[Federal Register Volume 62, Number 191 (Thursday, October 2, 1997)]
[Notices]
[Pages 51715-51720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26131]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

Federal Reserve System

Federal Deposit Insurance Corporation


Proposed Agency Information Collection Activities; Comment 
Request

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

ACTION: Notice and request for comment.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act of 1995 (44 U.S.C. chapter 35), the OCC, the Board, and the FDIC 
(the ``agencies'') may not conduct or sponsor, and the respondent is 
not required to respond to, and information collection that has been 
extended, revised, or implemented on or after October 1, 1995, unless 
it displays a currently valid Office of Management and Budget (OMB) 
control number. The Federal Financial Institutions Examination Council 
(FFIEC), of which the agencies are members, has approved the agencies' 
publication for public comment of proposed revisions to the 
Consolidated Reports of Condition and Income (Call Report), which are 
currently approved collections of information. At the end of the 
comment period, the comments and recommendations received will be 
analyzed to determine the extent to which the FFIEC should modify the 
proposed revisions prior to giving its final approval. The agencies 
will then submit the revisions to OMB for review and approval.

DATES: Comments must be submitted on or before December 1, 1997.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the agencies. All comments, which should refer to the OMB 
control number(s), will be shared among the agencies.
    OCC: Written comments should be submitted to the Communications 
Division, Third Floor, Office of the Comptroller of the Currency, 250 E 
Street, S.W., Washington, D.C. 20219; Attention: Paperwork Docket No. 
1557-0081 (FAX number (202) 874-5274; Internet address: 
REGS.<a href="/cdn-cgi/l/email-protection#0a696567676f647e794a656969247e786f6b79246d657c"><span class="__cf_email__" data-cfemail="fd9e9290909893898ebd929e9ed3898f989c8ed39a928b">[email protected]</span></a>). Comments will be available for inspection 
and photocopying at that address.
    Board: Written comments should be addressed to Mr. William W. 
Wiles, Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, N.W., Washington, D.C. 20551, or delivered to the 
Board's mail room between 8:45 a.m. and 5:15 p.m., and to the security 
control room outside of those hours. Both the mail room and the 
security control room are accessible from the courtyard entrance on 
20th Street between Constitution Avenue and C Street, N.W. Comments 
received may be inspected in room M-P-500 between 9:00 a.m. and 5:00 
p.m., except as provided in section 261.8 of the Board's Rules 
Regarding Availability of Information, 12 CFR 261.8(a).
    FDIC: Written comments should be addressed to Robert E. Feldman, 
Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance 
Corporation, 550 17th Street, N.W., Washington, D.C. 20429. Comments 
may be hand delivered to the guard station at the rear of the 550 17th 
Street Building (located on F Street ), on business days between 7:00 
a.m. and 5:00 p.m. (Fax number: (202) 898-3838; Internet address: 
<a href="/cdn-cgi/l/email-protection#2f4c4042424a415b5c6f494b464c01484059"><span class="__cf_email__" data-cfemail="f1929e9c9c949f8582b197959892df969e87">[email protected]</span></a>).

[[Page 51716]]

Comments may be inspected and photocopied in the FDIC Public 
Information Center, Room 100, 801 17th Street, N.W., Washington, D.C., 
between 9:00 a.m. and 4:30 p.m. on business days.
    A copy of the comments may also be submitted to the OMB desk 
officer for the agencies: Alexander Hunt, Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 3208, Washington, D.C. 20503.

FOR FURTHER INFORMATION CONTACT:
A copy of the proposed revisions to the collections of information may 
be requested from any of the agency clearance officers whose names 
appear below.
    OCC: Jessie Gates, OCC Clearance Officer, (202) 874-5090, 
Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency, 250 E Street, S.W., Washington, D.C. 
20219.
    Board: Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829, 
Division of Research and Statistics, Board of Governors of the Federal 
Reserve System, 20th and C Streets, NW., Washington, DC 20551. 
Telecommunications Device for the Deaf (TDD) users may contact Diane 
Jenkins, (202) 452-3544, Board of Governors of the Federal Reserve 
System, 20th and C Streets, NW., Washington, DC 20551.
    FDIC: Steven F. Hanft, FDIC Clearance Officer, (202) 898-3907, 
Office of the Executive Secretary, Federal Deposit Insurance 
Corporation, 550 17th Street NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION: Proposal to revise the following currently 
approved collections of information:
    Title: Consolidated Reports of Condition and Income.
    Form Number: FFIEC 031, 032, 033,034.\1\
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    \1\ The FFIEC 031 report form is filed by banks with domestic 
and foreign offices. The FFIEC 032 report form is filed by banks 
with domestic offices only and total assets of $300 million or more. 
The FFIEC 033 report form is filed by banks with domestic offices 
only and total assets of $100 million or more but less than $300 
million. The FFIEC 034 report form is filed by banks with domestic 
offices only and total assets of less than $100 million.
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For OCC

    OMB Number: 1557-0081.
    Frequency of Response: Quarterly.
    Affected Public: National Banks.
    Estimated Number of Respondents: 2,700 national banks.
    Estimated Time per Response: 40.34 burden hours.
    Estimated Total Annual Burden: 435,672 burden hours.

For Board

    OMB Number: 7100-0036.
    Frequency of Response: Quarterly.
    Affected Public: State Member Banks.
    Estimated Number of Respondents: 1,002 state member banks.
    Estimated Time per Response: 46.46 burden hours.
    Estimated Total Annual Burden: 186,215 burden hours.

For FDIC

    OMB Number: 3064-0052.
    Frequency of Response: Quarterly.
    Affected Public: Insured State Nonmember Commercial and Savings 
Banks.
    Estimated Number of Respondents: 6,374 insured state nonmember 
commercial and savings banks.
    Estimated Time per Response: 30.27 burden hours.
    Estimated Total Annual Burden: 771,859 burden hours.
    The estimated time per response is an average which varies by 
agency because of differences in the composition of the banks under 
each agency's supervision (e.g., size distribution of banks, types of 
activities in which they are engaged, and number of banks with foreign 
offices). The time per response for a bank is estimated to range from 
15 to 400 hours, depending on individual circumstances.

General Description of Report

    This information collection is mandatory: 12 U.S.C. 161 (for 
national banks), 12 U.S.C. 324 (for state member banks), and 12 U.S.C. 
1817 (for insured state nonmember commercial and savings banks). Except 
for select sensitive items, this information collection is not given 
confidential treatment. Small businesses (i.e., small banks) are 
affected.

Abstract

    Consolidated Reports of Condition and Income are filed quarterly 
with the agencies for their use in monitoring the condition and 
performance of reporting banks and the industry as a whole. The reports 
are also used to calculate banks' deposit insurance and Financing 
Corporation assessments and for monetary policy and other public policy 
purposes.

Current Actions

    The reporting frequency for the ``Preferred deposits'' item would 
be changed from quarterly to annually and the level of detail in the 
trading assets and liabilities schedule generally applicable only to 
larger banks would be reduced. Existing items for ``high-risk mortgage 
securities'' and ``structured notes'' would be replaced by items for 
``mortgage-backed securities backed by closed-end first lien 1-4 family 
residential mortgages'' and ``other securities'' whose price volatility 
in response to specified interest rate changes exceeds a specified 
threshold level. New items would be added for reporting on transactions 
with affiliates, low level recourse transactions, and (on the FFIEC 031 
and 032 report forms only) capital requirements for market risk. The 
reporting requirements relating to allowances and provisions for credit 
losses would be clarified. For banks with foreign offices, holdings of 
available-for-sale securities in the domestic office assets and 
liabilities schedule would begin to be reported on a cost basis rather 
than at fair value. The categorization of securitized consumer loans 
for the purchase of light trucks and vans for personal use in two 
Memorandum items collected annually from larger banks also would be 
revised.
    Type of Review: Revision.
    The proposed revisions to the Consolidated Reports of Condition and 
Income (Call Report) that are discussed below have been approved for 
publication by the FFIEC. Unless otherwise indicated, the agencies 
would implement these proposed Call Report changes as of the March 31, 
1998, report date and the revisions would apply to all four sets of 
report forms (FFIEC 031, 032, 033, and 034). Nonetheless, as is 
customary for Call Report changes, banks are advised that, for the 
March 31, 1998, report date, reasonable estimates may be provided for 
any new or revised item for which the requested information is not 
readily available. The specific wording of the captions for the new or 
revised Call Report items discussed below should be regarded as 
preliminary.

Reductions in Frequency and Detail

    Based on their review of the current content of the Call Report, 
the agencies are proposing to reduce the reporting frequency for one 
item applicable to all banks and to reduce the level of detail in one 
schedule applicable to larger banks, as follows:

(1) Schedule RC-E--Deposit Liabilities

    Memorandum item 1.e., ``Preferred deposits,'' would be collected 
annually as of December 31 rather than quarterly as at present. In 
general, preferred deposits are deposits of states and political 
subdivisions in the U.S. which are secured or collateralized as 
required under state law. This Memorandum item was added to the Call 
Report in 1993 in response to a newly enacted statutory requirement 
directing the FDIC

[[Page 51717]]

to ensure that it ``receives on a regular basis'' from each FDIC-
insured depository institution information on the amount of preferred 
deposits (12 U.S.C. 1817(a)(9)).
    The agencies understand that bankers have identified the 
``Preferred deposits'' item as one of the Call Report items they have 
found to be particularly burdensome. Moreover, the statute does not 
specifically mandate quarterly reporting for this item. Thus, the FDIC 
has determined that collecting information on preferred deposits on an 
annual, rather than quarterly, basis would be consistent with the 
statutory requirement and would be adequate for purposes of meeting the 
FDIC's obligations under the Federal Deposit Insurance Act.

(2) Schedule RC-D--Trading Assets and Liabilities

    This schedule is completed by banks with $1 billion or more in 
total assets or with $2 billion or more in notional amount of off-
balance sheet derivative contracts. The agencies are proposing to 
eliminate item 6, ``Certificates of deposit (in domestic offices),'' 
item 7, ``Commercial paper (in domestic offices)'', and item 8, 
``Bankers acceptances (in domestic offices).'' Commercial paper held 
for trading would begin to be reported as part of a bank's trading 
account securities, normally in Schedule RC-D, item 5, ``Other debt 
securities (in domestic offices),'' consistent with the change in 
balance sheet classification of commercial paper not held for trading 
and the elimination of the loan schedule Memorandum item for commercial 
paper, both of which took effect as of March 31, 1997. As for 
certificates of deposit and bankers acceptances held for trading, the 
reporting of these two types of instruments in separate Schedule RC-D 
items is no longer considered sufficiently useful to warrant retaining 
items 6 and 8. Instead, these instruments would be included in a bank's 
``Other trading assets (in domestic offices),'' which are reported in 
Scheduled RC-D, item 9.

Investment Securities With High Price Volatility

    In December 1991, the FFIEC approved and the agencies adopted a 
Supervisory Policy Statement on Securities Activities which became 
effective on February 10, 1992 (57 FR 4029, February 3, 1992). Under 
this policy statement, prior to purchase and at subsequent testing 
dates, banks must test mortgage derivative products to determine 
whether they are ``high-risk'' or ``nonhigh-risk.'' These tests measure 
the expected weighted average life, average life sensitivity, and price 
sensitivity of mortgage derivative securities for specified changes in 
interest rates. During 1994, the agencies issued supervisory guidance 
concerning bank investments in ``structured notes'' which, in general, 
are debt securities (other than mortgage-backed securities) whose cash 
flow characteristics (coupon rate, redemption amount, or stated 
maturity) depend upon one or more indices and/or that have embedded 
forwards or options. Beginning in 1995, banks began to report the 
amortized cost and the fair value of their investment portfolio 
holdings of high-risk mortgage securities (Schedule RC-B, Memorandum 
items 8.a and 8.b) and structured notes (Schedule RC-B, Memorandum 
items 9.a and 9.b).
    With regard to structured notes, supervisory attention has 
primarily focused on ensuring that institutions understand and evaluate 
the market risks associated with these instruments. Instruments that 
have high market value or fair value sensitivity to changes in interest 
rates or other appropriate market risk factors, such as foreign 
exchange rates, have been the primary targets of such attention. 
However, some of the structured notes currently reported in Schedule 
RC-B, Memorandum item 9, may not have high market risk profiles and, in 
some cases, may have lower market risk volatility profiles than generic 
U.S. Treasury and U.S. Government agency securities. As a consequence, 
the agencies are considering revising the information collected on 
these instruments for supervisory purposes to reflect information based 
on significant price volatility under specific interest rate or major 
factor scenarios, e.g., an estimated change in value of 20 percent or 
more due to an immediate and sustained parallel shift in the yield 
curve of plus or minus 300 basis points. When the agencies develop the 
specific tests for significant price volatility, existing Memorandum 
items 9.a and 9.b on Schedule RC-B would be replaced with revised items 
requesting the amortized cost and fair value of securities (other than 
mortgage-backed securities backed by closed-end first lien 1-4 family 
residential mortgages) whose price volatility exceeds the specified 
threshold level under the specified interest rate or major factor 
scenario.
    This consistency, Schedule RC-B, Memorandum items 8.a and 8.b, 
which currently collect information on ``high-risk'' mortgage 
securities would be similarly replaced with items requesting the 
amortized cost and fair value of mortgage-backed securities backed by 
closed-end first lien 1-4 family residential mortgages whose price 
volatility exceeds a specified threshold level under a specified 
interest rate or major factor scenario. These mortgage-backed 
securities would be either the same as or a subset of the mortgage-
backed securities currently reported in Schedule RC-B, Memorandum items 
8.a and 8.b.
    If the agencies' specific tests for significant price volatility 
have not been developed in time to implement this proposed reporting 
change as of the March 31, 1998, report date, this Call Report revision 
would take effect at a report date later in 1998 (or thereafter) after 
the volatility tests have been devised.

Transactions Between Banks and Their Affiliates

    Section 23A of the Federal Reserve Act is designed to safeguard the 
resources of banks against misuse for the benefit of organizations 
under common control with the bank by regulating certain ``covered 
transactions'' (loans or extensions of credit and other transactions 
that expose the bank to risk) with an affiliate. Section 23A restricts 
the amount of such on terms that are at least as favorable to the bank 
as transactions with unaffiliated companies. As the activities of 
nonbank subsidiaries of bank holding companies have expanded, and as 
regulatory restrictions have been reduced, more reliance has been 
placed on Sections 23A and 23B to insulate institutions from the risks 
posed by transactions with their affiliates.
    Section 23A permits a bank to engage in covered transactions with 
affiliates so long as the covered transactions do not in the aggregate 
exceed: (1) 10 percent of the bank's capital stock and surplus with 
respect to a single affiliate and (2) 20 percent of capital and surplus 
with respect to all affiliates. Covered transactions are specifically 
described in Section 23A and include (a) loans and extensions of credit 
to an affiliate, (b) the purchase of securities issued by an affiliate, 
(c) the purchase of nonexempted assets from an affiliate, (d) the 
acceptance of securities issued by an affiliate as collateral for any 
loan to an unaffiliated company, and (e) the issuance of guarantee, 
acceptance, or letter of credit on behalf of an affiliate. In addition 
to the quantitative limits on a bank's exposure to an affiliate, 
Section 23A also imposes collateral requirements when a bank is lending 
to the affiliate or is issuing a guarantee, acceptance, or letter of 
credit for the account of the affiliate. These exposures

[[Page 51718]]

are the most direct method by which a bank can expose itself to an 
affiliate, and the collateral requirements are designed to diminish any 
risk related to these exposures.
    In order to monitor compliance with the aggregate limits in Section 
23A and to identify institution-specific and industry-wide levels of 
changes in covered transaction which a bank can expose itself to an 
affiliate, and the collateral requirements are designed to diminish any 
risk related to these exposures.
    In order to monitor compliance with the aggregate limits in Section 
23A and to identify institution-specific and industry-wide levels of 
and changes in covered transaction activity and its effects on bank 
risk exposures, the agencies are proposing to add four new items to 
Schedule RC-M--Memoranda. For covered transactions subject to Section 
23A's collateral requirements, bank would report (a) the outstanding 
amount of such transactions as of the Call Report date and (b) the 
maximum amount of such transactions during the calendar quarter ending 
with the report date. For covered transactions not subject to the 
collateral requirements, banks would likewise report (a) the 
outstanding amount of such transactions as of the Call Report date and 
(b) maximum amount of such transactions during the calendar quarter 
ending with the report date. Transactions that are exempt from 
quantitative limits under the statute, e.g., extensions of credit fully 
secured by U.S. Government securities and transactions with affiliate 
(sister) banks, would be excluded from being reported in the proposed 
items.
    The agencies specifically request comment on the burden associated 
with reporting date on covered transactions. Comment is also requested 
on potential ways to reduce burden with respect to these items, in 
particular the proposed reporting of the maximum amount of such 
transactions during the calendar quarter ending with the report date. 
For example, maximum amounts could be required to be reported only 
under certain conditions, e.g., if they are significantly higher than 
the end of period amount or if they approach the quantitative limits.

Reporting of Low Level Recourse Transactions for Risk-Based Capital 
Purposes

    The agencies' risk-based capital standards provide that the amount 
of risk-based capital that must be maintained for assets transferred 
with recourse should not exceed the maximum amount of recourse for 
which a bank is contractually liable under the recourse agreement. This 
rule applies to transactions in which a bank contractually limits its 
risk of loss or recourse exposure to less than the full effective 
minimum risk-based capital requirement for the assets transferred--
generally, four percent for qualifying first lien residential mortgages 
and eight percent for most other assets. The low level recourse rule 
also may apply to sales and securitizations of assets in which 
contractual cash flows (e.g., interest-only strips receivable and so-
called spread accounts), retained subordinated interests, or other 
assets (e.g., collateral invested amounts or cash collateral accounts) 
act as credit enhancements. If this rule does apply to a credit 
enhancement of this type, the maximum contractual dollar amount of the 
bank's exposure as of a Call Report date is generally limited to the 
amount carried as an asset on the balance sheet (Schedule RC) in 
accordance with generally accepted accounting principles.
    Current Call Report instructions require a bank to report its low 
level recourse transactions in Schedule RC-R--Regulatory Capital using 
the so-called ``gross-up'' method.
    In general, this method requires the bank to multiply the maximum 
amount of its recourse exposure by the reciprocal of the full effective 
minimum risk-based capital requirement for the assets transferred and 
to report the resulting dollar amount as an off-balance sheet credit 
equivalent amount in the risk weight category appropriate to the assets 
transferred.\2\
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    \2\ For example, if the bank's maximum contractual exposure is 
$10 million and the transferred assets would be in the 100 percent 
risk weight category, the bank would report a credit equivalent 
amount of $125 million [$10 million x (1/.08)] in the Schedule RC-R 
item for credit equivalent amounts of off-balance sheet items 
assigned to the 100 percent risk category (item 7.b).
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    However, the greater the volume of a bank's low level recourse 
transactions and the higher the bank's risk-based capital ratio in 
relation to the minimum requirement, the more the bank's calculated 
risk-based capital ratios become distorted as a result of applying the 
gross-up method. In these situations, another method of handling the 
bank's low level recourse transactions--the so-called ``direct 
reduction'' method--results in a more accurate measure of the bank's 
risk-based capital ratios. Under the direct reduction method, a bank 
generally would reduce its Tier 1 capital by the maximum amount of its 
recourse exposure (and would exclude this amount from its assets if the 
exposure were in the form of an on-balance sheet asset). Nevertheless, 
the Call Report instructions do not currently permit banks to use the 
direct reduction method when completing Schedule RC-R because the 
schedule's existing format does not provide a means for banks to 
disclose the amount by which assets and Tier 1 capital have been 
reduced through the application of the direct reduction method. Without 
knowing this amount, the agencies cannot readily verify the reported 
capital amounts and risk-weighted asset amounts for banks that would 
use the direct reduction method when reporting their low level recourse 
exposures.
    Some bankers with low level recourse transactions have expressed a 
strong preference for using the direct reduction method rather than the 
gross-up method. The agencies also note that savings associations 
report the dollar amount of their low level recourse exposures in the 
Thrift Financial Reports they file with the Office of Thrift 
Supervision in a manner consistent with the direct reduction method. 
Accordingly, the agencies are proposing to add a new subitem under 
Schedule RC-R, item 3, ``Amounts used in calculating regulatory capital 
ratios,'' for the ``Maximum contractual dollar amount of recourse 
exposure in low level recourse transactions.'' Banks preferring to 
apply the direct reduction method to these exposures when they complete 
Schedule RC-R would need to complete this new item and would include 
any on-balance sheet asset amounts that represent low level recourse 
exposures in item 8 of Schedule RC-R. Banks preferring to report their 
low level recourse exposures under the gross-up method would retain the 
option to use this method.

Capital Requirements for Market Risk

    In 1996, the agencies amended their risk-based capital standards to 
require banks with substantial trading activity to hold capital based 
on their market risk exposure. The new rule applies to banks with 
either (1) total trading assets and trading liabilities of at least $1 
billion or (2) total trading assets and trading liabilities in excess 
of 10 percent of total assets, unless exempted by their supervisory 
agency. The banks that will be subject to this new rule must comply 
with the market risk capital requirements by January 1, 1998. The 
market risk rule supplements the risk-based capital ratio calculations 
that focus principally on credit risk and adjusts both the risk-based 
capital ratio denominator and numerator. These adjustments involve 
``market risk equivalent assets'' for the denominator and ``Tier 3 
capital'' for the numerator.

[[Page 51719]]

    To enable the agencies and other users of the Call Report to 
calculate the risk-based capital ratios of those banks subject to the 
market risk rule, the agencies are proposing to add two new subitems to 
Schedule RC-R, item 3, ``Amounts used in calculating regulatory capital 
ratios,'' on the FFIEC 031 and 032 report forms only. In these new 
subitems, banks would report their ``Market risk equivalent assets'' 
and their ``Tier 3 capital.'' In addition, the instructions for items 4 
through 7 of Schedule RC-R, which are the items in which banks report 
their assets and the credit equivalent amounts of their off-balance 
sheet items by risk weight category, and item 8, ``On-balance sheet 
asset values excluded from and deducted in the calculation of the risk-
based capital ratio,'' would be revised. As revised, the instructions 
would tell banks to exclude from items 4 through 7 the amounts of all 
``covered positions'' (except foreign exchange positions outside the 
trading account and over-the-counter derivative positions) and to 
report the amounts of those ``covered positions'' that are on the 
balance sheet in item 8. The term ``covered positions'' means all 
positions in a bank's trading account, and all foreign exchange and 
commodity positions, whether or not in the trading account.

Allowance for Credit Losses

    The American Institute of Certified Public Accountants' Audit and 
Accounting Guide for Banks and Savings Institutions, issued as of April 
1, 1996, requires the allocation on the balance sheet of the allowance 
for credit losses between on-balance sheet financial instruments and 
off-balance sheet credit exposures. Previously, these allowance 
components often were reported in the aggregate in the allowance for 
loan and lease losses (ALLL).
    Banks have been advised to allocate the allowance for credit losses 
on Schedule RC-Balance Sheet consistent with their allocation 
methodology for other financial reporting purposes. For example, 
portions of the allowance related to off-balance sheet credit exposures 
that are reported as liabilities are to be included in Schedule RC, 
item 20, ``Other liabilities,'' and in item 4 of Schedule RC-G. Banks 
also have been advised to aggregate these components of the allowance 
for credit losses when completing Schedule RI-B, part II--Changes in 
Allowance for Loan and Lease Losses. institutions have been encouraged 
to disclose the amounts of these components in Schedule RI-E, item 9, 
``Other explanations.''
    The agencies are proposing to retain this method of reporting the 
allowance for credit losses. In so doing, Schedule RI-B, part II, would 
be retitled Changes in Allowance for Credit Losses, and item 4.a of 
Schedule RI--Income Statement would be recaptioned ``Provision for 
credit losses.'' However, Schedule RI-B, part I--Charge-offs Recoveries 
on Loans and Leases would not be changed, i.e., banks would continue to 
disclose their loan and lease charge-offs and recoveries only.
    Under the reporting standards in effect prior to the effective date 
of the revised audit and accounting guide, banks had included all the 
portion of he allowance related to off-balance sheet credit exposures 
in Tier 2 capital for risk-based capital purpose, subject to specified 
limits. This regulatory capital treatment remains in effect under the 
new reporting standards set forth in the revised audit and accounting 
guide.

Reporting by Banks With Foreign Offices of Investment Securities 
Holdings in the Domestics Office Assets and Liabilities Schedule

    On the FFIEC 031 version of the Call Report forms, banks with 
foreign offices report a breakdown of the investment securities they 
hold in domestic offices by type of security in Schedule RC-H--Selected 
Balance Sheet Items for Domestic Offices. These investment securities 
holdings are reported in Schedule RC-H on the same basis as they are 
reported on these banks' consolidated balance sheet (Schedule RC), 
i.e., held-to-maturity securities are reported at amortized cost while 
available-for-sale securities are reported at fair value. In the 
(consolidated) securities schedule (Schedule RC-B), held-to-maturity 
and available-for-sale securities are each separately reported at 
amortized cost and at fair value. This reporting treatment was 
implementing in 1994 when Financial Accounting Standards Board 
Statement No. 115, ``Accounting for Certain Investments in Debt and 
Equity Securities,'' took effect.
    Based on a review of the manner in which the domestic office 
securities data reported in items 10 through 17 of Schedule RC-H are 
analyzed and compared to other measures of domestic securities which 
are held by nonbank sectors and reported on a cost basis, the agencies 
are proposing to require banks with foreign offices to report all 
investment securities held in domestic offices on a cost basis in these 
eight Schedule RC-H items. This would mean that available-for-sale debt 
securities would be reflected in Schedule RC-H, items 10 through 17, at 
amortized cost rather than at fair value while equity securities would 
be included in this schedule at historical cost. This cost basis data 
should be available to banks with foreign offices because the 
amortized/historical cost of their entire investment securities 
portfolio is currently reported in the (consolidated) securities 
schedule (Schedule RC-B).
    This proposed change would not affect the reporting of a bank's 
held-to-maturity or available-for-sale securities on the Call Report 
balance sheet (Schedule RC) or on the securities schedule (Schedule RC-
B), nor would it alter the reporting of total assets in domestic 
offices in Schedule RC-H, item 8.

Reporting of Securitized Consumer Loans for Vehicle Purchases

    On the FFIEC 031 and 032 versions of the Call Report forms, banks 
with foreign offices or with $300 million or more in assets report 
annually as of September 30 the amount of their securitized consumer 
installment loans to purchase private passenger automobiles and the 
amount of all other securitized consumer installment loans (excluding 
credit cards and related plans) in Schedule RC-L, Memorandum items 5.a 
and 5.c, respectively. The instructions for these items currently 
direct banks to report securitized consumer loans for the purchase of 
pickup trucks and vans in the ``all other'' category, not in the 
``private passenger automobiles'' category.
    Based on a review of the manner in which these data are used for 
analyzing consumer credit markets, the agencies believe that 
securitized consumer loans for the purchase of pickup trucks, other 
light trucks, and vans for personal use would be more appropriately 
classified in the ``private passenger automobiles'' category. The 
instructions for Memorandum item 5.a would be revised so that banks 
would begin to include securitized consumer loans to purchase vans and 
light trucks (such as pickup trucks) for personal use in this item 
rather than in Memorandum item 5.c. In addition, the agencies would 
strike the word ``installment'' from the captions and instructions 
throughout Memorandum item 5.

Request for Comment

    Comments submitted in response to this Notice will be shared among 
the agencies and will be summarized or included in the agencies' 
requests for OMB approval. All comments will become a matter of public 
record. Written comments should address the accuracy of the burden 
estimates and ways to minimize burden as well as other relevant aspects 
of the information

[[Page 51720]]

collection request. Comments are invited on: (a) Whether the proposed 
revisions to the following collections of information are necessary for 
the proper performance of the agencies' functions, including whether 
the information has practical utility; (b) the accuracy of the 
agencies' estimate of the burden of the information collections as they 
are proposed to be revised, including the validity of the methodology 
and assumptions used; (c) ways to enhance the quality, utility, and 
clarity of the information to be collected; (d) ways to minimize the 
burden of information collection on respondents, including through the 
use of automated collection techniques or other forms of information 
technology; and (e) estimates of capital or start up costs and costs of 
operation, maintenance, and purchase of services to provide 
information.
    Comments are also requested on the expected effects on information 
currently reported in the Call Report resulting from this 
implementation of those portions of Financial Accounting Standards 
Board Statement No. 125, ``Accounting for Transfers and Servicing of 
Financial Assets and Extinguishments of Liabilities,'' that have had 
their effective date delayed until after December 31, 1997. The 
agencies are evaluating the need for additional data in this area. 
These portions of Statement No. 125 address collateral and secured 
borrowings, repurchase agreements, dollar-rolls, securities lending, 
and similar transactions.
    Banks should note that the FDIC is considering amendments to its 
regulations on the deposit insurance assessment base (12 CFR part 327) 
which may require certain changes to the Call Report. Should the FDIC 
adopt amendments that necessitate changes to the Call Report in 1998, 
those changes will be separately published for public comment as 
required under the Paperwork Reduction Act of 1995.

    Dated: September 26, 1997.
Karen Solomon,
Director, Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency.

    Board of Governors of the Federal Reserve System, September 18, 
1997.
William W. Wiles,
Secretary of the Board.

    Dated at Washington, D.C., this 17th day of September, 1997.

Federal Deposit Insurance Corporation.
Steven Hanft,
Assistant Executive Secretary.
[FR Doc. 97-26131 Filed 10-1-97; 8:45 am]
BILLING CODE 4810-33-M(\1/3\), 6210-01-M(\1/3\), 6714-01-M(\1/3\)


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