Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices 51715

2The Board will grant a stay if an informed

decision on environmental issues (whether raised

by a party or by the Board’s Section of

Environmental Analysis in its independent

investigation) cannot be made before the

exemption’s effective date. See Exemption of Outof-Service Rail Lines, 5 I.C.C. 2d 377 (1989). Any

request for a stay should be filed as soon as possible

so that the Board may take appropriate action before

the exemption’s effective date.

3Each offer of financial assistance must be

accompanied by the filing fee, which currently is

set at $900. See 49 CFR 1002.2(f)(25).

least 2 years; (2) any overhead traffic on

the line can be rerouted; (3) no formal

complaint filed by a user of rail service

on the line (or by a state or local

government entity acting on behalf of

such user) regarding cessation of service

over the line either is pending with the

Surface Transportation Board (Board) or

with any U.S. District Court or has been

decided in favor of complainant within

the 2-year period; and (4) the

requirements at 49 CFR 1105.7

(environmental reports), 49 CFR 1105.8

(historic reports), 49 CFR 1105.11

(transmittal letter), 49 CFR 1105.12

(newspaper publication), and 49 CFR

1152.50(d)(1) (notice to governmental

agencies) have been met.

As a condition to this exemption, any

employee adversely affected by the

abandonment shall be protected under

Oregon Short Line R. Co.—

Abandonment—Goshen, 360 I.C.C. 91

(1979). To address whether this

condition adequately protects affected

employees, a petition for partial

revocation under 49 U.S.C. 10502(d)

must be filed.

Provided no formal expression of

intent to file an offer of financial

assistance (OFA) has been received, this

exemption will be effective on

November 1, 1997, unless stayed

pending reconsideration. Petitions to

stay that do not involve environmental

issues,2 formal expressions of intent to

file an OFA under 49 CFR

1152.27(c)(2),3 and trail use/rail banking

requests under 49 CFR 1152.29 must be

filed by October 14, 1997. Petitions to

reopen or requests for public use

conditions under 49 CFR 1152.28 must

be filed by October 22, 1997, with:

Surface Transportation Board, Office of

the Secretary, Case Control Unit, 1925 K

Street, N.W., Washington, DC 20423.

A copy of any petition filed with the

Board should be sent to applicant’s

representative: Thomas J. Litwiler,

Oppenheimer Wolff & Donnelly, Two

Prudential Plaza, 45th Floor, 180 North

Stetson Avenue, Chicago, IL 60601.

If the verified notice contains false or

misleading information, the exemption

is void ab initio.

W&LE has filed an environmental

report which addresses the

abandonment’s effects, if any, on the

environment and historic resources. The

Section of Environmental Analysis

(SEA) will issue an environmental

assessment (EA) by October 7, 1997.

Interested persons may obtain a copy of

the EA by writing to SEA (Room 500,

Surface Transportation Board,

Washington, DC 20423) or by calling

SEA, at (202) 565–1545. Comments on

environmental and historic preservation

matters must be filed within 15 days

after the EA becomes available to the

public.

Environmental, historic preservation,

public use, or trail use/rail banking

conditions will be imposed, where

appropriate, in a subsequent decision.

Pursuant to the provisions of 49 CFR

1152.29(e)(2), W&LE shall file a notice

of consummation with the Board to

signify that it has exercised the

authority granted and fully abandoned

the line. If consummation has not been

effected by W&LE’s filing of a notice of

consummation by October 2, 1998, and

there are no legal or regulatory barriers

to consummation, the authority to

abandon will automatically expire.

Decided: September 25, 1997.

By the Board, David M. Konschnik,

Director, Office of Proceedings.

Vernon A. Williams,

Secretary.

[FR Doc. 97–26173 Filed 10–1–97; 8:45 am]

BILLING CODE 4915–00–P

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.

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.comments@occ.treas.gov).

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: comments@fdic.gov).
51716 Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices

1The 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.

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

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
Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices 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 ‘‘highrisk’’ 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 mortgagebacked securities would be either the

same as or a subset of the mortgagebacked 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
51718 Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices

2For 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).

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 socalled 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 socalled ‘‘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 offbalance sheet credit equivalent amount

in the risk weight category appropriate

to the assets transferred.2

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 socalled ‘‘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 onbalance 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 riskbased 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.
Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices 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 offbalance sheet items by risk weight

category, and item 8, ‘‘On-balance sheet

asset values excluded from and

deducted in the calculation of the riskbased 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 overthe-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-tomaturity 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
51720 Federal Register / Vol. 62, No. 191 / Thursday, October 2, 1997 / Notices

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)

DEPARTMENT OF THE TREASURY

Internal Revenue Service

Privacy Act of 1974, as amended;

System of Records

AGENCY: Internal Revenue Service,

Treasury

ACTION: Notice of alteration of Privacy

Act system of records

SUMMARY: The Treasury Department,

Internal Revenue Service, gives notice of

a proposed alteration to the system of

records entitled, ‘‘General Personnel

and Payroll Records -Treasury/IRS

36.003,’’ which is subject to the Privacy

Act of 1974, as amended, 5 U.S.C. 552a.

The system notice was last published in

its entirety in the Federal Register, Vol.

60, page 56804, on November 9, 1995.

DATES: Comments must be received no

later than November 3, 1997. The

alteration to the system of records will

be effective November 16, 1997, unless

comments are received which result in

a contrary determination.

ADDRESSES: Comments should be sent to

the Office of Governmental Liaison &

Disclosure, Internal Revenue Service,

1111 Constitution Avenue, NW,

Washington, DC 20224. Comments will

be made available for public inspection

and copying in the Internal Revenue

Service Freedom of Information Reading

Room, 1111 Constitution Avenue, NW,

Room 1621, Washington, DC 20224,

telephone number (202) 622–5164, (not

a toll free call).

FOR FURTHER INFORMATION CONTACT:

James O’Malley, Acting National

Director, Personnel Division, Internal

Revenue Service, (202) 874–6135.

SUPPLEMENTARY INFORMATION: The

purpose of the alteration is to add two

routine uses to the current routine uses

as a result of Executive Order 12897

dated February 3, 1994, and the

likelihood that the Service will be

requested to respond to increasing

numbers of support garnishment

interrogatories.

Currently, routine use number (7) is

used to disclose information on records,

where there is an indication of a

violation or potential violation of law,

whether civil, criminal, or regulatory in

nature, to any appropriate agency,

whether Federal, state, or local, charged

with the responsibility of investigating

or prosecuting such violation or charged

with enforcing or implementing the

statute, rule, regulation, or order issued

pursuant thereto or upon request of the

agency when the agency is investigating

the possible violation of their rules or

regulations.

The Internal Revenue Service (IRS)

believes that the current routine use

number (7) allows the IRS to disclose

the information requested in the

interrogatories, although the

interrogatories are not specifically

addressed. However, a new routine use

(21) is being added to clarify that

information from this system of records

may be disclosed in response to

garnishment interrogatories. A second

routine use (22) is also being added as

a result of the issuance of Executive

Order 12897 entitled ‘‘Garnishment of

Federal Employees’ Pay,’’ which will

permit non-Federal entities (i.e.,

commercial creditors) to request

garnishment of any employee’s pay for

just debts owing to these companies

which have been reduced to a

judgement.

The alteration to the existing Privacy

Act notice also incorporates the

Executive Order under the data element

‘‘Authority for Maintenance of the

System’’ to bring this system into

compliance with the requirements of the

Privacy Act. The specific changes to the

record system being altered are set forth

below.

Under ‘‘Authority for Maintenance of

the System:’’ delete the period after

Executive Order 10561 and add ‘‘and

Executive Order 12897.’’

Under ‘‘Routine Uses of Records

Maintained in the System, Including

Categories of Users and the Purposes of

Such Uses:,’’ add two routine uses by

inserting the following text after routine

use numbered twenty (20): ‘‘(21)

Respond to state and local authorities

for support garnishment interrogatories;

and (22) Provide information to private

creditors for the purpose of garnishment

of wages of an employee if a debt has

been reduced to a judgement.’’

The specific changes to the system

notice are published below.

Dated: September 24, 1997.

Alex Rodriguez,

Deputy Assistant Secretary (Administration).

Treasury/IRS 36.003

SYSTEM NAME:

General Personnel and Payroll

Records—Treasury/IRS

* * * * *

AUTHORITY FOR MAINTENANCE OF THE SYSTEM:

Description of change: Remove ‘‘and

Executive Order 10561.’’ and add

‘‘Executive Order 10561 and Executive

Order 12897. ’’

* * * * *

Description of changes: Replace the

period at the end of routine use number