[Federal Register Volume 62, Number 213 (Tuesday, November 4, 1997)]
[Notices]
[Pages 59704-59706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29148]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Proposed Collection; 
Comment Request

AGENCY: Board of Governors of the Federal Reserve System (Board)
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 Board, the Federal Deposit 
Insurance Corporation (FDIC), and the Office of the Comptroller of the 
Currency (OCC) (the ``Agencies'') may not conduct or sponsor, and the 
respondent is not required to respond to, an information collection 
that has been extended, revised, or implemented on or after October 1, 
1995, unless it displays a currently valid Office of Management and 
Budget (OMB) control number. Proposed revisions to the following 
currently approved collection of information have received approval 
from the Federal Financial Institutions Examination Council (FFIEC), of 
which the Agencies are members, and are hereby published for comment by 
the Board on behalf of the Agencies. At the end of the comment period, 
the comments and recommendations received will be analyzed to determine 
the extent to which the proposed revisions should be modified prior to 
the Board's submission of them to OMB for review and approval. Comments 
are invited on:
    (a) Whether the proposed revisions to the following collection 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 collection as it is proposed to be revised, including the 
validity of the methodology and assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (d) Ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.
DATES: Comments must be submitted on or before January 5, 1998.
ADDRESSES: Interested parties are invited to submit written comments to 
the agency listed below. All comments, which should refer to the OMB 
control number, will be shared among the Agencies.
    Written comments should be addressed to Mr. William W. Wiles,

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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).
    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 collection of information may be requested from the agency 
clearance officer whose name appears below.
    Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829, 
Division of Research and Statistics, Board of Governors of the Federal 
Reserve System, 20th and C Streets, N.W., Washington, D.C. 20551. 
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, N.W., Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
    Proposal to revise the following currently approved collection of 
information:
Title: Report of Assets and Liabilities of U.S. Branches and Agencies 
of Foreign Banks
Form Number: FFIEC 002
OMB Number: 7100-0032.
Frequency of Response: Quarterly.
Affected Public: U.S. branches and agencies of foreign banks.
Number of Respondents: 513
Total Annual Responses: 2,052
Estimated Time per Response: 23.25 burden hours.
Total Annual Burden: 47,709 burden hours.
    General Description of Report: This information collection is 
mandatory: 12 U.S.C. 3105(b)(2), 1817(a)(1) and (3), and 3102(b). 
Except for select sensitive items, this information collection is not 
given confidential treatment (5 U.S.C. 552(b)(8)).
    Small businesses (that is, small U.S. branches and agencies of 
foreign banks) are affected.
    Abstract: On a quarterly basis, all U.S. branches and agencies of 
foreign banks (U.S. branches) are required to file detailed schedules 
of assets and liabilities in the form of a condition report and a 
variety of supporting schedules. This balance sheet information is used 
to fulfill the supervisory and regulatory requirements of the 
International Banking Act of 1978. The data are also used to augment 
the bank credit, loan, and deposit information needed for monetary 
policy and other public policy purposes. The report is collected and 
processed by the Federal Reserve on behalf of all three Agencies.
Current Actions:
    The proposed revisions to the Report of Assets and Liabilities of 
U.S. Branches and Agencies of Foreign Banks (FFIEC 002) that are the 
subject of this notice have been approved by the FFIEC for 
implementation as of the March 31, 1998, report date. Nonetheless, as 
is customary for FFIEC 002 reporting changes, U.S. branches 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 proposed revisions are summarized as follows:
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, U.S. branches must test mortgage derivative products to 
determine whether they are ``high-risk'' or ``non high-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 U.S. branch 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, U.S. branches began to report the fair value and the amortized 
cost of their investment portfolio holdings of high-risk mortgage 
securities (Schedule RAL, Memoranda items 5 and 6) and structured notes 
(Schedule RAL, Memoranda items 7 and 8).
    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 
RAL, Memoranda items 7 and 8, 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 7 and 8 on Schedule RAL 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.
    For consistency, Schedule RAL, Memoranda items 5 and 6, 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 RAL, Memorandum items 5 and 6.
    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 FFIEC 002 revision 
would take effect at a report date later in 1998 (or thereafter) after 
the volatility tests have been devised.
Balances Due from Banks in Home Country and Home Country Central Bank

[[Page 59706]]

    The Agencies use various quantitative screens to identify U.S. 
branches with potentially significant liquidity risk exposure. These 
screens primarily rely on data collected in the FFIEC 002. The Agencies 
have determined that the existing data collected on Schedule A, item 
4.b, for balances due from banks in foreign countries and foreign 
central banks is not adequate for assessing U.S. branches liquidity 
exposure associated with their involvement with home country banks. The 
Agencies are therefore proposing to breakout balances due from banks in 
the U.S. branches home country from balances due from banks in other 
foreign countries.
    The existing data collected in item 4.b. on balances due from Other 
banks in foreign countries and foreign central banks would be modified 
to exclude data on balances due from banks in the U.S. branches home 
country. This modified data would be collected in renumbered item 4.c. 
A new item 4.b. for balances due from Banks in home country and home 
country central bank would be added to collect the information needed 
for liquidity analysis. The Agencies believe that the proposed break 
out will improve their ability to assess significant liquidity 
exposures without adding undue reporting burden on U.S. branches.
Pledged Securities
    The Agencies are also proposing to add a new memorandum item to 
Schedule RAL for pledged securities. The new item would identify the 
amount of U.S. government securities included in Schedule RAL items 
1.b.(1), U.S. Treasury securities, and 1.b.(2), U.S. Government agency 
obligations, that are pledged to secure deposits, repurchase 
transactions, borrowings, or for any other purpose. Based on a review 
of the manner in which information on pledged securities collected in 
the domestic bank Call Report has been used, the Agencies believe that 
this data would assist in determining whether securities held by a U.S. 
branch represent an actual source of liquidity to pay depositors or 
creditors or are already pledged to secure other branch obligations. 
The Agencies believe that the proposed item will improve their ability 
to assess significant liquidity exposures without adding undue 
reporting burden on U.S. branches.
Request for Comment
    Comments submitted in response to this Notice will be summarized or 
included in the Board's request for OMB approval. All comments will 
become a matter of public record. Written comments should address the 
accuracy of the burden estimates and ways to minimize burden including 
the use of automated collection techniques or the use of other forms of 
information technology as well as other relevant aspects of the 
information collection request.
    Comments also are requested on the expected effects on information 
currently reported in the FFIEC 002 report resulting from the 
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.
    In addition, comments are requested on the extent to which U.S. 
branches are engaged in guaranteed certificate of deposit and 
confirmation certificate of deposit transactions. Guaranteed 
certificates of deposit are certificates of deposit issued by non-U.S. 
branches that are guaranteed payable by U.S. branches. In contrast, 
confirmation certificates of deposit are certificates of deposit issued 
by U.S. branches that are guaranteed payable by the non-U.S. branches. 
The agencies are interested in obtaining information on the volume and 
prevalence of such transactions among U.S. branches.
    Insured U.S. branches 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 FFIEC 002. 
Should the FDIC adopt amendments that necessitate changes to the FFIEC 
002 in 1998, those changes will be separately published for public 
comment as required under the Paperwork Reduction Act of 1995.
    Board of Governors of the Federal Reserve System, October 30, 
1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-29148 Filed 11-3-97; 8:45 am]
BILLING CODE 6210-01-F