies published a proposal

that, among other provisions, generally

would treat both retained and

purchased subordinated interests

similarly for risk-based capital

purposes, i.e., banks and thrifts would

be required to hold capital against the

subordinated interest plus all more

senior interests unless the low-level

recourse rule applies. The proposal also

includes a multi-level approach for

determining the capital requirements for

asset securitizations. The multi-level

approach would vary the risk-based

capital requirements for positions in

securitizations, including subordinated

interests, according to their relative risk

exposure. The comment period for the

proposal ended on June 7, 2000. After

the agencies evaluate the comments

received, they will determine how to

proceed with their joint proposal.

B.1.b. Recourse Servicing—The right

to service loans and other financial

assets may be retained when the assets

are sold. This right also may be acquired

from another entity. Regardless of

whether servicing rights are retained or

acquired, recourse is present whenever

the servicer must absorb credit losses on

the assets being serviced. The banking

agencies and the OTS require an

institution to maintain risk-based

capital against the full amount of assets

sold by the institution if the institution,

as servicer, must absorb credit losses on

those assets. Additionally, the OTS

applies a capital charge to the full

amount of assets being serviced by a

thrift that has purchased the servicing

from another party if the thrift is

required to absorb credit losses on the

assets being serviced.

The agencies’ March 2000 risk-based

capital proposal would require banks

that purchase loan servicing rights

which provide loss protection to the

owners of the serviced loans to begin to

hold capital against those loans, thereby

making the risk-based capital treatment

of these servicing rights uniform for

banks and savings associations. As

mentioned above, after evaluating the

comments received on the proposal, the

agencies will determine how to proceed

with the proposal.

B.2. Interest Rate Risk

Section 305 of the FDIC Improvement

Act of 1991 mandates that the agencies’

risk-based capital standards take

adequate account of interest rate risk. In

August 1995, each of the banking

agencies amended its capital standards

to specifically include an assessment of

a bank’s interest rate risk, as measured

by its exposure to declines in the

economic value of its capital due to

changes in interest rates, in the

evaluation of bank capital adequacy. In

June 1996, the banking agencies issued

a Joint Agency Policy Statement on

Interest Rate Risk that provides

guidance on sound practices for

managing interest rate risk. This policy

statement does not establish a

standardized measure of interest rate

risk nor does it create an explicit capital

charge for interest rate risk. Instead, the

policy statement identifies the standards

that the banking agencies will use to

evaluate the adequacy and effectiveness

of a bank’s interest rate risk

management.

In 1993, the OTS adopted a final rule

that adds an interest rate risk

component to its risk-based capital

standards. Under this rule, savings

associations with a greater than normal

interest rate exposure must take a

deduction from the total capital

available to meet their risk-based capital

requirement. The deduction is equal to

one half of the difference between the

institution’s actual measured exposure

and the normal level of exposure. The

OTS has partially implemented this rule

by formalizing the review of interest rate

risk; however, no deductions from

capital are being made. Thus, the

regulatory capital approach to interest

rate risk adopted by the OTS differs

from that of the banking agencies.

B.3. Subsidiaries

The banking agencies generally

consolidate all significant majorityowned subsidiaries of the parent bank

for regulatory capital purposes. The

purpose of this practice is to assure that

capital requirements are related to all of

the risks to which the bank is exposed.

For subsidiaries that are not

consolidated on a line-for-line basis,

their balance sheets may be

consolidated on a pro-rata basis, bank

investments in such subsidiaries may be

deducted entirely from capital, or the

investments may be risk-weighted at

100 percent, depending upon the

circumstances. These options for

handling subsidiaries for purposes of

determining the capital adequacy of the

parent bank provide the banking

agencies with the flexibility necessary to

ensure that institutions maintain capital

levels that are commensurate with the

actual risks involved.

Under the OTS’ capital guidelines, a

statutorily mandated distinction is

drawn between subsidiaries engaged in

activities that are permissible for

40666 Federal Register / Vol. 65, No. 127 / Friday, June 30, 2000 / Notices

national banks and subsidiaries engaged

in ‘‘impermissible’’ activities for

national banks. For regulatory capital

purposes, subsidiaries of savings

associations that engage only in

permissible activities are consolidated

on a line-for-line basis, if majorityowned, and on a pro rata basis, if

ownership is between 5 percent and 50

percent. For subsidiaries that engage in

impermissible activities, investments in,

and loans to, such subsidiaries are

deducted from assets and capital when

determining the capital adequacy of the

parent.

B.4. Servicing Assets and Intangible

Assets

The four agencies’ capital rules permit

servicing assets and purchased credit

card relationships to count toward

capital requirements, subject to certain

limits. The aggregate regulatory capital

limit on these two categories of assets is

100 percent of Tier 1 capital. However,

within this overall limit, nonmortgage

servicing assets are combined with

purchased credit card relationships and

this combined amount is limited to no

more than 25 percent of an institution’s

Tier 1 capital. Before applying these

Tier 1 capital limits, mortgage servicing

assets, nonmortgage servicing assets,

and purchased credit card relationships

are each first limited to the lesser of 90

percent of their fair value or 100 percent

of their book value (net of any valuation

allowances). Any servicing assets and

purchased credit card relationships that

exceed the relevant limits, as well as all

other intangible assets such as goodwill

and core deposit intangibles, are

deducted from capital and assets in

calculating an institution’s Tier 1

capital.

Although the four agencies’ regulatory

capital treatment of servicing assets and

intangible assets is fundamentally the

same, the OTS’ capital rules contain two

differences from the banking agencies’

rules in this area. However, with the

passage of time, these two differences

have become relatively insignificant.

Under its rules, the OTS has

grandfathered, i.e., does not deduct from

regulatory capital, (a) core deposit

intangibles acquired before February

1994 up to 25 percent of Tier 1 capital

and (b) all purchased mortgage servicing

rights acquired before February 1990.

B.5. Collateralized Transactions

The FRB and the OCC assign a zero

percent risk weight to claims

collateralized by cash on deposit in the

institution or by securities issued or

guaranteed by the U.S. Government or

the central governments of countries

that are members of the Organization of

Economic Cooperation and

Development (OECD), provided a

positive margin of collateral protection

is maintained daily.

The FDIC and the OTS assign a 20

percent risk weight to claims

collateralized by cash on deposit in the

institution or by securities issued or

guaranteed by the U.S. Government or

OECD central governments.

As part of the Section 303 review of

their capital standards, the banking and

thrift agencies issued a joint proposal in

August 1996 that would permit

collateralized claims that meet criteria

that are uniform among all four agencies

to be eligible for a zero percent risk

weight, thereby eliminating the current

difference among the agencies. In

general, this proposal would allow

institutions supervised by the FDIC and

the OTS to hold less capital for

transactions collateralized by cash or

U.S. or OECD government securities.

The agencies are continuing to discuss

how they should proceed in order to

implement a uniform risk-based capital

treatment for collateralized transactions.

However, due to the amount of time

since the issuance of their 1996 joint

proposal, the agencies would likely

need to issue another proposed rule for

collateralized transactions before they

could move forward with a final rule.

B.6. Noncumulative Perpetual Preferred

Stock

Under the banking and thrift agencies’

capital standards, noncumulative

perpetual preferred stock is a

component of Tier 1 capital. The FDIC’s

capital standards define noncumulative

perpetual preferred stock as perpetual

preferred stock where the issuer has the

option to waive the payment of

dividends and where the dividends so

waived do not accumulate to future

periods and do not represent a

contingent claim on the issuer. Under

the FRB’s capital standards, perpetual

preferred stock is noncumulative if the

issuer has the ability and legal right to

defer or eliminate preferred dividends.

For these two agencies, for a perpetual

preferred stock issue to be considered

noncumulative, the issue may not

permit the accruing or payment of

unpaid dividends in any form,

including the form of dividends payable

in common stock. Thus, if the issuer of

perpetual preferred stock is required to

pay dividends in a form other than cash

when cash dividends are not or cannot

be paid, the issuer does not have the

option to waive or eliminate dividends

and the stock would not qualify as

noncumulative. The OCC’s capital

standards do not explicitly define

noncumulative perpetual preferred

stock, but the OCC normally has not

considered perpetual preferred stock

issues with this type of dividend

requirement to be noncumulative.

The OTS defines as noncumulative

those issues of perpetual preferred stock

where the unpaid dividends are not

carried over to subsequent dividend

periods. This definition does not

address the issuer’s ability to waive

dividends. As a result, the OTS has

permitted perpetual preferred stock

issues that require the payment of

dividends in the form of stock in the

issuer when cash dividends are not paid

to qualify as noncumulative.

B.7. Limitation on Subordinated Debt

and Limited-Life Preferred Stock

Consistent with the Basel Accord, the

internationally agreed-upon risk-based

capital framework which the banking

agencies’ risk-based capital standards

implement, the banking agencies limit

the amount of subordinated debt and

intermediate-term preferred stock that

may be treated as part of Tier 2 capital

to an amount not to exceed 50 percent

of Tier 1 capital. In addition, all

maturing capital instruments must be

discounted by 20 percent in each of the

last five years before maturity. The

banking agencies adopted this approach

in order to emphasize equity versus debt

in the assessment of capital adequacy.

The OTS has no limitation on the

ratio of maturing capital instruments as

part of Tier 2 capital. Furthermore, for

all maturing instruments issued after

November 7, 1989, thrifts have the

option of using either (a) the

discounting approach used by the

banking regulators, or (b) an approach

which allows for the full inclusion of all

such instruments provided that the

amount maturing in any one year does

not exceed 20 percent of the thrift’s total

capital. As for maturing capital

instruments issued on or before

November 7, 1989, the OTS has

grandfathered them with respect to the

discounting requirement.

B.8. Privately-Issued Mortgage-Backed

Securities

The banking agencies, in general,

place privately-issued mortgage-backed

securities in either the 50 percent or 100

percent risk-weight category, depending

upon the appropriate risk category of

the underlying assets. However,

privately-issued mortgage-backed

securities, if collateralized by

government agency or governmentsponsored agency securities, are

generally assigned to the 20 percent risk

weight category.

The OTS assigns privately-issued

high-quality mortgage-related securities

Federal Register / Vol. 65, No. 127 / Friday, June 30, 2000 / Notices 40667

to the 20 percent risk weight category.

In general, these are privately-issued

mortgage-backed securities that are

rated in one of the two highest rating

categories, e.g., AA or better, by at least

one nationally recognized statistical

rating organization.

The four agencies’ previously

mentioned March 8, 2000, proposed

risk-based capital amendments include

a multi-level approach for determining

the capital requirements for positions in

securitizations, including privatelyissued mortgage-backed securities,

according to their relative risk exposure.

Under this approach, mortgage-backed

securities in the two highest rating

categories would be assigned to the 20

percent risk category. If the agencies

were to adopt this approach in any final

rule resulting from the proposal, this

interagency difference would be

eliminated.

B.9. Nonresidential Construction and

Land Loans

The banking agencies assign loans for

nonresidential real estate development

and construction purposes to the 100

percent risk weight category. The OTS

generally assigns these loans to the same

100 percent risk category. However, if

the amount of the loan exceeds 80

percent of the fair value of the property,

the OTS deducts the excess portion

from assets and total capital.

B.10. ‘‘Covered Assets’’

The banking agencies generally place

assets subject to guarantee arrangements

by the FDIC or the former Federal

Savings and Loan Insurance Corporation

in the 20 percent risk weight category.

The OTS places these ‘‘covered assets’’

in the zero percent risk-weight category.

B.11. Pledged Deposits and

Nonwithdrawable Accounts

The OTS’ capital standards permit

savings associations to include pledged

deposits and nonwithdrawable accounts

that meet OTS’ criteria, Income Capital

Certificates, and Mutual Capital

Certificates in regulatory capital.

Instruments such as pledged deposits,

nonwithdrawable accounts, Income

Capital Certificates, and Mutual Capital

Certificates do not exist in the banking

industry and are not addressed in the

banking agencies’ capital standards.

C. Differences in Accounting Standards

Among the Federal Banking and Thrift

Agencies

C.1. Push Down Accounting

Push down accounting is the

establishment of a new accounting basis

for a depository institution in its

separate financial statements as a result

of a substantive change in control.

Under push down accounting, when a

depository institution is acquired in a

purchase (but not in a pooling of

interests), yet retains its separate

corporate existence, the assets and

liabilities of the acquired institution are

restated to their fair values as of the

acquisition date. These values,

including any goodwill, are reflected in

the separate financial statements of the

acquired institution as well as in any

consolidated financial statements of the

institution’s parent.

The banking agencies require push

down accounting when there is at least

a 95 percent change in ownership. This

approach is generally consistent with

accounting interpretations issued by the

staff of the Securities and Exchange

Commission.

The OTS requires push down

accounting when there is at least a 90

percent change in ownership.

C.2. Negative Goodwill

Under Accounting Principles Board

Opinion No. 16, ‘‘Business

Combinations,’’ negative goodwill arises

when the fair value of the net assets

acquired in a purchase business

combination exceeds the cost of the

acquisition and a portion of this excess

remains after the values otherwise

assignable to the acquired noncurrent

assets have been reduced to zero.

The banking agencies require negative

goodwill to be reported as a liability on

the balance sheet and do not permit it

to be netted against any goodwill that is

included as an asset. This ensures that

all goodwill assets are deducted in

regulatory capital calculations

consistent with the Basel Accord.

The OTS permits negative goodwill to

offset goodwill assets on the balance

sheet.

Dated at Washington, D.C., this 26th day of

June, 2000.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 00–16575 Filed 6–29–00; 8:45 am]

BILLING CODE 6714–01–P

FEDERAL RESERVE

Sunshine Act meeting; Notice

AGENCY HOLDING THE MEETING: Board of

Governors of the Federal Reserve

System.

TIME AND DATE: 10:00 a.m., Wednesday,

July 5, 2000.

PLACE: Marriner S. Eccles Federal

Reserve Board Building, 20th and C

Streets, N.W., Washington, D.C. 20551.

STATUS: Closed.

MATTERS TO BE CONSIDERED: 

1. Personnel actions (appointments,

promotions, assignments,

reassignments, and salary actions)

involving individual Federal Reserve

System employees.

2. Any matters carried forward from a

previously announced meeting.

CONTACT PERSON FOR MORE INFORMATION:

Lynn S. Fox, Assistant to the Board;

202–452–3204.

SUPPLEMENTARY INFORMATION: You may

call 202–452–3206 beginning at

approximately 5 p.m. two business days

before the meeting for a recorded

announcement of bank and bank

holding company applications

scheduled for the meeting; or you may

contact the Board’s Web site at http://

www.federalreserve.gov for an

electronic announcement that not only

lists applications, but also indicates

procedural and other information about

the meeting.

Dated: June 28, 2000.

Robert deV. Frierson,

Associate Secretary of the Board.

[FR Doc. 00–16714 Filed 6–28–00; 10:44 am]

BILLING CODE 6210–01–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Communicable Diseases Advisory

Council; Establishment

AGENCY: Department of Health and

Human Services.

ACTION: Notice of establishment of

advisory council.

SUMMARY: The Secretary of Health and

Human Services has established the

Communicable Diseases Advisory

Council (CDAC) to provide advice on

communicable diseases, regulations,

and related matters, formerly provided

by the National Advisory Health

Council (NAHC) for control of

communicable diseases pursuant to

section 361 of the Public Health Service

(PHS) Act. The members of the CDAC

are the Assistant Secretary for Health,

the Surgeon General of the Public

Health Service, the Director of the

National Institutes of Health, the

Director of the Centers for Disease

Control and Prevention, the

Commissioner of Food and Drugs, the

Director of the National Institute of

Allergy and Infectious Diseases, and the

Director of the National Center for

Infectious Diseases. The CDAC is

chaired by the Assistant Secretary for

Health. Section 361 of the PHS Act (42

U.S.C. 264) requires certain advisory