Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49363 

physical demonstrations will be 

included. If physical demonstrations are 

conducted, sessions may extend into 

September 22, 2005. 

I. Introduction 

II. Background Information on the San 

Angelo Test Facility and Treadwear Test 

Course 

III. FMVSS No. 138 Final Rule Highlights 

IV. OVSC Test Procedure TP–138 Content 

A. Overview of Suggested Test Equipment 

and Instrumentation 

B. Test Preparation Requirements 

C. Test Execution 

V. Vehicle Manufacturer Test Specification 

Form 

VI. Issues with Test Procedure TP–138 

VII. Questions & Answers 

VIII. Simulated and/or Physical 

Demonstration of a TPMS-Equipped 

Vehicle Using the Test Procedures 

Issued: August 17, 2004. 

Claude H. Harris, 

Director, Office of Vehicle, Safety 

Compliance. 

Editorial Note: This document was 

received at the Office of the Federal Register 

August 17, 2005. 

[FR Doc. 05–16631 Filed 8–22–05; 8:45 am] 

BILLING CODE 4910–59–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: Joint 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, an information 

collection 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 and the agencies 

should modify the proposed revisions 

prior to giving final approval. The 

agencies will then submit the revisions 

to OMB for review and approval. 

DATES: Comments must be submitted on 

or before October 24, 2005. 

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: You may submit comments, 

identified by [Attention: 1557–0081], by 

any of the following methods: 

• E-mail: 

regs.comments@occ.treas.gov. Include 

[Attention: 1557–0081] in the subject 

line of the message. 

• Fax: (202) 874–4448. 

• Mail: Public Information Room, 

Office of the Comptroller of the 

Currency, 250 E Street, SW., Mailstop 

1–5, Washington, DC 20219; Attention: 

1557–0081. 

Public Inspection: You may inspect 

and photocopy comments at the Public 

Information Room. You can make an 

appointment to inspect the comments 

by calling (202) 874–5043. 

Board: You may submit comments, 

which should refer to ‘‘Consolidated 

Reports of Condition and Income, 7100–

0036,’’ by any of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments 

on the http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include docket number in the subject 

line of the message. 

• Fax: (202) 452–3819 or (202) 452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper in Room MP–500 of the Board’s 

Martin Building (20th and C Streets, 

NW.) between 9 a.m. and 5 p.m. on 

weekdays. 

FDIC: You may submit comments, 

which should refer to ‘‘Consolidated 

Reports of Condition and Income, 3064–

0052,’’ by any of the following methods: 

• http://www.FDIC.gov/regulations/ 

laws/federal/propose.html. 

• E-mail: comments@FDIC.gov. 

Include ‘‘Consolidated Reports of 

Condition and Income, 3064–0052’’ in 

the subject line of the message. 

• Mail: Steven F. Hanft (202–898–

3907), Paperwork Clearance Officer, 

Room MB–3064, Federal Deposit 

Insurance Corporation, 550 17th Street, 

NW., Washington, DC 20429. 

• Hand Delivery: 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 a.m. and 5 p.m. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/propose.html including any 

personal information provided. 

Comments may be inspected at the FDIC 

Public Information Center, Room 100, 

801 17th Street, NW., between 9 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: Mark Menchik, Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, New 

Executive Office Building, Room 10235, 

Washington, DC 20503, or electronic 

mail to mmenchik@omb.eop.gov. 

FOR FURTHER INFORMATION CONTACT: For 

further information about the revisions 

discussed in this notice, please contact 

any of the agency clearance officers 

whose names appear below. In addition, 

copies of Call Report forms can be 

obtained at the FFIEC’s Web site (http:// 

www.ffiec.gov/ffiec_report_forms.htm). 

OCC: Mary Gottlieb, OCC Clearance 

Officer, or Camille Dixon, (202) 874–

5090, Legislative and Regulatory 

Activities Division, Office of the 

Comptroller of the Currency, 250 E 

Street, SW., Washington, DC 20219. 

Board: Michelle E. Long, Federal 

Reserve 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 call (202) 263–4869. 

FDIC: Steven F. Hanft, Paperwork 

Clearance Officer, (202) 898–3907, Legal 

Division, Federal Deposit Insurance 

Corporation, 550 17th Street, NW., 

Washington, DC 20429. 

49364 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

SUPPLEMENTARY INFORMATION: The 

agencies are proposing to revise and 

extend for three years the Call Report, 

which is currently an approved 

collection of information for each of the 

agencies. 

Report Title: Consolidated Reports of 

Condition and Income (Call Report). 

Form Number: Call Report: FFIEC 031 

(for banks with domestic and foreign 

offices) and FFIEC 041 (for banks with 

domestic offices only). 

Frequency of Response: Quarterly. 

Affected Public: Business or other forprofit. 

OCC: 

OMB Number: 1557–0081. 

Estimated Number of Respondents: 

1,950 national banks. 

Estimated Time per Response: 43.80 

burden hours (represents a decrease of 

4.47 hours associated with testing and 

enrollment in the Central Data 

Repository (CDR) and a net increase of 

1.81 hours for proposed new items and 

deletions). 

Estimated Total Annual Burden: 

341,621 burden hours. 

Board: 

OMB Number: 7100–0036. 

Estimated Number of Respondents: 

919 State member banks. 

Estimated Time per Response: 50.38 

burden hours (represents a decrease of 

4.01 hours associated with testing and 

enrollment in the CDR and a net 

increase of 2.01 hours for proposed new 

items and deletions). 

Estimated Total Annual Burden: 

185,197 burden hours. 

FDIC: 

OMB Number: 3064–0052. 

Estimated Number of Respondents: 

5,243 insured state nonmember banks. 

Estimated Time per Response: 34.73 

burden hours (represents a decrease of 

4.16 hours associated with testing and 

enrollment in the CDR and a net 

increase of 1.79 hours for proposed new 

items and deletions). 

Estimated Total Annual Burden: 

728,274 burden hours. 

The estimated time per response for 

the Call Report is an average that varies 

by agency because of differences in the 

composition of the institutions under 

each agency’s supervision (e.g., size 

distribution of institutions, types of 

activities in which they are engaged, 

and existence of foreign offices). The 

average reporting burden for the Call 

Report is estimated to range from 16 to 

625 hours per quarter, depending on an 

individual institution’s circumstances. 

Furthermore, the effect on reporting 

burden of the proposed revisions to the 

Call Report requirements will vary from 

institution to institution depending, in 

some cases, on the institution’s asset 

size and, in other cases, on its 

involvement with the types of activities 

or transactions to which the proposed 

changes apply. This proposal would add 

several new data items to the Call 

Report, revise certain existing items, 

eliminate a limited number of items, 

and remove the burden hours associated 

with testing and enrollment in the new 

CDR system, which had been added to 

the Call Report burden estimate in 2004, 

because these CDR activities will be 

completed prior to the implementation 

of the proposed revisions. Since the 

reduction in burden related to the CDR 

exceeds the net increase in burden from 

the proposed revisions to the content of 

the Call Report, the proposal as a whole 

would produce a net decrease in 

reporting burden for banks of all sizes. 

Nevertheless, the proposed new items 

and revisions of existing items, taken 

together, would have an effect on all 

banks. Therefore, as discussed more 

fully below in Section I. Overview, the 

agencies encourage banks and other 

interested parties to comment on such 

matters as data availability, data 

alternatives, and reporting thresholds 

for each proposal for new or revised 

data. Such comments will assist the 

agencies in determining the content of 

the final set of revisions to the Call 

Report. For purposes of this proposal, 

the following burden estimates include 

the effect of all of the proposed 

revisions without anticipating any 

possible modifications resulting from 

the public comment process that may 

lessen the impact of the revisions on 

some or all banks. 

General Description of Reports 

These information collections are 

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 selected 

items, these information collections are 

not given confidential treatment. 

Abstract 

Institutions file Call Reports with the 

agencies each quarter for the agencies’

use in monitoring the condition, 

performance, and risk profile of 

individual institutions and the industry 

as a whole. In addition, Call Reports 

provide the most current statistical data 

available for evaluating institutions’

corporate applications such as mergers, 

for identifying areas of focus for both 

on-site and off-site examinations, and 

for monetary and other public policy 

purposes. Call Reports are also used to 

calculate all institutions’ deposit 

insurance and Financing Corporation 

assessments and national banks’

semiannual assessment fees. 

Current Actions 

I. Overview 

The agencies last revised the form and 

content of the Call Report in a manner 

that significantly affected a substantial 

percentage of banks in March 2002. The 

revisions that have taken effect since 

March 2002 (i.e., in March 2003 and 

June 2005) were narrowly focused on 

certain specific activities in order to 

improve the information available to the 

agencies for those banks engaging in 

these activities. These focused revisions 

meant that the new or revised Call 

Report items pertaining to each of these 

activities were directly applicable to 

small percentages of banks rather than 

to most or all banks. 

During this recent period of limited 

revisions to the Call Report, the FFIEC 

and the agencies having been working 

toward the October 1, 2005, 

implementation of the CDR, the 

Internet-based system they are 

developing to modernize and streamline 

how Call Report data are collected, 

validated, managed, and distributed. At 

the same time, the agencies have also 

been carefully evaluating their 

information needs. In this regard, the 

agencies recognize that the Call Report 

imposes reporting burden, which is a 

component of the overall regulatory 

burden that banks face. Another 

contributor to this overall burden is the 

examination process, particularly onsite examinations during which bank 

management and staff spend time and 

effort responding to inquiries and 

requests for information that are 

designed to assist examiners in 

evaluating the condition and risk profile 

of the institution. The amount of 

attention that examiners initially direct 

to the various risk areas of the bank 

under examination is, in large part, 

determined from Call Report data. These 

data, and analytical reports generated 

from Call Report data such as the 

Uniform Bank Performance Report, 

assist examiners in making their 

preliminary assessments of risks and in 

scoping efforts during the planning 

phase of the examination process. 

The more risk-focused the 

information available to examiners from 

a bank’s Call Report, the better the job 

examiners can do before the start of 

their on-site work in making their 

preliminary assessments as to whether 

each of the risk areas of the bank 

presents greater than normal, normal, or 

less than normal risk. The degree of 

perceived risk determines the extent of 

the examination procedures, and the 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49365 

1 In addition, a smaller bank with significant 

involvement in these activities, as determined by its 

primary federal regulator, could be directed by its 

regulator to report this information. 

resultant regulatory burden, that are 

initially planned for each risk area. If 

the outcome of these procedures begins 

to reveal a greater than expected level of 

risk in a particular risk area, the 

examination scope and procedures are 

adjusted accordingly, adding to the 

regulatory burden imposed on the bank. 

Call Report data are also a vital source 

of information for the agencies’ off-site 

examination and surveillance activities. 

Among their benefits, these activities 

aid in determining whether the 

frequency of a bank’s examination cycle 

should remain at maximum allowed 

time intervals, thereby lessening overall 

regulatory burden. More risk-focused 

Call Report data enhance the agencies’

ability to assess whether an institution 

is experiencing changes in its risk 

profile that warrant immediate followup, which may include accelerating the 

timing of an on-site examination. 

In developing this proposal, the 

agencies have considered a range of 

potential information needs, 

particularly in the areas of credit risk, 

liquidity, and liabilities, and have 

identified those additions to the Call 

Report that are believed to be most 

critical and relevant to the agencies as 

they seek to fulfill their supervisory 

responsibilities. At the same time, the 

agencies have identified certain existing 

Call Report data that are no longer 

sufficiently critical or useful to warrant 

their continued collection from either 

all banks or banks that meet certain 

criteria (e.g., an asset size threshold). On 

balance, the agencies recognize that the 

reporting burden that would result from 

the addition to the Call Report of all of 

the new items discussed in this 

proposal would not be fully offset by the 

proposed elimination of, or 

establishment of reporting thresholds 

for, a limited number of other Call 

Report items, thereby resulting in a net 

increase in reporting burden. 

Nevertheless, when viewing these 

proposed revisions to the Call Report 

within a larger context, they are 

intended to enhance the agencies’ onand off-site supervision activities, 

which should help to control the overall 

regulatory burden on banks. 

Thus, the agencies are requesting 

comment on the following proposed 

revisions to the Call Report, which 

would take effect as of March 31, 2006. 

For each of the proposed revisions of 

existing items or proposed new items, 

the agencies are particularly interested 

in comments from banks on whether the 

information that is proposed to be 

collected is readily available from 

existing bank records. The agencies also 

invite comment on whether there are 

particular proposed revisions for which 

the new data would be of limited 

relevance for purposes of assessing risks 

in a specific segment of the banking 

industry. In such cases, comments are 

requested on what criteria, e.g., an asset 

size threshold or some other measure, 

should be established for identifying the 

specific segment of the banking industry 

that should be required to report the 

proposed new information. Finally, the 

agencies seek comment on whether, for 

a particular proposed revision, there is 

an alternative set of information that 

could satisfy the agencies’ data needs in 

that area and be less burdensome for 

banks to report than the new or revised 

items that the agencies have proposed. 

The agencies will consider all of the 

comments they receive as they 

formulate a final set of revisions to the 

Call Report for implementation in 

March 2006. 

(1) Burden-reducing revisions: 

• Eliminating Schedule RC-O, 

Memorandum item 2, ‘‘Estimated 

amount of uninsured deposits,’’ for 

banks with less than $1 billion in assets; 

• Collecting only the total amount of 

a bank’s holdings of asset-backed 

securities in Schedule RC–B from banks 

that only have domestic offices and are 

less than $1 billion in assets (but 

continuing to collect the breakdown by 

type of asset-backed security from all 

other banks); 

• Eliminating items for reporting the 

impact on income of derivatives held for 

purposes other than trading (Schedule 

RI, Memorandum items 9.a through 9.c); 

and 

• Eliminating items pertaining to 

bankers acceptances (Schedule RC, 

items 9 and 18; Schedule RC–H, items 

1 and 2; and Schedule RC–L, item 5). 

(2) Revisions of existing items and 

new items: 

• Splitting ‘‘Construction, land 

development, and other land loans’’

(CLD&OL loans) into separate categories 

for 1–4 family residential CLD&OL loans 

and all other CLD&OL loans (Schedule 

RC–C, part I, item 1.a; Schedule RC–N, 

item 1.a; Schedule RI–B, part I, item 1.a; 

and Schedule RC–L, item 1.c.1); 

• Splitting loans ‘‘Secured by 

nonfarm nonresidential properties’’

(commercial real estate loans) into 

separate categories for owner-occupied 

and other commercial real estate 

(Schedule RC–C, part I, item 1.e; 

Schedule RC–N, item 1.e; Schedule RI–

B, part I, item 1.e); 

• Replacing the breakdown of ‘‘Lease 

financing receivables’’ between leases 

from U.S. and non-U.S. addressees with 

a breakdown of leases between retail 

(consumer) leases and commercial 

leases for banks with foreign offices or 

with domestic offices only and $300 

million or more in total assets (Schedule 

RC–C, part I, items 10.a and 10.b; 

Schedule RC–N, items 8.a and 8.b on 

the FFIEC 031 and Memorandum item 

3.d on the FFIEC 041; and Schedule RI–

B, part I, items 8.a and 8.b on the FFIEC 

031 and Memorandum item 2.d on the 

FFIEC 041); 

• Collecting further information on 

Federal Home Loan Bank advances, 

which are currently reported in 

Schedule RC–M, item 5.a, by adding 

breakdowns of advances by type and by 

next repricing date and by splitting the 

existing item for advances with a 

remaining maturity of more than three 

years into two items; 

• Adding two items to the past due 

and nonaccrual assets schedule 

(Schedule RC–N) for ‘‘Additions to 

nonaccrual assets during the quarter’’

and ‘‘Nonaccrual assets sold during the 

quarter;’’

• Collecting additional information 

on credit derivatives by adding a 

breakdown by type of contract to the 

notional amounts currently reported in 

Schedule RC–L, item 7, along with new 

items for the maximum amounts 

payable and receivable on credit 

derivatives; adding credit derivatives to 

the existing maturity distribution of 

derivatives in Schedule RC–R, 

Memorandum item 2; adding credit 

derivatives to the breakdown of trading 

revenue by type of exposure currently 

collected in Schedule RI, Memorandum 

item 8; and adding a new income 

statement Memorandum item for the 

effect on earnings of credit derivatives 

held for purposes other than trading; 

• Adding a new Schedule RC–P to 

collect data pertaining to closed-end 1–

4 family residential mortgage banking 

activities for banks with $1 billion or 

more in total assets,1 including quarterend loans held for sale and quarterly 

originations, purchases, and sales, 

segregated between first and junior 

liens, and noninterest income from 

these activities; 

• Changing the category of 

noninterest income in which banks 

report income from certain sales of 

annuities from ‘‘Income from other 

insurance activities’’ (Schedule RI, item 

5.h.(2)) to ‘‘Investment banking, 

advisory, brokerage, and underwriting 

fees and commissions’’ (Schedule RI, 

item 5.d); 

• Splitting the income statement item 

for ‘‘Investment banking, advisory, 

brokerage, and underwriting fees and 

commissions’’ (Schedule RI, item 5.d) 

49366 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

2 In Schedule RC–B, the asset-backed securities 

reported in items 5.a through 5.f exclude mortgagebacked securities, which are reported separately in 

items 4.a(1) through 4.b(3) of the schedule. 

into separate items for fees and 

commissions from securities brokerage, 

fees and commissions from sales of 

annuities, and other fees and 

commissions; 

• Adding new items for the amounts 

included in ‘‘Federal funds purchased 

(in domestic offices)’’ (Schedule RC, 

item 14.b) and ‘‘Other borrowings’’

(Schedule RC–M, item 5.b) that are 

secured; 

• Adding an item to Schedule RC–F, 

‘‘Other Assets,’’ for the carrying value of 

the bank’s life insurance assets, which 

would replace the item in this schedule 

for reporting such assets if they exceed 

25 percent of ‘‘All other assets’’; 

• Revising Schedule RI–D, ‘‘Income 

from International Operations,’’ on the 

FFIEC 031 to focus on activity 

conducted in foreign offices; and 

• Revising the scope of Schedule RC–

S, column G, ‘‘All Other Loans and All 

Leases,’’ to cover securitizations and 

credit-enhanced asset sales involving 

assets other than loans and leases. 

(3) Other matters: 

• Clarifying the instructions to 

Schedule RC–S, Memorandum item 2, 

to indicate that the servicing of home 

equity lines should be included in the 

servicing of ‘‘Other financial assets’’

rather than 1–4 family residential 

mortgages; and 

• Revising the officer declaration and 

director attestation requirements and 

signatures that apply to the Call Report. 

These proposed revisions to the Call 

Report, which have been approved for 

publication by the FFIEC for the 

purpose of soliciting comments from 

banks and other interested parties, are 

discussed in more detail below. 

Type of Review: Revision and 

extension of currently approved 

collections. 

As mentioned above, the agencies 

plan to implement the proposed 

changes as of the March 31, 2006, report 

date. Nonetheless, as is customary for 

Call Report changes, institutions are 

advised that they may report reasonable 

estimates for any new or revised item in 

their reports for March 31, 2006, if the 

information to be reported is not readily 

available. In addition, the specific 

wording of the captions for the new and 

revised Call Report items discussed in 

this proposal and the numbering of 

these items in the report should be 

regarded as preliminary. 

II. Discussion of Proposed Revisions 

A. Burden-Reducing Revisions 

1. Uninsured Deposits 

All banks have been required to report 

the ‘‘Estimated amount of uninsured 

deposits’’ in Schedule RC–O, 

Memorandum item 2, since March 2002. 

To limit reporting burden, the FFIEC 

and the agencies advised banks that 

they were not expected to modify their 

information systems or acquire new 

systems solely for purposes of making 

this estimate. Rather, banks were 

instructed to base their estimates of the 

uninsured portion of their deposits on 

data that are readily available from the 

information systems and other records 

the bank has in place. Nonetheless, 

smaller banks continue to indicate that 

they find this Memorandum item 

burdensome and, as a consequence, 

many resort to reporting a simple 

estimate based on the number and 

amount of their deposit accounts of 

more than $100,000, the current limit of 

deposit insurance. 

Because banks already report the 

number and amount of such deposit 

accounts in Schedule RC–O, 

Memorandum item 1, the agencies are 

able to calculate the same simple 

estimate of uninsured deposits as these 

banks have done. A comparison of the 

amounts banks have reported for their 

estimated uninsured deposits in 

Memorandum item 2 with a simple 

estimate calculated by the agencies from 

the information reported in 

Memorandum item 1 revealed 

insignificant differences between the 

two figures for banks with less than $1 

billion in assets, which currently hold 

only about 20 percent of banks’ total 

domestic deposits. Only at larger 

institutions were the differences 

between banks’ reported estimates and 

the calculated simple estimate 

significant enough to have a potential 

effect on the estimate of insured 

deposits used by the FDIC in the 

determination of deposit insurance 

assessment premiums. Accordingly, the 

agencies are proposing that banks with 

less than $1 billion in total assets would 

no longer be required to complete 

Schedule RC–O, Memorandum item 2. 

Banks with $1 billion or more in total 

assets would continue to report the 

‘‘Estimated amount of uninsured 

deposits’’ in this Memorandum item. 

2. Holdings of Asset-Backed Securities 

In Schedule RC–B, ‘‘Securities,’’ the 

agencies collect a six-way breakdown of 

banks’ holdings of asset-backed 

securities (not held for trading 

purposes) in items 5.a through 5.f.2

Because banks with domestic offices 

only and less than $1 billion in total 

assets hold only a nominal percentage of 

the industry’s investments in assetbacked securities, the agencies have 

determined that continuing to request a 

breakdown by category of these 

institutions’ limited holdings is no 

longer warranted. Instead, these banks 

would report only their total holdings of 

asset-backed securities in Schedule RC–

B. However, all banks with foreign 

offices and other banks with $1 billion 

or more in total assets would continue 

to report the existing breakdown of their 

asset-backed securities in this schedule. 

3. Impact of Derivatives on Income 

Banks with foreign offices or with 

$100 million or more in total assets 

report the effect that their use of 

derivatives outside the trading account 

has had on their year-to-date interest 

income, interest expense, and net 

noninterest income in income statement 

(Schedule RI) Memorandum items 9.a 

through 9.c. The amounts reported in 

these Memorandum items are aggregates 

of all nontrading derivative positions 

and combine derivatives that may have 

substantially different underlying risk 

exposures, e.g., interest rate risk, foreign 

exchange risk, and credit risk. In 

recognition of the new data on credit 

derivatives that the agencies are 

proposing to collect (see Section II.B.6. 

below), the agencies have identified the 

three income statement Memorandum 

items as being of lesser utility and 

propose to delete them. 

4. Bankers Acceptances 

The Call Report balance sheet 

(Schedule RC) has long required banks 

to separately disclose the amount of 

their ‘‘Customers’’ liability to this bank 

on acceptances outstanding’’ (item 9) 

and their ‘‘Bank’s liability on 

acceptances executed and outstanding’’

(item 18). For banks with foreign offices, 

corresponding amounts are disclosed for 

acceptance assets and liabilities in 

domestic offices (Schedule RC–H, items 

1 and 2). In addition, banks with foreign 

offices or $100 million or more in total 

assets also report the amount of 

‘‘Participations in acceptances conveyed 

to others by the reporting bank’’

(Schedule RC–L, item 5). Over time, the 

volume of acceptance assets and 

liabilities as a percentage of industry 

assets and liabilities has declined 

substantially to a nominal amount, with 

only a small number of banks reporting 

these items. The agencies are proposing 

to delete these five items and banks 

would be instructed to include any 

acceptance assets and liabilities in 

‘‘Other assets’’ and ‘‘Other liabilities,’’

respectively, on the Call Report balance 

sheet. 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49367 

B. Revisions of Existing Items and New 

Items 

1. Construction Land Development, and 

Other Land Loans 

Construction, land development, and 

other land lending are highly 

specialized activities with inherent risks 

that must be managed and controlled to 

ensure that these activities remain 

profitable. Management’s ability to 

identify, measure, monitor, and control 

the risks from these types of loans 

through effective underwriting policies, 

systems, and internal controls is crucial 

to a sound lending program. In areas of 

the country that experience high levels 

of construction activity and an 

extremely competitive lending 

environment, these factors often lead to 

thinner profit margins on CLD&OL loans 

and looser underwriting standards. 

Moreover, the risk profiles, including 

loss rates, of CLD&OL loans vary across 

loan types because of differences in 

such factors as underwriting and 

repayment source. The agencies’ real 

estate lending standards recognize these 

differences in risk, for example, by 

setting higher supervisory loan-to-value 

limits for 1–4 family residential 

construction loans than for other 

construction loans. 

The agencies have seen substantial 

growth in the volume of CLD&OL loans 

in recent years. At commercial banks 

and state-chartered savings banks, these 

loans grew more rapidly than loan 

portfolios as a whole during 2003 and 

2004. The faster growth in CLD&OL 

lending than overall lending occurred 

each year not only for institutions as a 

whole, but also for banks with less than 

$100 million in assets, banks with $100 

million to $1 billion in assets, and for 

banks with more than $1 billion in 

assets. At year-end 2004, banks’

CLD&OL loans totaled more than $300 

billion, up nearly 40 percent from their 

level of $217 billion two years earlier. 

In addition, at banks with less than $100 

million in assets, CLD&OL loans were a 

higher percentage of total loans and 

leases at year-end 2004 (7 percent) than 

at banks with more than $1 billion in 

assets (less than 5 percent). Nearly 88 

percent of all banks reported holding 

CLD&OL loans at year-end 2004, 

including almost 79 percent of banks 

with less than $100 million in assets 

and more than 91 percent of banks with 

more than $1 billion in assets. 

In the Thrift Financial Report (TFR) 

(Form 1313, OMB No. 1550–0023) that 

the Office of Thrift Supervision (OTS) 

collects from the savings associations 

under its supervision, these institutions 

are required to report the amount of 

construction loans for 1–4 family 

residential properties separately from 

other construction loans. Charge-offs 

and recoveries on 1–4 family residential 

property construction loans are also 

reported separately from other 

construction loan charge-offs and 

recoveries in the TFR. The National 

Association of Home Builders (NAHB), 

in letters submitted to the agencies in 

January 2003 and May 2005 in response 

to the agencies’ requests for comment on 

past proposed revisions to the Call 

Report, has requested that the agencies 

‘‘consider itemizing the construction 

and land development lending data that 

are currently aggregated’’ to distinguish 

between different types of construction 

loans. The NAHB noted that their 

analysis of TFR data on construction 

loans revealed that residential 

construction loans ‘‘perform much 

better than most other real estate loans’’

and expressed concern that the ‘‘current 

lack of credible activity and 

performance data’’ on construction 

lending in the Call Report ‘‘impedes the 

Agencies’’ ability to accurately evaluate 

the level of risk associated with such 

activities.’’

The agencies agree with the NAHB 

that it would be beneficial to improve 

their ability to monitor the construction 

lending activities of individual banks 

and the industry as a whole by 

obtaining separate data on 1–4 family 

residential CLD&OL loans and all other 

CLD&OL loans, particularly in light of 

the substantial growth in this type of 

lending by banks. Such information 

would also enable the agencies to 

identify institutions that significantly 

shift from 1–4 family residential 

construction lending to other 

construction lending, and vice versa, 

and to identify when institutions that 

had been solely 1–4 family residential 

construction lenders move into other 

types of construction lending. 

Therefore, the agencies are proposing 

to split the existing item for 

‘‘Construction, land development, and 

other land loans’’ in the loan schedule 

(Schedule RC–C, part I, item 1.a), the 

past due and nonaccrual schedule 

(Schedule RC–N, item 1.a), and the 

charge-offs and recoveries schedule 

(Schedule RI–B, part I, item 1.a) into 

separate items for ‘‘1–4 family 

residential construction, land 

development, and other land loans’’ and 

‘‘Other construction, land development, 

and other land loans.’’ In addition, the 

agencies would similarly split the item 

for ‘‘Commitments to fund commercial 

real estate, construction, and land 

development loans secured by real 

estate’’ in the off-balance sheet items 

schedule (Schedule RC–L, item 1.c.(1)) 

into two items. 

2. Loans Secured by Nonfarm 

Nonresidential Properties 

Loans secured by nonfarm 

nonresidential properties (commercial 

real estate loans) include loans made to 

the occupants of such properties and 

loans to non-occupant investors. These 

two types of commercial real estate 

loans present different risk profiles. 

Loans secured by owner-occupied 

properties perform more like 

commercial and industrial loans 

because the success of the occupant’s 

business is the primary source of 

repayment. To ensure repayment of 

loans to non-occupant investors, the 

property must generate sufficient cash 

flow from the parties who are the 

occupants. 

The volume of commercial real estate 

loans at banks has also increased 

significantly in recent years. As with 

CLD&OL loans, commercial real estate 

loans grew more rapidly than loan 

portfolios as a whole at commercial 

banks and state-chartered savings banks 

during 2003 and 2004, both for the 

industry as a whole and for small, 

medium, and large banks. At year-end 

2004, banks’ commercial real estate 

loans stood at nearly $700 billion, a 

jump of 20 percent from the $584 billion 

in such loans at year-end 2002. The 

$700 billion in commercial real estate 

loans represented almost 14 percent of 

loans at all commercial banks and statechartered savings banks at year-end 

2004, but such loans were 19 percent of 

loans at banks with less than $100 

million in assets versus 11 percent of 

loans at banks with more than $1 billion 

in assets. Almost all banks hold 

commercial real estate loans, including 

96 percent of banks with less than $100 

million in assets and 93 percent of 

banks with more than $1 billion in 

assets. 

Because of the significant and 

growing level of bank involvement in 

commercial real estate lending and the 

different risk characteristics of owneroccupied and other commercial 

properties, separate reporting of these 

two categories of commercial real estate 

would enhance the agencies’ monitoring 

and risk-scoping capabilities. The 

agencies propose to split the existing 

item for loans ‘‘Secured by nonfarm 

nonresidential properties’’ in the loan 

schedule (Schedule RC–C, part I, item 

1.e), the past due and nonaccrual 

schedule (Schedule RC–N, item 1.e), 

and the charge-offs and recoveries 

schedule (Schedule RI–B, part I, item 

1.e) into separate items for loans 

secured by owner-occupied nonfarm 

nonresidential properties and loans 

49368 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

3Banks with domestic offices only and less than 

$300 million in total assets are not required to 

provide this breakdown. 

secured by other nonfarm 

nonresidential properties. 

When a commercial property that is 

partially occupied by the owner and 

partially occupied (or available to be 

occupied) by other parties, the property 

would be considered owner-occupied 

when the owner occupies more than 

half of the property’s usable space. 

Properties such as hotels and motels 

would not be considered owneroccupied. The agencies request 

comment on the reporting of partially 

owner-occupied properties and on any 

other definitional issues that may arise 

when determining whether to report a 

loan as secured by owner-occupied 

property. 

3. Retail and Commercial Leases 

Banks with foreign offices or with 

$300 million or more in total assets 

currently report a breakdown of their 

lease financing receivables between 

those from U.S. and non-U.S. addressees 

in Schedule RC–C, part I, items 10.a and 

10.b, and certain related schedules.3

Because banks lease various types of 

property to various types of customers, 

the current addressee breakdown, in 

which only a limited number of banks 

report having leases to non-U.S. 

addressees, does not provide 

satisfactory risk-related information 

about this type of financing activity. 

When reporting information on their 

loans that are not secured by real estate 

in the Call Report loan schedule and 

related schedules, banks distinguish, for 

example, between consumer (retail) 

loans and commercial loans. As with 

retail and commercial loans, there are 

differences between the underwriting of 

and repayment sources for retail and 

commercial leases. 

The agencies believe that the different 

risk characteristics of these two types of 

leases warrant replacing the existing 

addressee breakdown of leases with a 

retail versus commercial lease 

breakdown in the Call Report schedules 

for loans and leases, past due and 

nonaccrual assets, and charge-offs and 

recoveries. Retail (consumer) leases 

would be defined in a manner similar to 

consumer loans, i.e., as leases to 

individuals for household, family, and 

other personal expenditures. 

Commercial leases would encompass all 

other lease financing receivables. This 

proposed reporting change would affect 

only the approximately 500 banks with 

foreign offices or with $300 million or 

more in total assets that have lease 

financing receivables as assets. 

4. Federal Home Loan Bank Advances 

The Federal Home Loan Bank (FHLB) 

System is an increasingly important 

funding source for banks, particularly 

community banks, with over 57 percent 

of all banks reporting borrowings from 

FHLBs as of December 31, 2004. From 

year-end 2001 to year-end 2004, the 

volume of FHLB advances to 

commercial banks grew more than 25 

percent to $250 billion. At the same 

time, the array of advances offered by 

the 12 FHLBs has expanded in recent 

years, with many of the newer advance 

products containing features that can 

significantly alter an institution’s 

interest rate risk profile. 

The agencies currently collect 

aggregate information on FHLB 

advances that is stratified by remaining 

maturity (Schedule RC–M, items 5.a (1) 

through 5.a.(3)). This information does 

not differentiate among types of advance 

products, which means that the agencies 

cannot distinguish products with lower 

repricing risk (putable advances where 

the bank has the right, but not the 

obligation, to prepay the FHLB) from 

products with higher repricing risk 

(callable advances where the FHLB has 

the right, but not the obligation, to 

require the bank to prepay the advance 

or establish a new advance). 

Furthermore, the current reporting by 

remaining maturity is based on the 

contractual terms of the advances, but 

this approach does not capture the 

potential volatility associated with more 

complex products that have various 

embedded options. 

To address these informational 

deficiencies, the agencies are proposing 

to add two additional breakdowns of 

FHLB advances. The first would collect 

data on four categories of advances: 

Fixed rate, variable rate (where the 

interest rate is tied to an index), callable 

structured advances (where the FHLB 

has the option to call the advance), and 

other structured advances (putable, 

convertible, or with caps, floors, or 

other embedded derivatives). In the 

second breakdown, banks would report 

their advances based on the amount of 

time until the next repricing date (one 

year or less, over one year through three 

years, over three years through five 

years, and over five years). The existing 

data reported on the remaining maturity 

of FHLB advances would be modified 

by adding a new remaining maturity 

period of over five years, with a 

corresponding modification to the 

remaining maturity periods used for 

‘‘Other borrowings’’ in Schedule RC–M, 

item 5.b. This additional information 

would help the agencies’ assessments of 

interest rate risk, liquidity, and funds 

management and, in particular, would 

assist examiners with their risk-scoping 

of examinations, which can be 

performed off-site and thereby reduce 

on-site examination hours. 

Banks currently report standby letters 

of credit issued by a Federal Home Loan 

Bank on their behalf in Schedule RC–L, 

item 9, ‘‘All other off-balance sheet 

liabilities,’’ when these letters of credit 

exceed 10 percent of the bank’s total 

equity capital. When these letters of 

credit exceed 25 percent of total equity 

capital, the amount must also be 

separately identified and disclosed in 

Schedule RC–L. Because of the growth 

in this activity, the agencies would add 

a preprinted caption to Schedule RC–L, 

item 9.c, to facilitate the reporting and 

identification of standby letters of credit 

issued by a Federal Home Loan Bank 

when the amount exceeds 25 percent of 

total equity capital. 

5. Nonaccrual Assets 

Information on nonaccrual assets is a 

key indicator of the credit quality of a 

bank’s assets. Effective December 31, 

2003, bank holding companies that file 

the Consolidated Financial Statements 

for Bank Holding Companies (FR Y–9C) 

(OMB No. 7100–0128) with the Board 

began to complete two new items in the 

report’s Schedule HC–N, ‘‘Past Due and 

Nonaccrual Loans, Leases, and Other 

Assets’: Memorandum item 7, 

‘‘Additions to nonaccrual assets during 

the quarter,’’ and Memorandum item 8, 

‘‘Nonaccrual assets sold during the 

quarter.’’ The agencies propose to add 

these same items to the comparable Call 

Report schedule (Schedule RC–N). 

Although the overall quarter-toquarter change in a bank’s nonaccrual 

assets can be calculated based on the 

quarter-end totals reported for such 

assets in Schedule RC–N, the reasons for 

the change cannot be determined from 

the information currently reported in 

Schedule RC–N. Information relating to 

inflows and outflows of nonaccrual 

assets would enhance the agencies’

ability to track shifts in the credit 

quality of a bank’s assets. Information 

on additions to nonaccrual assets during 

the quarter would indicate the extent of 

erosion or improvement in the quality of 

a bank’s assets. Data on the outflow of 

nonaccrual assets, such as sale activity, 

would also provide insight into the 

approaches taken by a bank’s 

management to the resolution of 

problem assets. Thus, the proposed new 

items would assist the agencies in 

assessing a bank’s ability to manage 

credit risk and deal with credit 

problems. 

For the industry as a whole, 

information on inflows and outflows 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49369 

4Loans held for investment are loans that the 

bank has the intent and ability to hold for the 

foreseeable future or until maturity or payoff. 

would aid in the evaluation of credit 

cycle trends. For example, a slowdown 

in inflows of nonaccrual assets may 

indicate an approaching peak level of 

nonperforming assets after the end of a 

recession. The information on 

nonaccrual asset sales would increase 

the agencies’ understanding of the 

evolution of the secondary market for 

sales of distressed assets, which has 

only come into existence in recent 

years. 

Because bank holding companies that 

file the FR Y–9C report (i.e., bank 

holding companies with total 

consolidated assets of $150 million or 

more and certain multibank holding 

companies) have reported the volume of 

additions to nonaccrual assets and sales 

of such assets for the past two years, 

banks that are subsidiaries of these 

holding companies should have systems 

in place for compiling these data. Other 

banks, however, may not currently track 

these data, although the agencies believe 

that sales of nonaccrual assets by small 

banks are infrequent at present. Thus, 

the agencies are particularly interested 

in receiving comments from banks that 

do not fall within the scope of an FR 

Y–9C report about their ability to report 

the amounts of quarterly additions to, 

and sales of, nonaccrual assets 

beginning March 31, 2006. 

6. Information on Credit Derivatives 

The volume of credit derivatives, as 

measured by their notional amount, has 

increased significantly at banks over the 

past several years, rising from an 

aggregate notional amount of $395 

billion at year-end 2001 to $3.1 trillion 

at March 31, 2005. From the end of the 

fourth quarter of 2004 to the end of the 

first quarter of 2005 alone, the notional 

amount of credit derivatives reported by 

banks increased by $778 billion or 33 

percent. However, despite this volume, 

the number of banks currently 

participating in the credit derivatives 

market, almost all of which have in 

excess of $1 billion in assets, is 

extremely small: 19 banks act as a 

guarantor by selling credit protection to 

other parties (i.e., they are assuming 

credit risk), while 26 banks are buying 

credit protection from other parties (i.e., 

they are hedging credit risk). A number 

of these banks enter into some credit 

derivatives as guarantor and other credit 

derivatives as beneficiaries. 

To gain a better understanding of the 

nature and trends of the credit 

derivative activities that are 

concentrated in a small number of large 

banks, the agencies are proposing to 

expand the information they collect in 

several Call Report schedules. First, in 

Schedule RC–L, item 7, where banks 

currently report the notional amounts of 

the credit derivatives on which they are 

the guarantor and on which they are the 

beneficiary, these banks would be 

required to provide a breakdown of 

these notional amounts by type of credit 

derivative: credit default swaps, total 

return swaps, credit options, and other 

credit derivatives. Banks would also 

report the maximum amounts they 

would pay and receive on credit 

derivatives on which they are the 

guarantor and on which they are the 

beneficiary, respectively. 

Second, in Schedule RC–R, 

Memorandum item 2, where banks 

currently present a maturity distribution 

of their derivative contracts that are 

subject to the risk-based capital 

requirements, credit derivatives would 

be added as a new category of 

derivatives with their remaining 

maturities reported separately for those 

that are investment grade and those that 

are subinvestment grade. 

Third, in Schedule RI, Memorandum 

item 8, banks that reported average 

trading assets of $2 million or more for 

any quarter of the preceding calendar 

year currently provide a four-way 

breakdown of trading revenue by type of 

risk exposure. When banks that must 

complete Memorandum item 8 hold 

credit derivatives for trading purposes, 

they have to report the revenue from 

these derivatives in one of the four 

existing risk exposure categories, none 

of which is particularly suitable for 

reporting such revenue. Accordingly, 

the agencies propose to add a new risk 

exposure category for credit derivatives. 

This information would address the 

current weakness in the reporting of 

trading revenue, but, more importantly, 

it would enable the agencies to begin to 

identify the extent to which credit 

derivatives held for trading purposes 

contribute to a bank’s trading revenue 

each period and over time. 

Finally, the agencies propose to add a 

new Memorandum item to Schedule RI, 

‘‘Income Statement,’’ for the changes in 

fair value recognized in earnings on 

credit derivatives that are held for 

purposes other than trading, e.g., to 

economically hedge credit exposures 

arising from nontrading assets (such as 

available-for-sale securities or loans 

held for investment 4) or unused lines of 

credit. In this regard, the agencies 

reiterate that credit derivatives held for 

purposes other than trading should not 

be reported as trading assets or 

liabilities in the Call Report and the 

changes in fair value of such credit 

derivatives should not be reported as 

trading revenue. Consistent with the 

existing guidance in the Glossary entry 

for ‘‘Derivative contracts’’ in the Call 

Report instructions, credit derivatives 

held for purposes other than trading 

with positive and negative fair values 

should be reported in ‘‘Other assets’’

and ‘‘Other liabilities,’’ respectively, on 

the Call Report balance sheet. Changes 

in fair value of derivatives held for 

purposes other than trading that are not 

designated as hedging instruments 

should be reported consistently as either 

‘‘Other noninterest income’’ or ‘‘Other 

noninterest expense’’ in the Call Report 

income statement. 

7. 1–4 Family Residential Mortgage 

Banking Activities 

Mortgage banking activities, 

particularly those involving closed-end 

1–4 family residential mortgages, have 

become an increasingly important line 

of business for many banks. Mortgage 

banking revenues are a significant 

component of earnings for these 

institutions and have been critical to the 

recent record earnings achieved by the 

banking industry as a whole. The 

growth of the industry’s mortgage 

banking activities also reflects the 

central role that securitization 

mechanisms now play in the mortgage 

market. 

However, these activities and the 

revenues they generate can be quite 

volatile over the business and interest 

rate cycle. Furthermore, a bank’s 

mortgage banking operations can raise 

significant management and supervisory 

concerns related to credit, liquidity, 

interest rate, and operational risk. 

Understanding the importance of 

mortgage banking activities to an 

institution’s financial condition and risk 

profile requires information about the 

transactional flows associated with 

residential mortgages. In this regard, the 

OTS has collected a large set of cash 

flow data on mortgage loan 

disbursements, purchases, and sales in 

the TFR for more than a decade. 

After considering the OTS’s reporting 

requirements as well as the types of 

information commonly disclosed by 

banking organizations with large 

mortgage banking operations, the 

agencies are proposing to add a new 

Schedule RC–P that would contain a 

series of items that are focused on 

closed-end 1–4 family residential 

mortgage loans, with data reported 

separately for first liens and junior liens. 

The new items would cover loans 

originated, purchased, and sold during 

the quarter, loans held for sale at 

quarter-end, and the year-to-date 

noninterest income earned from closedVerDate Aug<18>2005 15:03 Aug 22, 2005 Jkt 205001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 E:\FR\FM\23AUN1.SGM 23AUN1
49370 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

5However, commissions and fees from sales of 

annuities by a bank’s trust department (or a 

consolidated trust company subsidiary) that are 

executed in a fiduciary capacity are to be reported 

in ‘‘Income from fiduciary activities’’ in Schedule 

RI, item 5.a, and income from sales of annuities to 

bank customers by a bank’s securities brokerage 

subsidiary are reported in ‘‘Investment banking, 

advisory, brokerage, and underwriting fees and 

commissions’’ in Schedule RI, item 5.d. 

end 1–4 family residential mortgage 

banking activities. This income would 

consist of the portion of a bank’s ‘‘Net 

servicing fees,’’ ‘‘Net securitization 

income,’’ and ‘‘Net gains (losses) on 

sales of loans and leases’’ (Schedule RI, 

items 5.f, 5.g, and 5.i) attributable to 

closed-end 1–4 family residential 

mortgage loans. 

The proposed new items would be 

reported by all banks with $1 billion or 

more in total assets. In addition, banks 

with less than $1 billion in assets that 

are significantly involved in mortgage 

banking activities, as determined by 

their primary Federal regulator, could 

be directed by their regulator to report 

this mortgage banking information. 

For loans originated, purchased, and 

sold during the quarter, banks would 

report the principal amount of these 

loans. Originations would include those 

loans for which the origination and 

underwriting process was handled by 

the bank or a consolidated subsidiary of 

the bank, but would exclude those loans 

for which the origination and 

underwriting process was handled by 

another party, including a 

correspondent or mortgage broker, even 

if the loan was closed in the name of the 

bank or a consolidated subsidiary of the 

bank. Such loans would be treated as 

purchases, as would acquisitions of 

loans closed in the name of another 

party. Sales of loans would include 

those transfers of loans that have been 

accounted for as sales in accordance 

with generally accepted accounting 

principles, i.e., where the loans are no 

longer included in the bank’s 

consolidated total assets. Loans held for 

sale at quarter-end would be reported at 

the lower of cost or fair value, consisent 

with their presentation in the Call 

Report balance sheet. The agencies 

request comment on the reporting 

approach discussed in this paragraph. 

8. Income Statement Reclassification of 

Income From Annuity Sales 

In the Call Report income statement 

(Schedule RI), banks currently report 

commissions and fees from sales of 

annuities (fixed, variable, and deferred) 

and related referral and management 

fees as a component of item 5.h.(2), 

‘‘Income from other insurance 

activities.’’ 5 Because annuities are 

deemed to be financial investment 

products rather than insurance, the 

agencies propose to revise the 

instructions for item 5.h.(2) and item 

5.d, ‘‘Investment banking, advisory, 

brokerage, and underwriting fees and 

commissions,’’ by moving the references 

to annuities in the former item to the 

latter item. This change in the income 

statement classification for commissions 

and fees from annuity sales and related 

income should affect no more than 25 

percent of all banks based on the 

number of banks that currently report 

‘‘Income from the sale and servicing of 

mutual funds and annuities’’ in 

Schedule RI, Memorandum item 2. 

9. Investment Banking, Advisory, 

Brokerage, and Underwriting Income 

As the caption for Schedule RI, item 

5.d, ‘‘Investment banking, advisory, 

brokerage, and underwriting fees and 

commissions,’’ indicates, this income 

statement item commingles noninterest 

income from a variety of activities. At 

present, approximately 25 percent of all 

banks report that they earn income from 

these activities. However, the 

percentage of institutions reporting such 

income varies significantly as a function 

of bank size, ranging from less than 12 

percent of banks with less than $100 

million in assets to more than 60 

percent of banks with $1 billion or more 

in assets. The smaller banks that report 

income in Schedule RI, item 5.d, 

generally are not involved in investment 

banking and securities underwriting 

activities, but generate fees and 

commissions from sales of one or more 

types of investment products to 

customers. (In addition, as discussed in 

the preceding section, some banks 

generate commissions and fees from 

sales of annuities and the agencies are 

proposing to include such income in 

Schedule RI, item 5.d.) 

In order to better understand the 

sources of banks’ noninterest income, 

the agencies are proposing to 

distinguish between banks’ investment 

banking (dealer) activities and their 

sales (brokerage) activities by splitting 

item 5.d (after moving commissions and 

fees from annuity sales and related 

income into this income statement 

category from item 5.h.(2) as discussed 

in the preceding section) into three 

separate items. As revised, item 5.d 

would be subdivided into items for 

‘‘Fees and commissions from securities 

brokerage,’’ ‘‘Fees and commissions 

from annuity sales,’’ and ‘‘Investment 

banking, advisory, and underwriting 

fees and commissions.’’ Securities 

brokerage income would include fees 

and commissions from sales of mutual 

funds and from purchases and sales of 

other securities and money market 

instruments for customers (including 

other banks) where the bank is acting as 

agent. 

10. Certain Secured Borrowings 

When banks raise funds from sources 

other than deposit liabilities, they may 

do so on a secured or unsecured basis. 

‘‘Securities sold under agreements to 

repurchase’’ (Schedule RC, item 14.b) 

and ‘‘Federal Home Loan Bank 

advances’’ (Schedule RC–M, item 5.a) 

always represent secured borrowings, 

whereas ‘‘Subordinated notes and 

debentures’’ (Schedule RC, item 19) 

must be unsecured. However, amounts 

included in ‘‘Federal funds purchased 

(in domestic offices)’’ (Schedule RC, 

item 14.a) and ‘‘Other borrowings’’

(Schedule RC–M, item 5.b) can be 

secured or unsecured, but this cannot be 

determined at present from the Call 

Report. This uncertainty adversely 

affects the agencies’ assessment of 

banks’ liquidity positions. Moreover, as 

a bank’s condition deteriorates, it 

usually encounters increasing difficulty 

in rolling over existing unsecured debt 

or borrowing additional funds on an 

unsecured basis. When an institution 

fails, the relative volume of secured and 

unsecured borrowings directly 

influences the loss to the FDICadministered deposit insurance fund. 

Thus, to better understand the 

structure of banks’ nondeposit liabilities 

and the effect of these liabilities on 

liquidity, the agencies are proposing to 

add two items to Schedule RC–M in 

which banks would report the secured 

portion of their ‘‘Federal funds 

purchased’’ and their ‘‘Other 

borrowings.’’ At present, only about one 

fifth of all banks have purchased federal 

funds and the same percentage of 

institutions have other borrowings. The 

use of these funding sources increases 

in relation to bank size, with 15 percent 

of banks with less than $100 million in 

assets reporting federal funds purchased 

and about 11 percent of such banks 

reporting other borrowings. The 

respective percentages for these two 

types of liabilities increase to nearly 53 

and 64 percent for banks with $1 billion 

or more in assets. 

11. Life Insurance Assets 

Banks include their holdings of life 

insurance assets (i.e., the cash surrender 

value reported to the bank by the 

insurance carrier, less any applicable 

surrender charges not reflected by the 

carrier in this reported value) in 

Schedule RC–F, item 5, ‘‘All other 

assets.’’ If the carrying amount of a 

bank’s life insurance assets included in 

item 5 is greater than $25,000 and 

exceeds 25 percent of its ‘‘All other 

Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 49371 

assets,’’ the bank must disclose this 

carrying amount in item 5.b. 

In December 2004, the agencies issued 

an Interagency Statement on the 

Purchase and Risk Management of Life 

Insurance to provide guidance to 

institutions to help ensure that their risk 

management processes for bank-owned 

life insurance (BOLI) are consistent with 

safe and sound banking practices. Given 

the risks associated with BOLI, the 

Interagency Statement advises 

institutions that it is generally not 

prudent for an institution to hold BOLI 

with an aggregate cash surrender value 

that exceeds 25 percent of the 

institution’s capital as measured in 

accordance with its primary Federal 

regulator’s concentration guidelines. 

Although more than 40 percent of all 

banks report the amount of their life 

insurance assets in item 5.b under the 

current 25 percent of ‘‘All other assets’’

disclosure threshold, this reporting 

mechanism does not ensure that the 

agencies are able to monitor whether all 

banks holding life insurance assets are 

approaching or have exceeded the 25 

percent of capital concentration 

threshold. As a consequence, the 

agencies are proposing to revise Call 

Report Schedule RC–F by adding a new 

item 5 in which all banks would report 

their holdings of life insurance assets 

and by renumbering existing item 5, 

‘‘All other assets,’’ as item 6. The 

agencies note that all savings 

associations are currently required to 

report the amount of their life insurance 

assets in the TFR (Schedule SC, lines 

SC615 and SC625). 

12. Income From International 

Operations 

In the FFIEC 031 version of the Call 

Report, banks with foreign offices whose 

international operations account for 

more than 10 percent of total revenues, 

total assets, or net income must 

complete Schedule RI–D, ‘‘Income from 

International Operations.’’ Banks that 

must complete this schedule, of which 

there are less than 40, are directed to 

report estimates of the amounts of their 

income and expense attributable to 

international operations after 

eliminating intrabank accounts. These 

estimates should reflect all appropriate 

internal allocations of income and 

expense, whether or not recorded in that 

manner in the bank’s formal accounting 

records. The agencies have found that 

the term ‘‘international operations’’ is 

subject to varying interpretations and 

has led to differences between what 

some banks report as international 

income in their internal management 

reports compared to the income 

reported in Schedule RI–D. 

In order to obtain better income data 

about banks’ foreign operations in a less 

burdensome manner, the agencies are 

proposing to revise the approach taken 

in Schedule RI–D. Instead of collecting 

income from ‘‘international operations,’’

the agencies would begin to capture 

income from foreign offices as that term 

is currently defined for Call Report 

purposes. This revised approach should 

improve the usefulness of the Schedule 

RI–D data in assessing the significance 

of foreign office net income to banks’

overall net income. The threshold for 

completing revised Schedule RI–D 

would continue to be based on a 10 

percent test, but the total revenues, total 

assets, and net income used for this test 

would be based on foreign office 

revenues, assets, and net income, which 

should present a clearer standard than 

at present. 

The data items in proposed revised 

Schedule RI–D, ‘‘Income from Foreign 

Offices,’’ would for the most part mirror 

categories of income and expense 

reported in Schedule RI. The categories 

that would be used for foreign offices 

would include total interest income; 

total interest expense; provision for loan 

and lease losses; trading revenue; 

investment banking, advisory, 

brokerage, and underwriting fees and 

commissions; net securitization income; 

all other noninterest income; realized 

gains (losses) on held-to-maturity and 

available-for-sale securities; total 

noninterest expense; applicable income 

taxes; and extraordinary items and other 

adjustments, net of income taxes. The 

amounts reported in the preceding 

income and expense categories would 

be reported gross, i.e., before 

eliminating the effects of transactions 

with domestic offices, which would be 

a change from the current Schedule RI–

D approach under which amounts are 

reported net of intrabank transactions. 

Banks would also report the amount of 

any adjustments to pretax income for 

internal allocations to foreign offices for 

the effects of equity capital on overall 

bank funding costs before arriving at net 

income attributable to foreign offices 

before internal allocations of income 

and expense. To complete the 

remainder of revised Schedule RI–D, 

banks would next report the amount of 

internal allocations of income and 

expense applicable to foreign offices, 

followed by the amount of eliminations 

arising from the consolidation of foreign 

offices with domestic offices. Finally, 

banks would then report their 

consolidated net income attributable to 

foreign offices. 

13. Scope of Securitizations To Be 

Included in Schedule RC–S 

In column G of Schedule RC–S, 

‘‘Servicing, Securitization, and Asset 

Sale Activities,’’ banks report 

information on securitizations and on 

asset sales with recourse or other sellerprovided credit enhancements involving 

loans and leases other than those 

covered in columns A through F. 

Although the scope of Schedule RC–S 

was intended to cover all of a bank’s 

securitizations and credit-enhanced 

asset sales, as currently structured 

column G does not capture transactions 

involving assets other than loans and 

leases. As a result, securitization 

transactions involving such assets as 

securities, for example, have not been 

reported in Schedule RC–S. Therefore, 

the agencies propose to revise the scope 

of column G to encompass ‘‘All Other 

Loans, All Leases, and All Other Assets’’

to ensure that they can identify and 

monitor the full range of banks’

involvement in and credit exposure to 

securitizations and asset sales. With 

fewer than 30 banks reporting data on 

securitizations in column G of Schedule 

RC–S at present, the proposed change in 

the scope of column G is expected to 

affect only a nominal number of banks. 

C. Other Matters 

1. Instructional Clarification for 

Servicing of Home Equity Lines 

Banks report the outstanding 

principal balance of assets serviced for 

others in Schedule RC–S, Memorandum 

item 2. In Memorandum items 2.a and 

2.b, the amounts of 1–4 family 

residential mortgages serviced with 

recourse and without recourse, 

respectively, are reported. 

Memorandum item 2.c covers all other 

financial assets serviced for others, but 

banks are required to report the amount 

of such servicing only if the servicing 

volume is more than $10 million. The 

instructions for Memorandum items 2.a 

and 2.b do not explicitly define ‘‘1–4 

family residential mortgages.’’ However, 

the caption for column A of the body of 

Schedule RC–S is ‘‘1–4 family 

residential loans,’’ which the 

instructions for column A describe as 

closed-end loans secured by first or 

junior liens on 1–4 family residential 

properties as defined for Schedule RC–

C, part I, items 1.c.(2)(a) and (b). 

Some banks have asked whether 

Memorandum items 2.a and 2.b should 

include servicing of home equity lines 

of credit because such lines are also 

secured by 1–4 family residential 

properties. Information on 

securitizations and asset sales involving 

home equity lines is reported in column 

49372 Federal Register / Vol. 70, No. 162 / Tuesday, August 23, 2005 / Notices 

B of the body of Schedule RC–S. To 

resolve the questions about the scope of 

Memorandum items 2.a and 2.b, the 

agencies are proposing to clarify the 

instructions by stating that these two 

items should include servicing of 

closed-end loans secured by first or 

junior liens on 1–4 family residential 

properties only. Servicing of home 

equity lines would be included in 

Memorandum item 2.c. 

2. Officer Declaration and Director 

Attestation Requirements and 

Signatures 

The Call Report must be signed by an 

authorized officer of the bank and 

attested to by not less than two directors 

(trustees) for state nonmember banks 

and three directors for national and 

State member banks. As required by 

statute, the officer declaration and 

director attestation address the 

correctness of the information reported 

in the Call Report. The statute also 

recognizes that banks are responsible for 

maintaining procedures to ensure the 

accuracy of this information. 

Given the importance placed upon the 

quality of the information reported in 

the Call Report, the agencies believe that 

the chief executive officer and chief 

financial officer are the most 

appropriate officers within a bank to 

sign a declaration concerning the 

preparation of the report. Similarly, 

because of the duties normally carried 

out by the audit committee of the board 

of directors, audit committee members 

are the most appropriate directors to 

attest to the correctness of the report. 

The agencies recognize, however, that 

some banks may not have audit 

committees and that, at some banks, the 

same individual may perform the 

functions of both the chief executive 

officer and the chief financial officer. 

The agencies plan to revise the 

existing officer declaration to require 

that the Call Report be signed by each 

bank’s chief executive officer (or the 

person performing similar functions) 

and chief financial officer (or the person 

performing similar functions), who may 

be the same person. The revised 

declaration would also state that these 

officers are responsible for establishing 

and maintaining adequate internal 

control over financial reporting, 

including controls over regulatory 

reports. The director attestation would 

be revised to require that the directors 

who sign be members of the bank’s 

audit committee. If the bank has no 

audit committee or if the committee has 

less than the two or three directors 

required to attest to the Call Report, 

other directors would sign the 

attestation. The revised director 

attestation would also indicate that the 

directors signing the attestation have 

reviewed the bank’s Call Report. 

III. Request for Comment 

Public comment is requested on all 

aspects of this joint notice. As 

previously mentioned, the agencies 

particularly wish to encourage banks 

and other interested parties to comment 

on such matters as data availability, data 

alternatives, and reporting thresholds 

for each proposal for new or revised 

data. In addition, comments are invited 

on: 

(a) Whether the proposed revisions to 

the Call Report 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’

estimates 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 collections 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 submitted in response to 

this joint 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 

collection request. 

Dated: August 16, 2005. 

Stuart E. Feldstein, 

Assistant Director, Legislative and Regulatory 

Activities Division, Office of the Comptroller 

of the Currency. 

Board of Governors of the Federal Reserve 

System, August 18, 2005. 

Jennifer J. Johnson, 

Secretary of the Board. 

Dated at Washington, DC, this 17th day of 

August, 2005. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 05–16680 Filed 8–22–05; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

Proposed Collection; Comment 

Request for Form 13013C 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice and request for 

comments. 

SUMMARY: The Department of the 

Treasury, as part of its continuing effort 

to reduce paperwork and respondent 

burden, invites the general public and 

other Federal agencies to take this 

opportunity to comment on proposed 

and/or continuing information 

collections, as required by the 

Paperwork Reduction Act of 1995, 

Public Law 104–13 (44 U.S.C. 

3506(c)(2)(A)). Currently, the IRS is 

soliciting comments concerning Form 

13013C, Taxpayer Advocacy Panel 

(TAP) Membership Application. 

DATES: Written comments should be 

received on or before October 24, 2005 

to be assured of consideration. 

ADDRESSES: Direct all written comments 

to Glenn P. Kirkland, Internal Revenue 

Service, room 6516, 1111 Constitution 

Avenue, NW., Washington, DC 20224. 

FOR FURTHER INFORMATION CONTACT: 

Requests for additional information or 

copies of the form should be directed to 

R. Joseph Durbala, (202) 622–3634, 

Internal Revenue Service, room 6516, 

1111 Constitution Avenue, NW., 

Washington, DC 20224, or through the 

internet at RJoseph.Durbala@irs.gov. 

SUPPLEMENTARY INFORMATION: 

Title: Taxpayer Advocacy Panel (TAP) 

Membership Application. 

OMB Number: 1545–1788. 

Form Number: 13013C. 

Abstract: Form 13013C is an 

application to volunteer to serve on the 

Taxpayer Advocacy Panel (TAP), as an 

advisory panel to the Internal Revenue 

Service. The TAP application is 

necessary for the purpose of recruiting 

perspective members to voluntarily 

participate on the Taxpayer Advocacy 

Panel for the Internal Revenue Service. 

It is necessary to gather information to 

rank applicants as well as to balance the 

panels demographically. 

Current Actions: There are no changes 

being made to the form at this time. 

Type of Review: Extension of a 

currently approved collection. 

Affected Public: Individuals, and 

business or other for-profit 

organizations. 

Estimated Number of Respondents: 

1,200. 

Estimated Time per Respondent: 1 

hour, 30 minutes.