Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54807 

• The Commission’s contractor will 

receive hand-delivered or messengerdelivered paper filings for the 

Commission’s Secretary at 236 

Massachusetts Avenue, NE., Suite 110, 

Washington, DC 20002. The filing hours 

at this location are 8 a.m. to 7 p.m. All 

hand deliveries must be held together 

with rubber bands or fasteners. Any 

envelopes must be disposed of before 

entering the building. 

• Commercial overnight mail (other 

than U.S. Postal Service Express Mail 

and Priority Mail) must be sent to 9300 

East Hampton Drive, Capitol Heights, 

MD 20743. 

• U.S. Postal Service first-class, 

Express, and Priority mail must be 

addressed to 445 12th Street, SW., 

Washington DC 20554. 

People with Disabilities: To request 

materials in accessible formats for 

people with disabilities (braille, large 

print, electronic files, audio format), 

send an e-mail to fcc504@fcc.gov or call 

the Consumer & Governmental Affairs 

Bureau at 202–418–0530 (voice), 202– 

418–0432 (tty). 

Parties shall send one copy of their 

comments and reply comments to Best 

Copy and Printing, Inc., Portals II, 445 

12th Street, SW., Room CY–B402, 

Washington, DC 20554, (800) 378–3160, 

e-mail FCC@BCPIWEB.com. Comments 

filed in response to this public notice 

will be available for public inspection 

and copying during business hours in 

the FCC Reference Information Center, 

Portals II, 445 12th Street SW., Room 

CY–A257, Washington, DC 20554, and 

via the Commission’s Electronic 

Comment Filing System (ECFS) by 

entering the docket number, WT Docket 

No. 08–165. The comments may also be 

purchased from Best Copy and Printing, 

Inc., telephone (800) 378–3160, 

facsimile (202) 488–5563, or e-mail 

FCC@BCPIWEB.com. 

Federal Communications Commission. 

James D. Schlichting, 

Acting Chief, Wireless Telecommunications 

Bureau. 

[FR Doc. E8–22311 Filed 9–22–08; 8:45 am] 

BILLING CODE 6712–01–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 a proposal to extend, with 

revision, 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 November 24, 2008. 

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 should direct all written 

comments to: Communications 

Division, Office of the Comptroller of 

the Currency, Public Information Room, 

Mailstop 1–5, Attention: 1557–0081, 

250 E Street, SW., Washington, DC 

20219. In addition, comments may be 

sent by fax to (202) 874–4448, or by 

electronic mail to 

regs.comments@occ.treas.gov. For 

security reasons, the OCC requires that 

visitors make an appointment to inspect 

comments. You may do so by calling 

(202) 874–5043. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and submit to security screening in 

order to inspect and photocopy 

comments. 

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 

http://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: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal/ 

propose.html. Follow the instructions 

for submitting comments on the FDIC 

Web site. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: comments@FDIC.gov. 

Include ‘‘Consolidated Reports of 

Condition and Income, 3064–0052’’ in 

the subject line of the message. 

• Mail: Herbert J. Messite (202–898– 

6834), Counsel, Attn: Comments, Room 

F–1052, 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. 


jlentini on PROD1PC65 with NOTICES
54808 Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 

1See 67 Federal Register 3995, January 27, 2004. 

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. 

Additionally, commenters may send a 

copy of their comments to the OMB 

desk officer for the agencies by mail to 

the Office of Information and Regulatory 

Affairs, U.S. Office of Management and 

Budget, New Executive Office Building, 

Room 10235, 725 17th Street, NW., 

Washington, DC 20503, or by fax to 

(202) 395–6974. 

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 the 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, (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. Shore, Federal 

Reserve 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 call (202) 263–4869. 

FDIC: Herbert J. Messite, Counsel, 

(202) 898–6834, Legal Division, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: The 

agencies are proposing to revise and 

extend for three years the Call Report, 

which are currently approved 

collections of information. 

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: 

1,650 national banks. 

Estimated Time per Response: 46.24 

burden hours. 

Estimated Total Annual Burden: 

305,237 burden hours. 

Board 

OMB Number: 7100–0036. 

Estimated Number of Respondents: 

874 state member banks. 

Estimated Time per Response: 52.82 

burden hours. 

Estimated Total Annual Burden: 

184,653 burden hours. 

FDIC 

OMB Number: 3064–0052. 

Estimated Number of Respondents: 

5,162 insured state nonmember banks. 

Estimated Time per Response: 36.88 

burden hours. 

Estimated Total Annual Burden: 

761,498 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 

650 hours per quarter, depending on an 

individual institution’s circumstances. 

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). At present, except for 

selected data items, these information 

collections are not given confidential 

treatment. 

Abstract 

Institutions submit Call Report data to 

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. Call Report data 

provide the most current statistical data 

available for evaluating institutions’ 

corporate applications, for identifying 

areas of focus for both on-site and offsite examinations, and for monetary and 

other public policy purposes. The 

agencies use Call Report data in 

evaluating interstate merger and 

acquisition applications to determine, as 

required by law, whether the resulting 

institution would control more than ten 

percent of the total amount of deposits 

of insured depository institutions in the 

United States. Call Report data are also 

used to calculate institutions’ deposit 

insurance and Financing Corporation 

assessments and national banks’ 

semiannual assessment fees. 

Current Actions 

I. Overview 

The agencies are proposing to 

implement several changes to the Call 

Report requirements on a phased-in 

basis during 2009 to better support their 

surveillance and supervision of 

individual banks and enhance their 

monitoring of the industry’s condition 

and performance. The proposed 

revisions reflect a thorough and careful 

review of the agencies’ data needs in a 

variety of areas as banks encounter the 

most turbulent environment in more 

than a decade. Thus, the revisions 

include new items that focus on areas in 

which the banking industry is facing 

heightened risk as a result of market 

turmoil and illiquidity and weakening 

economic and credit conditions. Where 

possible, the agencies have sought to 

establish reporting thresholds for 

proposed new items. Other proposed 

new items will be relevant to only a 

small percentage of banks. The 

proposed revisions are discussed in 

detail in sections II.A through IV.F of 

this notice. 

In their review of data needs in the 

current environment, the agencies 

concluded that additional information 

on banks’ securitization and structured 

finance activities would assist the 

agencies in evaluating the nature and 

scope of banks’ involvement with the 

traditionally off-balance sheet entities 

that issue these products. However, the 

Financial Accounting Standards Board 

(FASB) is proposing to amend the 

accounting standards governing the 

accounting for financial asset transfers 

and the consolidation of variable 

interest entities in a manner that may 

cause a substantial volume of assets in 

bank-sponsored entities to be brought 

onto bank balance sheets. Therefore, the 

agencies have decided to wait until the 

outcome of the FASB’s amendment 

projects is clearer and the effect of the 

accounting changes on banks’ 

securitization and structured finance 

activities can be evaluated before 

proposing to revise the information 

currently collected on these activities in 

Schedule RC–S, Servicing, 

Securitization, and Asset Sale 

Activities. Depending on the outcome of 

the amendments (including their 

effective date) and their impact on 

banks, the agencies may decide that 

they are confronted with an immediate 

and critical need for specific 

information pertaining to the 

securitization and structured finance 

activities significantly affected by the 

amended accounting standards. If that 

were the case, the agencies would 

consider using the previously approved 

supplement to the Call Report to collect 

the necessary data for a limited time 

period in accordance with the policy 

established for the use of the 

supplement.1 The agencies’ ongoing 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54809 

2See Statement of Financial Accounting 

Standards No. 141, Business Combinations (FAS 

141), paragraph 57(b). This accounting treatment 

does not apply to those acquired loans within the 

scope of American Institute of Certified Public 

Accountants Statement of Position 03–3, 

Accounting for Certain Loans or Debt Securities 

Acquired in a Transfer (SOP 03–03). 

Call Report data needs in this area in 

response to the amended accounting 

standards would then be incorporated 

into a formal proposal that the agencies 

would publish with a request for 

comment in accordance with the 

requirements of the Paperwork 

Reduction Act of 1995. 

The agencies’ review also identified a 

need for data on higher risk 1–4 family 

residential mortgage loans, often 

referred to as subprime mortgages, that 

are either held by banks or serviced for 

others and on residential mortgagebacked securities for which a significant 

portion of the underlying mortgage 

loans are higher risk. The agencies will 

be developing a separate reporting 

proposal that would request industry 

comment on the collection of 

information in the Call Report on these 

higher risk residential mortgages and 

residential mortgage-backed securities, 

including proposed definitions for such 

mortgages and securities. The proposal 

would be published in the Federal 

Register and the comments received 

would assist the agencies in 

determining whether and how to 

proceed with the collection of data on 

these mortgages and securities in the 

Call Report. 

With respect to the proposed Call 

Report changes that are the subject of 

this proposal, the revisions that would 

take effect as of March 31, 2009, 

include: 

• The addition of new items in 

response to a revised accounting 

standard that will provide information 

on held-for-investment loans and leases 

acquired in business combinations; 

• Revisions to several Call Report 

schedules in response to accounting 

changes applicable to noncontrolling 

(minority) interests in consolidated 

subsidiaries; 

• Clarifications of the definition of 

the term ‘‘loan secured by real estate’’ 

and of the instructions for reporting 

unused commitments; 

• The addition of a new item to be 

reported annually on the bank’s fiscal 

year-end date; 

• Exemptions from reporting certain 

existing Call Report items for banks 

with less than $1 billion in total assets; 

• Instructional guidance on 

quantifying misstatements in the Call 

Report; and 

• The elimination of confidential 

treatment for data collected on fiduciary 

income, expenses, and losses. 

The proposed Call Report revisions to 

be implemented as of June 30, 2009, 

include new or revised items for: 

• Real estate construction and 

development loans outstanding with 

capitalized interest and the amount of 

such interest included in income for the 

quarter (for banks with construction and 

development loan concentrations); 

• Holdings of collateralized debt 

obligations and other structured 

financial products by type of product 

and underlying collateral; 

• Holdings of commercial mortgagebacked securities; 

• Unused commitments with an 

original maturity of one year or less to 

asset-backed commercial paper 

conduits; 

• Fair value measurements by level 

for asset and liability categories reported 

at fair value on a recurring basis (for 

banks that have $500 million or more in 

total assets, apply a fair value option, or 

are required to complete the Call Report 

trading schedule); 

• Pledged loans and pledged trading 

assets; 

• Collateral held against over-thecounter (OTC) derivative exposures by 

type of collateral and type of 

counterparty as well as the current 

credit exposure on OTC derivatives by 

type of counterparty (for banks with $10 

billion or more in total assets); 

• Remaining maturities of unsecured 

other borrowings and subordinated 

notes and debentures; 

• Investments in real estate ventures; 

• Held-to-maturity and available-forsale securities in domestic offices (for 

banks that have both domestic and 

foreign offices); 

• Past due and nonaccrual trading 

assets; 

• Credit derivatives by credit quality 

and remaining maturity and by 

regulatory capital treatment; and 

• Whether the bank is a trustee or 

custodian for certain types of accounts 

or provides certain services in 

connection with orders for securities 

transactions regardless of whether the 

bank exercises trust powers, which will 

take the form of yes/no questions. 

The proposed Call Report revisions 

that would take effect December 31, 

2009, apply only to Schedule RC–T, 

Fiduciary and Related Services. These 

revisions include: 

• Breaking out foundations and 

endowments as well as investment 

advisory agency accounts as separate 

types of fiduciary accounts in the 

schedule’s sections for reporting 

fiduciary and related assets and income; 

• Adding items for Individual 

Retirement Accounts and similar 

accounts included in fiduciary and 

related assets; 

• Expanding the breakdown of 

managed assets by type of asset to cover 

all types of fiduciary accounts; 

• Adding new asset types in the 

breakdown of managed assets by type of 

asset; 

• Revising the manner in which 

discretionary investments in common 

trust funds and collective investment 

funds are reported in the breakdown of 

managed assets by type of asset; 

• Adding items for the market value 

of discretionary investments in 

proprietary mutual funds and the 

number of managed accounts holding 

such investments; and 

• Adding items for the number and 

principal amount outstanding of debt 

issues in substantive default for which 

the institution serves as indenture 

trustee. 

For the March 31, June 30, and 

December 31, 2009, report dates, banks 

may provide reasonable estimates for 

any new or revised Call Report item 

initially required to be reported as of 

that date for which the requested 

information is not readily available. The 

specific wording of the captions for the 

new or revised Call Report data items 

discussed in this proposal and the 

numbering of these data items should be 

regarded as preliminary. 

Type of Review: Revision and 

extension of currently approved 

collections. 

II. Discussion of Revisions Proposed for 

March 2009 

A. Loans and Leases Acquired in 

Business Combinations 

Banks must apply Statement of 

Financial Accounting Standards No. 141 

(Revised), Business Combinations (FAS 

141(R)), which was issued in December 

2007, prospectively to business 

combinations for which the acquisition 

date is on or after the beginning of their 

first annual reporting period beginning 

on or after December 15, 2008. Thus, for 

banks with calendar year fiscal years, 

FAS 141(R) will apply to business 

combinations with acquisition dates on 

or after January 1, 2009. Under FAS 

141(R), all business combinations are to 

be accounted for by applying the 

acquisition method. 

Under current generally accepted 

accounting principles, loans to be held 

for investment that are acquired in a 

business combination accounted for 

using the purchase method generally are 

recorded at ‘‘present values of amounts 

to be received determined at appropriate 

current interest rates, less allowances’’ 

for loan and lease losses (ALLL).2 Thus, 


jlentini on PROD1PC65 with NOTICES
54810 Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 

in practice, an acquired bank’s ALLL 

generally is carried over to the acquiring 

bank’s (consolidated) balance sheet. In 

contrast, under FAS 141(R), a bank 

acquiring loans to be held for 

investment in a business combination 

accounted for using the acquisition 

method must record these loans at fair 

value. The fair value of these loans 

incorporates assumptions regarding 

credit risk. As a result, FAS 141(R) does 

not permit an acquiring bank to carry 

over the acquired bank’s ALLL. This 

same prohibition on carrying over the 

ALLL would apply in those situations 

when a bank must apply push down 

accounting, which is the establishment 

of a new accounting basis for a bank in 

its separate financial statements and its 

Call Report as a result of the bank 

becoming substantially wholly owned 

via a purchase transaction or a series of 

purchase transactions. 

Because of this significant change in 

the accounting for acquired loans, 

paragraph 68(h) of FAS 141(R) requires 

the following disclosures about the 

loans (not subject to SOP 03–3) and 

leases that were acquired in each 

business combination that occurred 

during the reporting period: 

• The fair value of the loans and 

leases; 

• The gross contractual amounts 

receivable; and 

• The best estimate at the acquisition 

date of the contractual cash flows not 

expected to be collected. 

These disclosures are intended to 

assist users of financial statements in 

understanding the credit quality and 

collectibility of the acquired loans and 

leases at the time of their acquisition. 

Accordingly, and in recognition of this 

significant change in accounting 

practice for business combinations, the 

agencies are proposing to add new items 

to the Call Report that would encompass 

the three acquisition date disclosures 

required by FAS 141(R) cited above for 

the following categories of acquired 

held-for-investment loans (not subject to 

SOP 03–3) and leases: 

• Loans secured by real estate; 

• Commercial and industrial loans; 

• Loans to individuals for household, 

family, and other personal expenditures; 

and 

• All other loans and all leases. 

These new items would be completed 

by banks that have engaged in business 

combinations that must be accounted 

for in accordance with FAS 141(R) or 

that have been involved in push down 

accounting transactions to which the 

measurement principles in FAS 141(R) 

apply, i.e., in general, transactions for 

which the acquisition date is on or after 

January 1, 2009. A bank that has 

completed one or more business 

combinations or has applied push down 

accounting during the current calendar 

year would report these acquisition date 

data (as aggregate totals if multiple 

business combinations have occurred) 

in each Call Report submission after the 

acquisition date during that year. 

The agencies are also considering 

whether banks that have engaged in 

FAS 141(R) business combinations 

should provide additional information 

in the Call Report about the acquired 

held-for-investment loans (not subject to 

SOP 03–3) and leases and the loss 

allowances established for them in 

periods after their acquisition. The 

agencies are considering requiring banks 

to report the outstanding balance of 

these acquired loans and leases, their 

carrying amount, and the amount of the 

allowance for post-acquisition losses on 

these loans and leases, which is 

consistent with the information that 

banks currently report in the Call Report 

about ‘‘purchased impaired loans’’ 

accounted for in accordance with SOP 

03–3. Since these purchased loans will 

be recorded at fair value at acquisition, 

this information would help the 

agencies and other users of the Call 

Report to track management’s judgments 

regarding the collectibility of the 

acquired loans and leases in periods 

after the acquisition date and evaluate 

fluctuations in the level of the overall 

ALLL as a percentage of the held-forinvestment loan and lease portfolio in 

periods after a business combination. 

However, the agencies recognize that 

information about acquired loans and 

leases and related allowances will 

become less useful from an analytical 

standpoint with the passage of time after 

a business combination. 

The agencies request comment on the 

merits and availability of the postacquisition loan and lease data 

described above that are being 

considered for possible addition to the 

Call Report and the period of time after 

a business combination this information 

should be reported (e.g., through the 

end of the calendar year of the 

acquisition, through the end of the 

calendar year after the year of the 

acquisition, for a longer period, or for 

some other period such as the first four 

calendar quarters after the acquisition). 

B. Noncontrolling Interests in 

Consolidated Financial Statements 

In December 2007, the FASB issued 

Statement No. 160, Noncontrolling 

Interests in Consolidated Financial 

Statements (FAS 160). FAS 160 requires 

a bank to clearly present in its 

consolidated financial statements the 

equity ownership interest in and the 

financial statement results of its 

subsidiaries that are attributable to the 

noncontrolling ownership interests in 

these subsidiaries. FAS 160 defines a 

noncontrolling interest, also called a 

minority interest, as the portion of 

equity in a bank’s subsidiary not 

attributable, directly or indirectly, to the 

parent bank. Under FAS 160, the 

ownership interests in subsidiaries held 

by the noncontrolling interests must be 

clearly identified, labeled, and 

presented in the consolidated balance 

sheet within equity capital, but separate 

from the parent bank’s equity capital. 

FAS 160 also requires that the amount 

of consolidated net income attributable 

to the bank and to the noncontrolling 

interests in the bank’s subsidiaries be 

clearly identified and presented on the 

face of the consolidated income 

statement. In this regard, the 

consolidated income statement will 

reflect the amount of the bank’s 

consolidated net income, with separate 

line items then indicating the portions 

of the consolidated net income 

attributable to the noncontrolling 

interests and to the parent bank. 

The agencies are proposing to make 

several changes to conform the Call 

Report to the presentation requirements 

of FAS 160. The agencies propose to 

amend Schedule RC, Balance Sheet, by 

replacing item 22, ‘‘Minority interest in 

consolidated subsidiaries,’’ which is 

currently reported outside the Equity 

Capital section, with a new item 27.b in 

the Equity Capital section for 

‘‘Noncontrolling (minority) interests in 

consolidated subsidiaries.’’ The 

agencies also propose to renumber and 

rename Schedule RC, items 26 through 

29 in the following manner: 

• Item 26.a, ‘‘Retained earnings;’’ 

• Item 26.b, ‘‘Accumulated other 

comprehensive income;’’ 

• Item 26.c, ‘‘Other equity capital 

components;’’ 

• Item 27.a, ‘‘Total bank equity 

capital (sum of items 23 through 26.c);’’ 

• Item 27.b, ‘‘Noncontrolling 

(minority) interests in consolidated 

subsidiaries;’’ 

• Item 28, ‘‘Total equity capital (sum 

of items 27.a and 27.b);’’ and 

• Item 29, ‘‘Total liabilities and 

equity capital (sum of items 21 and 

28).’’ 

The agencies also propose to adjust 

certain captions in Schedule RC–R, 

Regulatory Capital, to reflect these 

changes to the Equity Capital section of 

the Call Report balance sheet and to 

conform to FAS 160. Schedule RC–R, 

item 1, ‘‘Total equity capital (from 

Schedule RC, item 28),’’ will be 

renamed ‘‘Total bank equity capital 

(from Schedule RC, item 27.a).’’ 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54811 

Schedule RC–R, item 6, ‘‘Qualifying 

minority interest in consolidated 

subsidiaries,’’ will be renamed to 

‘‘Qualifying noncontrolling (minority) 

interest in consolidated subsidiaries.’’ 

Further, the agencies propose to 

amend Schedule RI, Income Statement, 

and Schedule RI–A, Changes in Equity 

Capital, to add or revise items to 

conform to FAS 160. In Schedule RI, 

new items 12, ‘‘Net income (loss) 

attributable to bank and noncontrolling 

(minority) interests (sum of items 10 

and 11),’’ and 13, ‘‘Less: Net income 

(loss) attributable to noncontrolling 

(minority) interests,’’ will be added to 

identify the entity’s consolidated net 

income and segregate net income 

attributable to noncontrolling interests. 

Current Schedule RI, item 12, ‘‘Net 

income (loss) (sum of items 10 and 11),’’ 

will be renumbered as item 14 and 

renamed ‘‘Net income (loss) attributable 

to bank (item 12 minus item 13).’’ The 

instructions to Schedule RI, item 7.d, 

‘‘Other noninterest expense,’’ will be 

amended to remove net income (or loss) 

attributable to noncontrolling (minority) 

interests from the current list of 

components of ‘‘Other noninterest 

expense.’’ 

Schedule RI–A will be retitled 

Changes in Bank Equity Capital. In 

Schedule RI–A, the following changes 

will be made: 

• Current item 1, ‘‘Total equity 

capital most recently reported for the 

December 31, 20xx, [previous calendar 

year-end] Reports of Condition and 

Income (i.e., after adjustments from 

amended Reports of Income),’’ will be 

renamed ‘‘Total bank equity capital 

most recently reported for the December 

31, 20xx, Reports of Condition and 

Income (i.e., after adjustments from 

amended Reports of Income);’’ 

• Current item 4, ‘‘Net income (loss) 

(must equal Schedule RI, item 12),’’ will 

be renamed ‘‘Net income (loss) 

attributable to bank (must equal 

Schedule RI, item 14);’’ and 

• Current item 12, ‘‘Total equity 

capital end of current period (sum of 

items 3 through 11) (must equal 

Schedule RC, item 28),’’ will be 

renamed ‘‘Total bank equity capital end 

of current period (sum of items 3 

through 11) (must equal Schedule RC, 

item 27.a).’’ 

The instructions to Schedule RI–A, item 

5, ‘‘Sale, conversion, acquisition, or 

retirement of capital stock, net,’’ will be 

amended to state that increases and 

decreases in bank equity capital 

resulting from changes in a bank’s 

ownership interest in a subsidiary while 

it retains its controlling financial 

interest in the subsidiary should be 

reported in item 5. 

C. Clarification of the Definition of Loan 

Secured by Real Estate 

The agencies have found that the 

definition of a ‘‘loan secured by real 

estate’’ in the Glossary section of the 

Call Report instructions has been 

interpreted differently by Call Report 

preparers and users. This has led to 

inconsistent reporting of loans 

collateralized by real estate in the loan 

schedule (Schedule RC–C) and other 

schedules of the Call Report that collect 

loan data. As a result, the agencies are 

proposing to clarify the definition by 

explaining that the estimated value of 

the real estate collateral must be greater 

than 50 percent of the principal amount 

of the loan at origination in order for the 

loan to be considered secured by real 

estate. Banks should apply this clarified 

definition prospectively and they need 

not reevaluate and, if appropriate, 

recategorize loans that they currently 

report as loans secured by real estate 

into other loan categories on the Call 

Report loan schedule. 

The revised definition of a ‘‘loan 

secured by real estate’’ would read as 

follows: 

For purposes of these reports, a loan 

secured by real estate is a loan secured 

wholly or substantially by a lien or liens on 

real property for which the lien or liens are 

central to the extension of the credit—that is, 

the borrower would not have been extended 

credit in the same amount or on terms as 

favorable without the lien or liens on real 

property. To be considered wholly or 

substantially secured by a lien or liens on 

real property, the estimated value of the real 

estate collateral (after deducting any more 

senior liens) must be greater than 50 percent 

of the principal amount of the loan at 

origination. A loan satisfying the criteria 

above, except a loan to a state or political 

subdivisions in the U.S., is to be reported as 

a loan secured by real estate in the Reports 

of Condition and Income, (1) regardless of 

whether the loan is secured by a first or a 

junior lien; (2) regardless of the department 

within the bank or bank subsidiary that made 

the loan; (3) regardless of how the loan is 

categorized in the bank’s records; (4) and 

regardless of the purpose of the financing. 

Only in a transaction where a lien or liens 

on real property (with an estimated collateral 

value greater than 50 percent of the loan’s 

principal amount at origination) have been 

taken as collateral solely through an 

abundance of caution and where the loan 

terms as a consequence have not been made 

more favorable than they would have been in 

the absence of the lien or liens, would the 

loan not be considered a loan secured by real 

estate for purposes of the Reports of 

Condition and Income. In addition, when a 

loan is partially secured by a lien or liens on 

real property, but the estimated value of the 

real estate collateral (after deducting any 

more senior liens) is 50 percent or less of the 

principal amount of the loan at origination, 

the loan should not be categorized as a loan 

secured by real estate. Instead, the loan 

should be reported in one of the other loan 

categories used in these reports based on the 

purpose of the loan. 

D. Clarification of Instructions for 

Unused Commitments 

Banks report unused commitments in 

Schedule RC–L, item 1. The instructions 

for this item identify various 

arrangements that should be reported as 

unused commitments, including but not 

limited to commitments for which the 

bank has charged a commitment fee or 

other consideration, commitments that 

are legally binding, loan proceeds that 

the bank is obligated to advance, 

commitments to issue a commitment, 

and revolving underwriting facilities. 

However, the agencies have found that 

some banks have not reported 

commitments that they have entered 

into until they have signed the loan 

agreement for the financing that they 

have committed to provide. Although 

the agencies consider these 

arrangements to be within the scope of 

the existing instructions for reporting 

commitments in Schedule RC–L, they 

believe that these instructions may not 

be sufficiently clear. Therefore, the 

agencies are proposing to revise the 

instructions for Schedule RC–L, item 1, 

‘‘Unused commitments,’’ to read as 

follows: 

Report in the appropriate subitem the 

unused portions of commitments. Unused 

commitments are to be reported gross, i.e., 

include in the appropriate subitem the 

amounts of commitments acquired from and 

conveyed to others. 

For purposes of this item, 

commitments include: 

(1) Commitments to make or purchase 

extensions of credit in the form of loans 

or participations in loans, lease 

financing receivables, or similar 

transactions. 

(2) Commitments for which the bank 

has charged a commitment fee or other 

consideration. 

(3) Commitments that are legally 

binding. 

(4) Loan proceeds that the bank is 

obligated to advance, such as: 

(a) Loan draws; 

(b) Construction progress payments; 

and 

(c) Seasonal or living advances to 

farmers under prearranged lines of 

credit. 

(5) Rotating, revolving, and open-end 

credit arrangements, including, but not 

limited to, retail credit card lines and 

home equity lines of credit. 

(6) Commitments to issue a 

commitment at some point in the future, 

including commitments that have been 

entered into even though the related 

loan agreement has not yet been signed. 


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3On the FFIEC 041 report, banks with less than 

$1 billion in assets are currently exempt from 

completing these Memorandum items. 

(7) Overdraft protection on depositors’ 

accounts offered under a program where 

the bank advises account holders of the 

available amount of overdraft 

protection, for example, when accounts 

are opened or on depositors’ account 

statements or ATM receipts. 

(8) The bank’s own takedown in 

securities underwriting transactions. 

(9) Revolving underwriting facilities 

(RUFs), note issuance facilities (NIFs), 

and other similar arrangements, which 

are facilities under which a borrower 

can issue on a revolving basis short-term 

paper in its own name, but for which 

the underwriting banks have a legally 

binding commitment either to purchase 

any notes the borrower is unable to sell 

by the rollover date or to advance funds 

to the borrower. 

Exclude forward contracts and other 

commitments that meet the definition of 

a derivative and must be accounted for 

in accordance with FASB Statement No. 

133, which should be reported in 

Schedule RC–L, item 12. Include the 

amount (not the fair value) of the 

unused portions of loan commitments 

that do not meet the definition of a 

derivative that the bank has elected to 

report at fair value under a fair value 

option. Also include forward contracts 

that do not meet the definition of a 

derivative. The unused portions of 

commitments are to be reported in the 

appropriate subitem regardless of 

whether they contain ‘‘material adverse 

change’’ clauses or other provisions that 

are intended to relieve the issuer of its 

funding obligations under certain 

conditions and regardless of whether 

they are unconditionally cancelable at 

any time. 

In the case of commitments for 

syndicated loans, report only the bank’s 

proportional share of the commitment. 

For purposes of reporting the unused 

portions of revolving asset-based 

lending commitments, the commitment 

is defined as the amount a bank is 

obligated to fund—as of the report 

date—based on the contractually agreed 

upon terms. In the case of revolving 

asset-based lending, the unused 

portions of such commitments should 

be measured as the difference between 

(a) the lesser of the contractual 

borrowing base (i.e., eligible collateral 

times the advance rate) or the note 

commitment limit, and (b) the sum of 

outstanding loans and letters of credit 

under the commitment. The note 

commitment limit is the overall 

maximum loan amount beyond which 

the bank will not advance funds 

regardless of the amount of collateral 

posted. This definition of 

‘‘commitment’’ is applicable only to 

revolving asset-based lending, which is 

a specialized form of secured lending in 

which a borrower uses current assets 

(e.g., accounts receivable and inventory) 

as collateral for a loan. The loan is 

structured so that the amount of credit 

is limited by the value of the collateral. 

E. Fiscal Year-End Date 

Although most banks have a calendar 

year fiscal year, many banks do not. The 

agencies currently do not have a 

systematic means for identifying the 

fiscal year-end dates of banks. In 

contrast, savings associations report 

their fiscal year-ends to the Office of 

Thrift Supervision in the Thrift 

Financial Report. 

New accounting standards typically 

take effect for fiscal years beginning on 

or after a date specified in the standard 

and banks are expected to adopt new 

standards for Call Report purposes in 

accordance with their effective date. 

Thus, individual banks must adopt new 

standards in different quarterly Call 

Reports based on their fiscal year-end 

dates. In addition, the applicability of 

certain regulations is based on a bank’s 

fiscal year. For example, the annual 

audit and reporting requirements of Part 

363 of the FDIC’s regulations apply to 

insured institutions with $500 million 

or more in total assets as of the 

beginning of their fiscal year. As another 

example, banks do not have to start 

complying with Regulation R— 

Exceptions for Banks from the 

Definition of Broker in the Securities 

Exchange Act of 1934 (12 CFR part 218), 

which the Board and the Securities and 

Exchange Commission (SEC) jointly 

adopted in September 2007, and the 

‘‘broker’’ exceptions in section 3(a)(4) of 

the Securities Exchange Act of 1934 

until the first day of their fiscal year 

commencing after September 30, 2008. 

To facilitate the agencies’ ability to 

determine when individual banks 

should be implementing accounting 

standards and regulations and to assess 

their compliance, the agencies are 

proposing to add a Memorandum item 

to the Call Report balance sheet in 

which banks would report their fiscal 

year-end date. This item would be 

collected annually as of each March 31. 

F. Exemptions From Reporting for 

Certain Existing Call Report Items 

The agencies have identified certain 

Call Report items for which the reported 

data are of lesser usefulness for banks 

with less than $1 billion in total assets. 

Accordingly, the agencies are proposing 

to exempt such banks from completing 

the following Call Report items effective 

March 31, 2009: 

• Schedule RI, Memorandum item 2, 

‘‘Income from the sale and servicing of 

mutual funds and annuities (in 

domestic offices);’’ 

• Schedule RC–B, Memorandum 

items 5.a through 5.f, ‘‘Asset-backed 

securities,’’ on the FFIEC 031 report;3

• Schedule RC–L, item 2.a, ‘‘Amount 

of financial standby letters of credit 

conveyed to others;’’ and 

• Schedule RC–L, item 3.a, ‘‘Amount 

of performance standby letters of credit 

conveyed to others.’’ 

G. Quantifying Misstatements in the 

Call Report 

The General Instructions section of 

the Call Report instructions discusses 

the filing of amended Call Reports. In 

this regard, the instructions state that: 

When dealing with the recognition 

and measurement of events and 

transactions in the Call Report, 

amended reports may be required if a 

bank’s primary federal bank supervisory 

authority determines that the reports as 

previously submitted contain errors that 

are material for the reporting bank. 

Materiality is a qualitative characteristic 

of accounting information which is 

defined in Financial Accounting 

Standards Board (FASB) Concepts 

Statement No. 2 as ‘‘the magnitude of an 

omission or misstatement of accounting 

information that, in the light of 

surrounding circumstances, makes it 

probable that the judgment of a 

reasonable person relying on the 

information would have been changed 

or influenced by the omission or 

misstatement.’’ 

FASB Statement No. 154, Accounting 

Changes and Error Corrections (FAS 

154), provides guidance for reporting 

the correction of an error or 

misstatement in previously issued 

financial statements. An error or 

misstatement can result from 

mathematical mistakes, mistakes in the 

application of generally accepted 

accounting principles, or oversight or 

misuse of facts that existed at the time 

the financial statements were prepared, 

and includes a change from an 

accounting principle that is not 

generally accepted to one that is 

generally accepted. The Glossary entry 

for ‘‘Accounting Changes’’ in the Call 

Report instructions includes a section 

on ‘‘Corrections of Accounting Errors’’ 

that provides guidance on reporting 

such corrections that is consistent with 

FAS 154. However, neither FAS 154 nor 

the Glossary entry for ‘‘Accounting 

Changes’’ specifies the appropriate 

method to quantify an error or 


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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54813 

4SAB 108 can be accessed at http://www.sec.gov/ 

interps/account/sab108.pdf. SAB 108 has been 

codified as Topic 1.N. in the SEC’s Codification of 

Staff Accounting Bulletins. 

5SAB 99 can be accessed at http://www.sec.gov/ 

interps/account/sab99.htm. SAB 99 has been 

codified as Topic 1.M. in the SEC’s Codification of 

Staff Accounting Bulletins. 

6For example, see the Call Report Supplemental 

Instructions for June 2007 at http://www.ffiec.gov/ 

PDF/FFIEC_forms/ 

FFIEC031_041_suppinst_200706.pdf. 

misstatement for purposes of evaluating 

materiality. 

In September 2006, the SEC staff 

noted in Staff Accounting Bulletin No. 

108, Considering the Effects of Prior 

Year Misstatements when Quantifying 

Misstatements in Current Year Financial 

Statements (SAB 108),4 that in 

describing the concept of materiality, 

FASB Concepts Statement No. 2, 

Qualitative Characteristics of 

Accounting Information, indicates that 

materiality determinations are based on 

whether ‘‘it is probable that the 

judgment of a reasonable person relying 

upon the report would have been 

changed or influenced by the inclusion 

or correction of the item’’ (emphasis 

added). The staff believes registrants 

must quantify the impact of correcting 

all misstatements, including both the 

carryover and reversing effects of prior 

year misstatements, on the current year 

financial statements. 

SAB 108 describes two approaches, 

generally referred to as ‘‘rollover’’ and 

‘‘iron curtain,’’ that have been 

commonly used to accumulate and 

quantify misstatements. The rollover 

approach ‘‘quantifies a misstatement 

based on the amount of the error 

originating in the current year income 

statement,’’ which ‘‘ignores the 

‘carryover effects’ of prior year 

misstatements.’’ In contrast, the ‘‘iron 

curtain approach quantifies a 

misstatement based on the effects of 

correcting the misstatement existing in 

the balance sheet at the end of the 

current year, irrespective of the 

misstatement’s year(s) of origination.’’ 

Because each of these approaches has its 

weaknesses, SAB 108 advises that the 

impact of correcting all misstatements 

on current year financial statements 

should be accomplished by quantifying 

an error under both the rollover and 

iron curtain approaches and by 

evaluating the error measured under 

each approach. When either approach 

results in a misstatement that is 

material, after considering all relevant 

quantitative and qualitative factors, an 

adjustment to the financial statements 

would be required. Guidance on the 

consideration of all relevant factors 

when assessing the materiality of 

misstatements is provided in the SEC’s 

Staff Accounting Bulletin No. 99, 

Materiality (SAB 99).5 SAB 108 observes 

that when the correction of an error in 

the current year would materially 

misstate the current year’s financial 

statements because the correction 

includes the effect of the prior year 

misstatements, the prior year financial 

statements should be corrected. 

The agencies have advised banks that, 

for Call Report purposes, a bank that is 

a public company or a subsidiary of a 

public company should apply the 

guidance from SAB 108 and SAB 99 

when quantifying the impact of 

correcting misstatements, including 

both the carryover and reversing effects 

of prior year misstatements, on their 

current year Call Reports.6 The agencies 

believe that the guidance in SAB 108 

and SAB 99 represents sound 

accounting practices that all banks, 

including those that are not public 

companies, should follow for purposes 

of quantifying misstatements and 

considering all relevant factors when 

assessing the materiality of 

misstatements in their Call Reports. 

Accordingly, the agencies are proposing 

to incorporate the guidance in these two 

Staff Accounting Bulletins into the 

section of the ‘‘Accounting Changes’’ 

Glossary entry on error corrections, 

thereby establishing a single approach 

for quantifying misstatements in the 

Call Report that would be applicable to 

all banks. The Glossary entry would 

explain that the impact of correcting all 

misstatements on current year Call 

Reports should be accomplished by 

quantifying an error under both the 

rollover and iron curtain approaches 

and by evaluating the error measured 

under each approach. When either 

approach results in a misstatement that 

is material, after considering all relevant 

quantitative and qualitative factors, 

appropriate adjustments to Call Reports 

would be required. 

H. Eliminating Confidential Treatment 

for Fiduciary Income, Expense, and Loss 

Data 

An important public policy issue for 

the agencies has been how to use market 

discipline to complement supervisory 

resources. Market discipline relies on 

market participants having sufficient 

appropriate information about the 

financial condition and risks of banks. 

The Call Report, in particular, is widely 

used by securities analysts, rating 

agencies, and large institutional 

investors as sources of bank-specific 

data. Disclosure that increases 

transparency should lead to more 

accurate market assessments of 

individual banks’ performance and 

risks. This, in turn, should result in 

more effective market discipline on 

banks. 

Despite this emphasis on market 

discipline, the FFIEC and the agencies 

currently accord confidential treatment 

to the information that certain 

institutions report in Call Report 

Schedule RC–T, Fiduciary and Related 

Services, on fiduciary and related 

services income, expenses, and losses 

(items 12 through 18, items 19.a through 

23, and Memorandum item 4). 

Approximately 400 institutions that 

exercise fiduciary powers and have 

either total fiduciary assets greater than 

$250 million or gross fiduciary and 

related services income greater than 10 

percent of revenue report their fiduciary 

and related services income quarterly 

and expenses and losses annually as of 

year-end. Around 200 institutions that 

exercise fiduciary powers, have total 

fiduciary assets greater than $100 

million but less than or equal to $250 

million, and do not meet the fiduciary 

income test mentioned above report 

their fiduciary and related services 

income, expenses, and losses annually 

as of year-end. An additional 1,000 

institutions that exercise fiduciary 

powers, have total fiduciary assets of 

$100 million or less, and do not meet 

the fiduciary income test mentioned 

above are exempt from reporting their 

fiduciary and related services income, 

expenses, and losses. 

Data on fiduciary and related services 

income, expenses, and losses (except for 

gross fiduciary and related services 

income, which is also reported in each 

institution’s Call Report income 

statement) are the only financial 

information currently collected on the 

Call Report that is treated as 

confidential on an individual institution 

basis. Nevertheless, the agencies publish 

aggregate data derived from these 

confidential items. The agencies have 

accorded confidential treatment to the 

fiduciary services income data for 

individual institutions since it began to 

be collected in 1997 in a separate report, 

the Annual Report of Trust Assets 

(FFIEC 001). Confidential treatment was 

retained when the reporting of trust data 

was incorporated into the Call Report 

and the separate trust report was 

eliminated in 2001. However, the 

agencies do not preclude institutions 

from publicly disclosing the fiduciary 

and related services income, expense, 

and loss data that the agencies treat as 

confidential. 

The agencies originally applied this 

confidential treatment to the fiduciary 

and related services income, expense, 

and loss information because these data 


jlentini on PROD1PC65 with NOTICES
54814 Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 

7 71 Federal Register 74580, December 12, 2006. 

generally pertain to only a portion of a 

reporting institution’s total operations 

and not to the institution as a whole. 

However, the agencies make publicly 

available on an individual bank basis 

the Call Report data they collect on 

income and expenses from foreign 

offices from banks with such offices 

where foreign activities exceed certain 

levels even though these data pertain to 

only a portion of these banks’ total 

operations. 

In addition, under the Uniform 

Interagency Trust Rating System, the 

agencies assign a rating to the earnings 

of an institution’s fiduciary activities at 

those institutions with fiduciary assets 

of more than $100 million, which are 

also the institutions that report their 

fiduciary and related services income, 

expenses, and losses in Call Report 

Schedule RC–T. The agencies’ 

evaluation of an institution’s trust 

earnings considers such factors as the 

profitability of fiduciary activities in 

relation to the size and scope of those 

activities and the institution’s overall 

business, taking this into account by 

functions and product lines. Although 

the agencies’ ratings for individual 

institutions are not publicly available, 

the reason for rating the trust earnings 

of institutions with more than $100 

million in fiduciary assets—its effect on 

the financial condition of the 

institution—means that fiduciary and 

related services income, expense, and 

loss information for these institutions is 

also relevant to market participants and 

others in the public as they seek to 

evaluate the financial condition and 

performance of individual institutions. 

Increasing the transparency of 

institutions’ fiduciary activities by 

making individual institutions’ 

fiduciary income, expense, and loss data 

available to the public should improve 

the market’s ability to assess these 

institutions’ performance and risks and 

thereby enhance market discipline. 

Accordingly, the agencies are proposing 

to eliminate the confidential treatment 

for the data on fiduciary and related 

services income, expenses, and losses 

that are reported in Schedule RC–T 

beginning with the amounts reported as 

of March 31, 2009. Fiduciary and 

related services income, expense, and 

loss data reported in Schedule RC–T for 

report dates prior to March 31, 2009, 

would remain confidential. 

III. Discussion of Revisions Proposed for 

June 2009 

A. Construction and Development Loans 

With Interest Reserves 

In December 2006, the agencies issued 

final guidance on commercial real estate 

(CRE) loans, including construction, 

land development, and other land (C&D) 

loans, entitled Concentrations in 

Commercial Real Estate Lending, Sound 

Risk Management Practices (CRE 

Guidance).7 This guidance was 

developed to reinforce sound risk 

management practices for institutions 

with high and increasing concentrations 

of commercial real estate loans on their 

balance sheets. It provides a framework 

for assessing CRE concentrations; risk 

management, including board and 

management oversight, portfolio 

management, management information 

systems, market analysis and stress 

testing, underwriting and credit risk 

review; and supervisory oversight, 

including CRE concentration 

management and an assessment of 

capital adequacy. 

In issuing the CRE Guidance, the 

agencies noted that CRE concentrations 

had been rising over the past several 

years and had reached levels that could 

create safety and soundness concerns in 

the event of a significant economic 

downturn. As a consequence, the CRE 

Guidance explains that, as part of their 

ongoing supervisory monitoring 

processes, the agencies would use 

certain criteria to identify institutions 

that are potentially exposed to 

significant CRE concentration risk. 

Thus, the CRE Guidance states in part 

that an institution whose total reported 

construction, land development, and 

other land loans is approaching or 

exceeds 100 percent or more of the 

institution’s total risk-based capital may 

be identified for further supervisory 

analysis of the level and nature of its 

CRE concentration risk. As of March 31, 

2008, approximately 28 percent of all 

banks held C&D loans in excess of 100 

percent of their total risk-based capital. 

A practice that is common in C&D 

lending is the establishment of an 

interest reserve as part of the original 

underwriting of a C&D loan. The interest 

reserve account allows the lender to 

periodically advance loan funds to pay 

interest charges on the outstanding 

balance of the loan. The interest is 

capitalized and added to the loan 

balance. Frequently, C&D loan budgets 

will include an interest reserve to carry 

the project from origination to 

completion and may cover the project’s 

anticipated sell-out or lease-up period. 

Although potentially beneficial to the 

lender and the borrower, the use of 

interest reserves carries certain risks. Of 

particular concern is the possibility that 

an interest reserve could disguise 

problems with a borrower’s willingness 

and ability to repay the debt consistent 

with the terms and conditions of the 

loan agreement. For example, a C&D 

loan for a project on which construction 

ceases before it has been completed or 

is not completed in a timely manner 

may appear to be performing if the 

continued capitalization of interest 

through the use of an interest reserve 

keeps the troubled loan current. This 

practice can erode collateral protection 

and mask loans that should otherwise 

be reported as delinquent or in 

nonaccrual status. 

Since the CRE Guidance was issued, 

market conditions have weakened, most 

notably in the C&D sector. As this 

weakening has occurred, the agencies’ 

examiners are encountering C&D loans 

on projects that are troubled, but where 

interest has been capitalized 

inappropriately, resulting in overstated 

income and understated volumes of past 

due and nonaccrual C&D loans. 

Therefore, to assist the agencies in 

monitoring C&D lending activities at 

those banks with a concentration of 

such loans, i.e., C&D loans (in domestic 

offices) that exceeded 100 percent of 

total risk-based capital as of the 

previous calendar year-end, the agencies 

are proposing to add two new Call 

Report items. First, banks with such a 

concentration would report the amount 

of C&D loans (in domestic offices) 

included in the Call Report loan 

schedule (Schedule RC–C) on which the 

use of interest reserves is provided for 

in the loan agreement. Second, these 

banks would report the amount of 

capitalized interest included in the 

interest and fee income on loans during 

the quarter. These data, together with 

information that banks currently report 

on the amount of past due and 

nonaccrual C&D loans, will assist in 

identifying banks with C&D loan 

concentrations that may be engaging in 

questionable interest capitalization 

practices for supervisory follow-up. 

B. Structured Financial Products 

Carried in Securities and Trading 

Portfolios 

Structured financial products such as 

collateralized debt obligations (CDOs) 

have become increasingly more complex 

and the volume of these financial 

products has increased substantially in 

recent years. Structured financial 

products generally convert a large pool 

of assets and other exposures (such as 

derivatives and third-party guarantees) 

into tradable capital market debt 

instruments. Some of the more complex 

financial product structures mix asset 

classes in an attempt to create 

investment products that diversify risk. 

In recent years, increasingly complex 

structured financial products have 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54815 

8These new line items would not include 

mortgage-backed and asset-backed commercial 

paper, which would continue to be reported as MBS 

and ABS, respectively, in Schedules RC–B and RC– 

D. 

9Securities backed by commercial and industrial 

loans that are commonly regarded as ABS rather 

than CLOs in the marketplace would continue to be 

reported as ABS in Schedules RC–B and RC–D. 

become more widely held as 

investments and trading assets, allowing 

investors and traders to acquire 

positions in a pool of assets with 

varying risks and rewards depending on 

the underlying collateral or reference 

assets. Synthetic structured financial 

products use credit derivatives and a 

reference pool of assets, which has led 

to the creation of hybrid products, 

which are a combination of cash and 

synthetic structured financial products. 

Further, complex products known as 

CDOs ‘‘squared,’’ which are CDOs 

backed primarily by the tranches of 

other CDOs, have contributed to the 

opacity and inability of investors to 

understand the performance of these 

highly complex products. 

Some holders of structured financial 

products have sustained financial losses 

due to defaults and losses on the 

underlying assets and other exposures. 

In addition, reduced market liquidity 

has contributed to significant fair value 

declines and lack of price transparency 

for other structured financial products. 

These recent market events have 

demonstrated the need for the agencies 

to collect more comprehensive 

information on investment products 

with significant market, credit, 

liquidity, and valuation risks in order to 

identify and monitor banks with 

exposures to these products and to track 

such exposures for the industry as a 

whole. 

Currently, banks separately report 

their holdings of regular mortgagebacked securities (MBS) (such as 

mortgage-backed pass-through 

securities, collateralized mortgage 

obligations, and real estate mortgage 

investment conduits) in the Call Report 

securities schedule (Schedule RC–B) or 

trading schedule (Schedule RC–D), as 

appropriate. All banks separately report 

their holdings of held-to-maturity and 

available-for-sale asset-backed securities 

(ABS) in the securities schedule. Those 

banks with large trading portfolios 

separately report their held-for-trading 

ABS in the trading schedule. Banks’ 

holdings of all other debt securities not 

issued by governmental entities in the 

U.S. are reported as ‘‘Other debt 

securities’’ in either the securities or 

trading schedule, as appropriate. 

However, the more complex structured 

financial products discussed above are 

not separately reported in Schedules 

RC–B and RC–D, but are currently 

reported in other line items within these 

two schedules. 

Therefore, the agencies propose to 

separately collect certain structured 

financial product data in both the 

securities and trading schedules of the 

Call Report. First, the agencies would 

add line items to collect information on 

certain structured financial products by 

type of structure (cash, synthetic, and 

hybrid). Each of these three new line 

items would cover CDOs, collateralized 

loan obligations (CLOs), collateralized 

bond obligations (CBOs), CDOs squared 

and cubed, and similar structured 

financial products.8 These new line 

items would be added to the body of the 

securities schedule and the trading 

schedule. In Schedule RC–B, the 

amortized cost and fair value of these 

three types of structures will be reported 

using the current four-column format 

that distinguishes between held-tomaturity and available-for-sale 

securities. In Schedule RC–D, the fair 

value of these three types of structures 

would be reported. Since the new items 

on structured financial products would 

include CDOs, the agencies will delete 

existing Memorandum items 5.a and 5.b 

from the trading schedule (Schedule 

RC–D). 

Second, the agencies would collect 

information on these complex 

structured financial products by the 

predominant type of collateral 

supporting the structures in new 

memorandum items in both Schedule 

RC–B and Schedule RC–D. The 

collateral supporting these products has 

distinct risk characteristics and the new 

information will provide the agencies 

with greater insight into the risks 

associated with the various 

collateralized structured financial 

products. The structured financial 

products would be reported according 

to the following types of collateral: 

• Trust preferred securities issued by 

financial institutions; 

• Trust preferred securities issued by 

real estate investment trusts; 

• Corporate and similar loans; 9

• 1–4 family residential MBS issued 

or guaranteed by U.S. governmentsponsored enterprises (GSEs); 

• 1–4 family residential MBS not 

issued or guaranteed by GSEs; 

• Diversified (mixed) pools of 

structured financial products such as 

CDOs squared and cubed (also known as 

‘‘pools of pools’’); and 

• Other collateral. 

In Schedule RC–B, amortized cost and 

fair value would be reported by the 

predominant type of collateral 

supporting the structure based on 

whether the products are classified as 

held-to-maturity or available-for-sale. In 

Schedule RC–D, the fair value of these 

products would be reported by 

predominant type of collateral 

supporting the structure. 

C. Holdings of Commercial MortgageBacked Securities 

At present, all banks report 

information on their holdings of held-tomaturity and available-for-sale MBS in 

Schedule RC–B, Securities, without 

distinguishing between residential and 

commercial MBS. Banks with average 

trading assets of $2 million or more in 

any of the four preceding calendar 

quarters provide information on MBS 

held for trading in Schedule RC–D, but 

only those with average trading assets of 

$1 billion or more disclose the amount 

of their residential and commercial 

MBS. 

Differences in residential mortgages 

and commercial mortgages carry 

through to MBS backed by these two 

types of mortgages. In contrast to 

residential mortgage loans, commercial 

mortgage loans are normally 

nonrecourse, which means that if the 

borrower defaults, the creditor cannot 

seize any other assets of the borrower. 

As a consequence, the ability of the 

underlying commercial real estate to 

produce income and the value of the 

property are key factors when assessing 

the credit risk of commercial MBS. In 

addition, the prepayment risk of 

commercial MBS is lower than on 

residential MBS because commercial 

mortgages normally place restrictions on 

prepayment that typically are not 

present on residential mortgages. 

Furthermore, the residential real estate 

market often performs differently than 

the commercial real estate market. 

Given the differences between 

residential and commercial MBS, the 

agencies are proposing to revise the 

reporting of MBS in Schedule RC–B, 

Securities, and Schedule RC–D, Trading 

Assets and Liabilities, in order to 

separately identify and track bank 

holdings of commercial MBS. In 

Schedule RC–B, items 4.a, ‘‘Passthrough securities,’’ and 4.b, ‘‘Other 

mortgage-backed securities,’’ would be 

revised to cover only residential MBS. 

New items 4.c.(1) and (2) would be 

added for ‘‘Commercial pass-through 

securities’’ and ‘‘Other commercial 

mortgage-backed securities.’’ Similarly, 

in Schedule RC–D, items 4.a through 4.c 

would cover only residential MBS and 

a new item 4.d would collect data on 

‘‘Commercial mortgage-backed 

securities.’’ These new and revised 

items would replace Memorandum 

items 4.a, ‘‘Residential mortgage-backed 


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securities,’’ and 4.b, ‘‘Commercial 

mortgage-backed securities,’’ in 

Schedule RC–D, which are currently 

completed only by banks with average 

trading assets of $1 billion or more in 

any of the four preceding calendar 

quarters. 

D. Unused Eligible Liquidity Facilities 

for Asset-Backed Commercial Paper 

(ABCP) Conduits With an Original 

Maturity of One Year or Less 

Under the agencies’ risk-based capital 

guidelines, banks are required to hold 

capital against the unused portions of 

eligible liquidity facilities that provide 

support to ABCP programs. The capital 

guidelines apply different risk-based 

capital requirements to eligible liquidity 

facilities based on the original maturity 

of the facilities. Banks are currently 

required to hold less capital against 

eligible liquidity facilities with original 

maturities of one year or less than 

against liquidity facilities with original 

maturities in excess of one year. 

However, because of the current 

structure of Schedule RC–R, Regulatory 

Capital, the instructions for the 

schedule direct banks to report the 

credit equivalent amount of both types 

of eligible liquidity facilities in item 53, 

‘‘Unused commitments with an original 

maturity exceeding one year.’’ The 

reporting of both types of eligible 

liquidity facilities in a single item has 

been accomplished by having banks 

adjust the credit equivalent amount of 

eligible liquidity facilities with original 

maturities of one year or less to produce 

the effect of the lower capital charge 

applicable to such liquidity facilities. 

This approach does not promote 

transparency with respect to the actual 

credit equivalent amount of eligible 

liquidity facilities with original 

maturities of one year or less and does 

not allow for verification of the accuracy 

of the credit converting and risk 

weighting of these exposures. 

To address these concerns, the 

agencies propose to renumber Schedule 

RC–R, item 53 as item 53.a and add a 

new item 53.b, ‘‘Unused commitments 

with an original maturity of one year or 

less to asset-backed commercial paper 

conduits,’’ to Schedule RC–R. The credit 

conversion factor applied to amounts 

reported in item 53.b, column A, would 

be 10 percent. 

E. Fair Value Measurements 

Effective for the March 31, 2007, 

report date, the banking agencies began 

collecting information on certain assets 

and liabilities measured at fair value on 

Call Report Schedule RC–Q, Financial 

Assets and Liabilities Measured at Fair 

Value. Currently, this schedule is 

completed by banks with a significant 

level of trading activity or that use a fair 

value option. The information collected 

on Schedule RC–Q is intended to be 

consistent with the fair value 

disclosures and other requirements in 

FASB Statement No. 157, Fair Value 

Measurements (FAS 157). 

Based on the banking agencies’ 

ongoing review of industry reporting 

and disclosure practices since the 

inception of this standard, and the 

reporting of items at fair value on 

Schedule RC, Balance Sheet, the 

agencies are proposing to expand the 

data collected on Schedule RC–Q in two 

material respects. 

First, to improve the consistency of 

data collected on Schedule RC–Q with 

the FAS 157 disclosure requirements 

and industry disclosure practices, the 

agencies are proposing to expand the 

detail of the collected data. The agencies 

are proposing to expand the detail on 

Schedule RC–Q to collect fair value 

information on all assets and liabilities 

reported at fair value on a recurring 

basis in a manner consistent with the 

asset and liability breakdowns on 

Schedule RC. Thus, the agencies are 

proposing to add items to collect fair 

value information on: 

• Available-for-sale securities; 

• Federal funds sold and securities 

purchased under agreements to resell; 

• Federal funds purchased and 

securities sold under agreements to 

repurchase; 

• Other borrowed money; and 

• Subordinated notes and debentures. 

The agencies also are proposing to 

modify the existing collection of loan 

and lease data and trading asset and 

liability data to collect data separately 

for: 

• Loans and leases held for sale; 

• Loans and leases held for 

investment; 

• Trading derivative assets; 

• Other trading assets; 

• Trading derivative liabilities; and 

• Other trading liabilities. 

The agencies would also add totals to 

capture total assets and total liabilities 

for items reported on the schedule. In 

addition, the agencies are proposing to 

modify the existing items for ‘‘other 

financial assets and servicing assets’’ 

and ‘‘other financial liabilities and 

servicing liabilities’’ to collect 

information on ‘‘other assets’’ and 

‘‘other liabilities’’ reported at fair value 

on a recurring basis, including 

nontrading derivatives. 

Components of ‘‘other assets’’ and 

‘‘other liabilities’’ would be separately 

reported if they are greater than $25,000 

and exceed 25 percent of the total fair 

value of ‘‘other assets’’ and ‘‘other 

liabilities,’’ respectively. In conjunction 

with this change, the existing reporting 

for loan commitments accounted for 

under a fair value option would be 

revised to include these instruments, 

based on whether their fair values are 

positive or negative, in the items for 

‘‘other assets’’ and ‘‘other liabilities’’ 

reported at fair value on a recurring 

basis, with separate disclosure of these 

commitments if significant. 

Second, the agencies are proposing to 

modify the reporting criteria for 

Schedule RC–Q. The current 

instructions require all banks that have 

adopted FAS 157 and (1) have elected 

to account for financial instruments or 

servicing assets and liabilities at fair 

value under a fair value option or (2) are 

required to complete Schedule RC–D, 

Trading Assets and Liabilities, to 

complete Schedule RC–Q. The agencies 

are proposing to maintain this reporting 

requirement for banks that use a fair 

value option or that have significant 

trading activity. In addition, the 

agencies are proposing to extend the 

requirement to complete Schedule 

RC–Q to all banks that reported $500 

million or more in total assets at the 

beginning of their fiscal year, regardless 

of whether they have elected to apply a 

fair value option to financial or 

servicing assets and liabilities. Thus, 

Schedule RC–Q would be completed by 

all banks that are required to obtain an 

independent annual financial statement 

audit pursuant to Part 363 of the FDIC’s 

regulations and are therefore required to 

include the FAS 157 fair value 

disclosures in their financial statements. 

The banking agencies have 

determined that the proposed 

information is necessary to more 

accurately assess the impact of fair 

value accounting and fair value 

measurements for safety and soundness 

purposes. The collection of the 

information on Schedule RC–Q, as 

proposed, will facilitate and enhance 

the banking agencies’ ability to monitor 

the extent of fair value accounting in 

banks’ Reports of Condition, including 

the elective use of fair value accounting 

and the nature of the inputs used in the 

valuation process, pursuant to the 

disclosure requirements of FAS 157. 

The information collected on Schedule 

RC–Q is consistent with the disclosures 

required by FAS 157 and consistent 

with industry practice for reporting fair 

value measurements and should, 

therefore, not impose significant 

incremental burden on banks. 


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10All other collateral would include, but not be 

limited to, mortgage-backed securities, asset-backed 

securities, and structured financial products. 

F. Pledged Loans in Loan and Trading 

Portfolios and Pledged Trading 

Securities 

Banks have been pledging loans for 

many years and the volume of these 

pledges has grown considerably in 

recent years. Pledging of bank loans is 

the act of setting aside certain loans to 

secure or collateralize bank transactions 

with the bank continuing to own the 

loans unless the bank defaults on the 

transaction. Pledging is used for 

securing public deposits, repurchase 

agreements, and other bank borrowings. 

Pledging affects a bank’s liquidity and 

other asset and liability management 

programs. 

Today there are a number of 

alternative funding structures used by 

banks that require banks to pledge 

loans. Some of these funding structures 

include pledging on-balance sheet loans 

to finance and support securitization 

structures held by the bank that do not 

meet sales treatment, pledging loans to 

secure borrowings from a Federal Home 

Loan Bank, and packaging of on-balance 

sheet loans to collateralize bonds sold 

by banks. Currently, the Call Report 

does not provide information on the 

volume of pledged loans. Therefore, the 

banking agencies propose to collect the 

total amount of held-for-sale and heldfor-investment loans and leases reported 

in Schedule RC–C, Loans and Lease 

Financing Receivables, that are pledged 

and the total amount of pledged loans 

that are carried in the trading portfolio 

and reported in Schedule RC–D, 

Trading Assets and Liabilities. 

In addition, although the agencies 

have long collected data on total amount 

of held-to-maturity and available-forsale securities reported in Schedule RC– 

B, Securities, that are pledged, banks 

have not been required to report the 

amount of securities carried in the 

trading portfolio that are pledged. 

Therefore, for reasons similar to those 

for collecting data on pledged loans, the 

agencies are proposing to add an item to 

Schedule RC–D to capture the amount 

of pledged trading securities. 

G. Collateral for OTC Derivative 

Exposures and Distribution of Credit 

Exposures 

The growth in banks’ OTC derivatives 

and the related counterparty credit 

exposures has been significant in recent 

years. For some major dealer banks, the 

counterparty credit risk from OTC 

derivatives rivals or exceeds their 

commercial and industrial loans 

outstanding. Despite the magnitude of 

these derivative exposures, there is 

virtually no information on OTC 

derivative counterparty credit exposures 

and associated risk mitigation in the 

Call Report. 

Given the size of OTC derivative 

counterparty credit exposures, and the 

important risk mitigation provided by 

collateral held to offset or mitigate such 

exposures, information on the 

distribution of each would assist the 

agencies in their oversight and 

supervision of banks engaging in OTC 

derivative activities. Therefore, the 

agencies propose to collect data in 

Schedule RC–L, Derivatives and OffBalance Sheet Items, that will provide a 

breakdown of the fair value of collateral 

posted for OTC derivative exposures by 

type of collateral and type of derivative 

counterparty and a separate breakdown 

of the current credit exposure on OTC 

derivatives by type of counterparty. This 

information would give the agencies 

important insights into the extent to 

which collateral is used as part of the 

credit risk management practices 

associated with derivative credit 

exposures to different types of 

counterparties and changes over time in 

the nature and extent of the collateral 

protection. 

Since a majority of OTC derivative 

transactions are conducted in larger 

banks, only banks with total assets of 

$10 billion or more would be required 

to report the proposed new data. These 

banks would report, using a matrix, the 

collateral’s fair value allocated by type 

of counterparty and type of collateral as 

well as the current credit exposure 

associated with each type of 

counterparty. The proposed types of 

collateral for which the fair value would 

be reported are (a) cash—U.S. dollar; (b) 

cash—Other currencies; (c) U.S. 

Treasury securities; (d) U.S. 

Government agency and U.S. 

Government-sponsored agency debt 

securities; (e) corporate bonds; (f) equity 

securities; and (g) all other collateral.10

The fair value of the collateral would be 

reported according to the following 

types of counterparties: (a) Banks and 

securities firms; (b) monoline financial 

guarantors; (c) hedge funds; (d) 

sovereign governments; and (e) 

corporations and all other 

counterparties. The current credit 

exposure (after considering the effect of 

master netting agreements with OTC 

derivative counterparties) would also be 

reported for these five types of 

counterparties. The total current credit 

exposure from OTC derivative 

exposures that would be reported for 

these counterparties in Schedule RC–L 

would not necessarily equal the current 

credit exposure in the Call Report’s 

regulatory capital schedule (Schedule 

RC–R) because the amount reported in 

Schedule RC–R excludes derivatives not 

covered by the risk-based capital 

standards. 

H. Maturity Distributions of Unsecured 

Other Borrowings and Subordinated 

Debt 

As part of the Omnibus Budget 

Reconciliation Act of 1993, Congress 

enacted depositor preference legislation 

that elevated the claims of depositors in 

domestic offices (and in insured 

branches in Puerto Rico and U.S. 

territories and possessions) over the 

claims of general unsecured creditors in 

a bank failure. When a bank fails, the 

claims of general unsecured creditors 

provide a cushion that lowers the cost 

of the failure to the Deposit Insurance 

Fund (DIF) administered by the FDIC. 

The greater the amount of general 

unsecured creditor claims, the greater 

the cushion and the lower the cost of 

the failure to the DIF. 

The FDIC is considering proposing an 

adjustment to the risk-based assessment 

system so that insured depository 

institutions with greater amounts of 

general unsecured long-term liabilities 

will be rewarded with a lower 

assessment rate. Currently, the Call 

Reports lacks information regarding the 

remaining maturities of unsecured 

‘‘other borrowings’’ and subordinated 

notes and debentures. Therefore, the 

agencies are proposing to collect this 

information in the Call Report so that 

the FDIC would be able to implement 

such an adjustment. More specifically, 

banks would report separate maturity 

distributions for ‘‘other borrowings’’ (as 

defined for Schedule RC–M, item 5.b) 

that are unsecured and for subordinated 

notes and debentures (as defined for 

Schedule RC, item 19) in Schedule 

RC–O, Other Data for Deposit Insurance 

and FICO Assessments. The maturity 

distributions would include remaining 

maturities of one year or less, over one 

year through three years, over three 

years through five years, and over five 

years. 

I. Investments in Real Estate Ventures 

At present, a bank with investments 

in real estate ventures reports real estate 

(other than bank premises) owned or 

controlled by the bank and its 

consolidated subsidiaries that is held for 

investment purposes as a component of 

‘‘Other real estate owned’’ in Schedule 

RC–M, item 3.a. If a bank has 

investments in real estate ventures in 

the form of investments in subsidiaries 

that have not been consolidated; 

associated companies; and corporate 


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54818 Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 

joint ventures, unincorporated joint 

ventures, general partnerships, and 

limited partnerships over which the 

bank exercises significant influence that 

are engaged in the holding of real estate 

for investment purposes, these 

investments are reported as a 

component of ‘‘Investments in 

unconsolidated subsidiaries and 

associated companies’’ in Schedule 

RC–M, item 4.a. To better distinguish a 

bank’s investments in real estate 

ventures from these other categories of 

assets, particularly because ‘‘Other real 

estate owned’’ also includes real estate 

acquired either through foreclosure or in 

any other manner for debts previously 

contracted, which presents different 

supervisory considerations than real 

estate investments, the agencies are 

proposing to add a new asset category 

to the Call Report balance sheet 

(Schedule RC) for investments in real 

estate ventures. This new balance sheet 

category would include those 

investments in real estate ventures that 

are currently reported as part of ‘‘Other 

real estate owned’’ and ‘‘Investments in 

unconsolidated subsidiaries and 

associated companies.’’ By making this 

change, the agencies would be able to 

eliminate item 3.a and items 4.a through 

4.c from Schedule RC–M. 

J. Revisions to Schedule RC–H for 

Securities Held in Domestic Offices 

Information reported by banks with 

foreign offices on Schedule RC–H, 

Selected Balance Sheet Items for 

Domestic Offices, on the FFIEC 031 

report form is fundamental for public 

policy purposes in the measurement 

and analysis of the domestic (U.S.) 

banking system. The agencies have used 

estimates of certain domestic office 

measures to facilitate these public 

policy efforts. However, the agencies 

have determined that enhanced 

information on available-for-sale and 

held-to-maturity securities in domestic 

offices is necessary to accomplish these 

public policy efforts. 

At present, banks with foreign offices 

report the combined amortized 

(historical) cost of available-for-sale and 

held-to-maturity securities by type of 

security in items 10 through 17 of 

Schedule RC–H. The agencies propose 

to replace this combined reporting with 

two columns to collect information 

separately on the fair value of availablefor-sale securities and the amortized 

cost of held-to-maturity securities held 

in the domestic offices of banks with 

foreign offices. 

After the transition to this Schedule 

RC–H revision, this proposed change 

should not result in significant 

additional ongoing reporting burden 

because banks are required to designate 

securities as either available-for-sale, 

held-to-maturity, or held for trading per 

FASB Statement No. 115, Accounting 

for Certain Investments in Debt and 

Equity Securities, and to report the fair 

value and amortized cost of all 

available-for-sale and held-to-maturity 

securities by type of security in Call 

Report Schedule RC–B, Securities. 

K. Trading Assets That Are Past Due or 

in Nonaccrual Status 

The agencies have observed that 

banks are holding assets in the trading 

category for longer periods of time due 

to market and other factors. Some of 

these assets are exhibiting delinquency 

patterns similar to assets held outside of 

the trading account. Currently, the 

agencies do not distinguish past due 

and nonaccrual trading assets from 

other assets on Schedule RC–N, Past 

Due and Nonaccrual Loans, Leases, and 

Other Assets. The agencies propose to 

replace Schedule RC–N, item 9, for 

‘‘Debt securities and other assets’’ that 

are past due 30 days or more or in 

nonaccrual status with two separate 

items: item 9.a, ‘‘Trading assets,’’ and 

item 9.b, ‘‘All other assets (including 

available-for-sale and held-to-maturity 

securities).’’ These items would follow 

the existing three-column breakdown on 

Schedule RC–N that banks utilize to 

report assets past due 30 through 89 

days and still accruing, past due 90 days 

or more and still accruing, and in 

nonaccrual status. Item 9.a would 

include all assets held for trading 

purposes, including loans held for 

trading. Collection of this information 

will allow the agencies to better assess 

the quality of assets held for trading 

purposes, and generally enhance 

surveillance and examination planning 

efforts. 

Also, the agencies propose to expand 

the scope of Schedule RC–D, Trading 

Assets, Memorandum item 3, ‘‘Loans 

measured at fair value that are past due 

90 days or more,’’ to include loans held 

for trading and measured at fair value 

that are in nonaccrual status. This 

change would provide for more 

consistent treatment with the 

information that would be collected on 

Schedule RC–N and with the disclosure 

requirements in FASB Statement No. 

159, The Fair Value Option for 

Financial Assets and Financial 

Liabilities. 

L. Enhanced Information on Credit 

Derivatives 

Effective for the March 2006 Call 

Report, the agencies revised the 

information collected on credit 

derivatives in Schedules RC–L, 

Derivatives and Off-Balance Sheet 

Items, and RC–R, Regulatory Capital, to 

gain a better understanding of the nature 

and trends of banks’ credit derivative 

activities. Since that time, the volume of 

credit derivative activity in the banking 

industry, as measured by the notional 

amount of these contracts, has increased 

steadily, rising to an aggregate notional 

amount of $16.4 trillion as of March 31, 

2008. The Call Report data indicate that 

the credit derivative activity in the 

industry is highly concentrated in banks 

with total assets in excess of $10 billion. 

For these banks, credit derivatives 

function as a risk mitigation tool for 

credit exposures in their operations as 

well as a financial product that is sold 

to third parties for risk management and 

other purposes. 

The agencies’ safety and soundness 

efforts continue to place emphasis on 

the role of credit derivatives in bank risk 

management practices. In addition, the 

agencies’ monitoring of credit derivative 

activities at certain banks has identified 

differences in interpretation as to how 

credit derivatives are treated under the 

agencies’ risk-based capital standards. 

To further the agencies’ safety and 

soundness efforts concerning credit 

derivatives and to improve transparency 

in the treatment of credit derivatives for 

regulatory capital purposes, the agencies 

propose to revise the information 

pertaining to credit derivatives that is 

collected on Schedules RC–L, RC–N 

(Past Due and Nonaccrual Loans, 

Leases, and Other Assets), and RC–R. 

In Schedule RC–L, item 7, ‘‘Credit 

derivatives,’’ the agencies propose to 

change the caption of column A from 

‘‘Guarantor’’ to ‘‘Sold Protection’’ and 

the caption of column B from 

‘‘Beneficiary’’ to ‘‘Purchased Protection’’ 

to eliminate confusion surrounding the 

meaning of ‘‘Guarantor’’ and 

‘‘Beneficiary’’ that commonly occurs 

between the users and preparers of these 

data. The agencies also propose to add 

a new item 7.c to Schedule RC–L to 

collect information on the notional 

amount of credit derivatives by 

regulatory capital treatment. For credit 

derivatives that are subject to the 

agencies’ market risk capital standards, 

the agencies propose to collect the 

notional amount of sold protection and 

the amount of purchased protection. For 

all other credit derivatives, the agencies 

propose to collect the notional amount 

of sold protection, the notional amount 

of purchased protection that is 

recognized as a guarantee under the 

risk-based capital guidelines, and the 

notional amount of purchased 

protection that is not recognized as a 

guarantee under the risk-based capital 

standards. 


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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices 54819 

The agencies also propose to add a 

new item 7.d to Schedule RC–L to 

collect information on the notional 

amount of credit derivatives by credit 

rating and remaining maturity. The item 

would collect the notional amount of 

sold protection broken down by credit 

ratings of investment grade and 

subinvestment grade for the underlying 

reference asset and by remaining 

maturities of one year or less, over one 

year through five years, and over five 

years. The same information would be 

collected for purchased protection. 

In Schedule RC–N, the agencies 

propose to change the scope of 

Memorandum item 6, ‘‘Past due interest 

rate, foreign exchange rate, and other 

commodity and equity contracts,’’ to 

include credit derivatives. The fair 

value of credit derivatives where the 

bank has purchased protection 

increased significantly to over $500 

billion at March 31, 2008, as compared 

to a negative $10 billion at March 31, 

2007. Thus, the performance of credit 

derivative counterparties has increased 

in importance. The expanded scope of 

Memorandum item 6 on Schedule RC– 

N would include the fair value of credit 

derivatives carried as assets that are past 

due 30 through 89 days and past due 90 

days or more. 

In Schedule RC–R, the agencies 

propose to change the scope of the 

information collected in Memorandum 

items 2.g.(1) and (2) on the notional 

principal amounts of ‘‘Credit derivative 

contracts’’ that are subject to risk-based 

capital requirements to include only (a) 

the notional principal amount of 

purchased protection that is defined as 

a covered position under the market risk 

capital guidelines and (b) the notional 

principal amount of purchased 

protection that is not a covered position 

under the market risk capital guidelines 

and is not recognized as a guarantee for 

risk-based capital purposes. The scope 

of Memorandum item 1, ‘‘Current credit 

exposure across all derivative contracts 

covered by the risk-based capital 

standards,’’ would be similarly revised 

to include the current credit exposure 

arising from credit derivative contracts 

that represent (a) purchased protection 

that is defined as a covered position 

under the market risk capital guidelines 

and (b) purchased protection that is not 

a covered position under the market risk 

capital guidelines and is not recognized 

as a guarantee for risk-based capital 

purposes. The agencies also propose to 

add new Memorandum items 3.a and 

3.b to Schedule RC–R to collect the 

present value of unpaid premiums on 

sold credit protection that is defined as 

a covered position under the market risk 

capital guidelines. Consistent with the 

information currently reported in 

Memorandum item 2.g, the agencies 

propose to collect this present value 

information with a breakdown between 

investment grade and subinvestment 

grade for the rating of the underlying 

reference asset and with the same three 

remaining maturity breakouts. 

M. Questions Concerning Certain Trust, 

Custodial, Safekeeping, and Other 

Services 

Under certain circumstances, banks 

can serve as trustee or custodian for 

Individual Retirement Accounts (IRAs), 

Health Savings Accounts (HSAs), and 

other similar accounts without 

obtaining trust powers. Banks may also 

provide custody, safekeeping, or other 

services involving the acceptance of 

orders for the sale or purchase of 

securities regardless of whether they 

have trust powers. Under the Board’s 

and the SEC’s recently adopted 

Regulation R—Exceptions for Banks 

from the Definition of Broker in the 

Securities Exchange Act of 1934 (12 

CFR part 218), a bank will only be able 

to effect securities transactions for 

customers if the bank meets one of the 

exceptions from the broker definition in 

section 3(a)(4) of the Securities 

Exchange Act of 1934. Under the trust 

and fiduciary exception, the securities 

transactions must be effected in a trust 

department or other department of a 

bank that is regularly examined for 

compliance with fiduciary standards. 

Accordingly, the agencies must be 

able to identify banks that serve as 

trustee or custodian for IRAs, HSAs, and 

other similar accounts or provide 

custody, safekeeping, or other services 

involving the acceptance of securities 

sale or purchase orders. Depending on 

whether such banks exercise trust 

powers, these activities will need to be 

examined during trust examinations or 

other examinations, as appropriate, in 

order to ensure that the activities are 

conducted in a satisfactory manner and 

in compliance with the requirements for 

the exception from the broker 

definition. Therefore, the agencies are 

proposing to add two yes/no questions 

to Schedule RC–M, one of which would 

ask each bank whether it acts as trustee 

or custodian for IRAs, HSAs, and other 

similar accounts and the other of which 

would ask whether the bank provides 

custody, safekeeping, or other services 

involving the acceptance of securities 

sale and purchase orders. 

IV. Discussion of Revisions Proposed for 

December 2009 

Schedule RC–T, Fiduciary and 

Related Services, was added to the Call 

Report effective December 31, 2001, 

replacing two separate reports, the 

Annual Report of Trust Assets (FFIEC 

001) and the Annual Report of 

International Fiduciary Activities 

(FFIEC 006). Schedule RC–T collects 

data on: 

• Fiduciary and related assets by type 

of fiduciary account, with the amount of 

assets and number of accounts reported 

separately for managed and nonmanaged accounts; 

• Fiduciary and related services 

income by type of fiduciary account and 

expenses, including fiduciary 

settlements, surcharges, and other losses 

by type of fiduciary account; 

• Managed assets held in personal 

trust and agency accounts by type of 

asset; 

• Corporate trust and agency 

accounts; and 

• The number of collective 

investment funds and common trust 

funds and the market value of fund 

assets by type of fund. 

FDIC-insured banks that exercise 

fiduciary powers and have fiduciary 

assets or accounts and uninsured 

limited-purpose national trust banks 

(trust institutions) must complete 

specified sections of Schedule RC–T 

either quarterly or annually (as of 

December 31) depending on the amount 

of their total fiduciary assets as of the 

preceding calendar year-end and their 

gross fiduciary and related services 

income for the preceding calendar year. 

Approximately 400 trust institutions 

with total fiduciary assets greater than 

$250 million or with gross fiduciary and 

related services income greater than 10 

percent of net interest income plus 

noninterest income report their 

fiduciary and related assets and their 

fiduciary and related services income 

quarterly and the remaining data items 

on Schedule RC–T annually. Around 

200 trust institutions with total 

fiduciary assets greater than $100 

million but less than or equal to $250 

million that do not meet the fiduciary 

income test mentioned above complete 

all of Schedule RC–T annually. About 

1,000 trust institutions with total 

fiduciary assets of $100 million or less 

that do not meet the fiduciary income 

test mentioned above must complete all 

of Schedule RC–T annually except the 

sections on fiduciary income and losses 

from which they are exempt. 

Since its addition to the Call Report 

at year-end 2001, Schedule RC–T has 

not been revised. During this time 

period, significant growth has occurred 

in both the assets in managed and nonmanaged fiduciary accounts at trust 

institutions. For the five year period 

ending December 31, 2007, managed 

assets increased from $3.3 trillion to 


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11http://www.irs.gov/taxstats/charitablestats/ 

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$5.6 trillion while non-managed assets 

climbed from $8.2 trillion to $17.7 

trillion. Assets held in custody and 

safekeeping accounts grew from $21.4 

trillion to $57.9 trillion over this same 

period. The number of corporate and 

municipal debt issues for which trust 

institutions serve as trustee has also 

increased over the past five years, rising 

from 237 thousand to 339 thousand, and 

the total par value of these debt issues 

has increased from $6.4 trillion to $15.7 

trillion. The total market value of the 

assets held in collective investment 

funds and common trust funds operated 

by trust institutions grew from $1.6 

trillion at year-end 2002 to $3.0 trillion 

at year-end 2007. 

The agencies have been monitoring 

the growth in fiduciary activities and 

trends in this area, both from data 

collected in Schedule RC–T and through 

the examination process, and have 

determined that certain data should be 

added to Schedule RC–T to enable the 

agencies to better evaluate the trust 

activities of individual trust institutions 

and the industry as a whole. The 

agencies are proposing to implement the 

following revisions to Schedule RC–T as 

of December 31, 2009. 

A. Institutional Foundations and 

Endowments 

In both the Fiduciary and Related 

Assets section of Schedule RC–T and 

the Fiduciary and Related Services 

Income section of the schedule, 

information on the assets, number of 

accounts, and income from fiduciary 

accounts of institutional foundations 

and endowments is currently reported 

as part of the total amounts reported for 

‘‘Other fiduciary accounts.’’ Internal 

Revenue Service (IRS) statistics for 

2004, the most recent year for which 

data are available, indicated that 

foundations and charitable trusts treated 

as foundations by the IRS held assets 

with a total book value of $451 billion.11

The agencies believe that trust 

institutions administer a substantial 

amount of these assets and that 

foundations and endowments are a 

major type of fiduciary account being 

aggregated as a component of ‘‘Other 

fiduciary accounts.’’ Given the volume 

of assets administered in accounts for 

foundations and endowments, separate 

reporting in Schedule RC–T of data for 

such a significant type of fiduciary 

account is warranted. 

B. Investment Advisory Agency 

Accounts 

Investment advisory agency accounts 

are accounts for which a trust 

institution provides investment advice 

for a fee, but where the ultimate 

investment decision rests with the 

customer. At present, the instructions 

for reporting in both the Fiduciary and 

Related Assets section of Schedule RC– 

T and the Fiduciary and Related 

Services Income section of the schedule 

do not identify the type of fiduciary 

account in which information on the 

assets, number of accounts, and income 

from investment advisory agency 

accounts should be reported. As a 

result, there is diversity in how trust 

institutions report this information in 

these two sections of Schedule RC–T. 

Investment management agency 

accounts share a common characteristic 

with investment advisory agency 

accounts in that both involve the 

provision of investment advice to a 

customer for the purpose of determining 

which securities to buy, sell, or hold. 

However, the former is a type of 

managed account while the latter is a 

type of non-managed account. In order 

to clarify where investment advisory 

agency accounts should be reported in 

Schedule RC–T and include them with 

the most appropriate type of fiduciary 

account given their characteristics, the 

agencies are proposing that investment 

advisory agency accounts be reported 

with investment management agency 

accounts in the Fiduciary and Related 

Assets and the Fiduciary and Related 

Services Income sections of Schedule 

RC–T. The line item captions in these 

two sections for ‘‘Investment 

management agency accounts’’ would 

be revised to read ‘‘Investment 

management and investment advisory 

agency accounts.’’ In addition, given the 

non-managed nature of investment 

advisory agency accounts, the currently 

blocked items for non-managed assets 

and number of non-managed accounts 

in the line for investment management 

agency accounts in the Fiduciary and 

Related Assets section of Schedule RC– 

T would be opened to enable trust 

institutions to report on these advisory 

accounts. 

C. IRAs, HSAs, and Other Similar 

Accounts 

IRAs, HSAs, and other similar 

accounts represent a large category of 

individual benefit and other retirementrelated accounts administered by trust 

institutions for which the agencies do 

not collect specific data. At present, 

data for these accounts is included in 

the totals reported for ‘‘Other employee 

benefit and other retirement-related 

accounts’’ and ‘‘Custody and 

safekeeping accounts’’ in the Fiduciary 

and Related Assets section of Schedule 

RC–T (items 7.c and 13). As of year-end 

2007, assets held in IRAs were 

estimated to be $4.7 trillion.12

Significant growth in IRAs 

administered by trust institutions is 

expected as retiring individuals roll 

assets held in 401(k) plans over into 

IRAs. Significant growth in HSAs is also 

anticipated as these accounts gain 

increased popularity with the public. 

IRAs, HSAs, and other similar accounts 

for individuals have risk characteristics 

that differ from employee benefit plans 

that are covered by the Employee 

Retirement Income Security Act. In 

particular, the risks of these accounts for 

individuals tend to center on 

compliance with the relevant provisions 

of the Internal Revenue Code and the 

potential penalties for violations 

thereof. To identify trust institutions 

experiencing significant changes in the 

number and market value of assets of 

these types of accounts for supervisory 

follow-up and to monitor both aggregate 

and individual trust institution growth 

trends involving these accounts, the 

agencies are proposing to add a line 

item to the Fiduciary and Related Assets 

section of Schedule RC–T for data on 

IRAs, HSAs, and other similar accounts 

included in ‘‘Other employee benefit 

and other retirement-related accounts’’ 

and ‘‘Custody and safekeeping 

accounts.’’ 

D. Managed Assets Held in Fiduciary 

Accounts 

Trust institutions currently report a 

breakdown of the market value of 

managed assets held in personal trust 

and agency accounts by type of asset in 

Memorandum item 1 of Schedule RC–T. 

The agencies do not collect a similar 

breakdown of the managed assets for 

other types of fiduciary accounts. The 

exercise of investment discretion adds a 

significant element of risk to the 

administration of managed fiduciary 

accounts. Therefore, it is essential that 

the agencies be able to monitor trends, 

both on a trust industry-wide basis and 

an individual trust institution basis, in 

how discretionary fiduciaries are 

investing the assets of managed 

accounts. The current scope of managed 

assets reporting is inadequate for 

monitoring and measuring risk 

exposures and provides inadequate 

information for examiners’ examination 

planning activities. 

Despite the importance of such data, 

managed personal trust and agency 


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accounts comprised just 20 percent of 

the number of total managed accounts 

and the assets of managed personal trust 

and agency accounts represented 18 

percent of total managed assets as of 

December 31, 2007. By comparison, as 

of the same date, investment 

management agency accounts comprise 

66 percent of the number of total 

managed accounts and the assets of 

investment management agency 

accounts represented 36 percent of total 

managed assets, while the assets of 

employee benefit and other retirement 

accounts comprised 41 percent of total 

managed assets. 

In order to close the significant data 

gap in current reporting, the agencies 

are proposing to expand Memorandum 

item 1 of Schedule RC-T to collect a 

three-way breakdown of the market 

value of all managed assets held in 

fiduciary accounts by type of asset. The 

market values for the various asset types 

would be reported separately for three 

categories of managed fiduciary 

accounts: (1) Personal trust and agency 

and investment management agency 

accounts, (2) employee benefit and other 

retirement accounts, and (3) all other 

accounts. The various types of fiduciary 

accounts have been combined into these 

three categories since each category is 

subject to unique regulatory and 

fiduciary standards. Data reported in 

this manner will assist in monitoring 

and measuring risk at trust institutions 

and in pre-examination planning by 

examiners. 

The agencies have also reviewed the 

types of assets for which trust 

institutions currently provide a 

breakdown in Memorandum item 1. In 

this regard, discretionary investments in 

common trust funds (CTFs) and 

collective investment funds (CIFs) are 

not separately reported in this 

Memorandum item. Instead, trust 

institutions are required to allocate the 

underlying assets of each CTF and CIF 

attributable to managed accounts to the 

individual line items for the various 

types of assets reported in 

Memorandum item 1. 

The agencies have found this method 

of reporting investments in CTFs and 

CIFs to be misleading, confusing, and 

burdensome for trust institutions. It is 

misleading because an investment in a 

CTF or CIF that invests in common 

stocks is very different in nature than a 

direct investment in an individual 

common stock, but these investments 

are reported as if the institution were 

investing in a specific asset, rather than 

in a fund. It is confusing and 

burdensome to reporting institutions 

that often do not understand the 

allocation process currently required for 

reporting the value of the underlying 

assets of the CTFs and CIFs. 

This allocation process requires 

institutions to segregate the underlying 

assets of each CTF and CIF by asset 

type, rather than following the more 

straightforward approach of reporting 

the total value of managed accounts’ 

holdings of investments in CTFs and 

CIFs. Therefore, the agencies are 

proposing to end the current method of 

reporting investments in CTFs and CIFs 

in Memorandum item 1 by adding a 

separate line item for investments in 

CTFs and CIFs. This new asset type will 

enable the agencies to collect data that 

actually reflects the investment choices 

of discretionary fiduciaries, i.e., 

investing in a fund rather than an 

individual asset, while simplifying the 

reporting of these investments by 

eliminating the requirement to report 

each type of asset held by a fund. 

At present, the asset type for 

‘‘common and preferred stocks’’ in 

Memorandum item 1 includes not only 

these stocks, but also all investments in 

mutual funds (other than money market 

mutual funds, which are reported 

separately), private equity investments, 

and investments in unregistered and 

hedge funds. Investments in mutual 

funds (other than money market mutual 

funds) have long been reported with 

common and preferred stocks. However, 

over time, these investments have gone 

from being a relatively minor 

investment option for managed 

fiduciary accounts to being one of the 

most significant asset types for managed 

fiduciary accounts. 

As a consequence, the agencies lack 

specific data on discretionary 

investments in mutual funds (other than 

money market mutual funds) despite 

their distinctive differences from 

investments in individual common 

stocks. Given these differences and the 

growth in mutual fund holdings in 

managed fiduciary accounts, the 

agencies are proposing to add two new 

items to Memorandum item 1 to collect 

data on investments in equity mutual 

funds and in other (non-money market) 

mutual funds separately from common 

and preferred stocks. 

Investments in hedge funds and 

private equity have grown rapidly since 

the implementation of Schedule RC–T 

in 2001, with large institutional 

investors, e.g., large pension plans, 

increasing their allocation to these types 

on investments in order to increase 

portfolio returns and pursue absolute 

return strategies. As mentioned above, 

these types of investments are currently 

reported in the ‘‘common and preferred 

stocks’’ asset type in Memorandum item 

1. However, given their unique 

characteristics and risks and the 

increasing role such investments are 

having in managed fiduciary portfolios, 

the agencies believe there is a need to 

identify the volume of these 

investments to monitor both aggregate 

trust industry exposure and trust 

institution-specific exposure. Therefore, 

the agencies are also proposing to 

modify Memorandum item 1 by adding 

a new item in which trust institutions 

would report investments in 

unregistered funds and private equity 

investments held in managed accounts 

separately from common and preferred 

stocks. 

Finally, since their inception in 1994, 

mutual funds for which the reporting 

trust institution or its subsidiary or 

affiliate is the sponsor or serves as an 

investment advisor (also referred to as 

proprietary mutual funds) have posed a 

significant fiduciary risk when the 

institution makes investments in such 

mutual funds for the fiduciary accounts 

it manages. In this situation, the 

institution’s dual roles present a conflict 

of interest, which has given rise to 

litigation on a number of occasions. 

Therefore, to supplement the proposed 

expanded information on mutual funds 

held in managed fiduciary accounts, the 

agencies are proposing to add items to 

Memorandum item 1 for the reporting of 

the market value of discretionary 

investments in proprietary mutual funds 

and the number of managed accounts 

holding such investments. This 

information will assist the agencies in 

measuring and monitoring the risk 

exposure of the trust industry and 

individual trust institutions with 

respect to the conflicts of interest 

inherent in discretionary investments in 

proprietary mutual funds. 

E. Corporate Trust and Agency 

Accounts 

Trust institutions currently report the 

number of corporate and municipal debt 

issues for which the institution serves as 

trustee and the outstanding principal 

amount of these debt issues in 

Memorandum item 2.a of Schedule RC– 

T. One of the major risks in the area of 

corporate trust administration involves 

debt issues that are in substantive 

default. A substantive default occurs 

when the issuer fails to make a required 

payment of interest or principal, 

defaults on a required payment into a 

sinking fund, or is declared bankrupt or 

insolvent. 

The occurrence of a substantive 

default significantly raises the risk 

profile for an indenture trustee of a 

defaulted issue. In such cases, every 

action or failure to act by the trustee is 

scrutinized intensely by the holders of 


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the defaulted issue, which brings about 

a heightened risk of being sued. In 

addition, the administrative demands in 

such a situation can result in the 

incurrence of significant expenses and 

the distraction of managerial time and 

attention from other areas of the trust 

department. Thus, to monitor and better 

understand the risk profile of trust 

institutions serving as an indenture 

trustee for debt securities and changes 

therein, the agencies are proposing to 

require trust institutions to report the 

number of such issues that are in 

substantive default and the principal 

amount outstanding for these issues. 

In addition, the agencies are 

proposing to revise the instructions for 

reporting on corporate trust accounts to 

state that issues of trust preferred stock 

for which the institution is trustee 

should be included in the amounts 

reported for corporate and municipal 

trusteeships. 

F. Instructional Clarifications 

The instructions for reporting the 

managed and non-managed assets and 

number of managed and non-managed 

accounts for defined contribution plans 

and defined benefit plans in items 5.a 

and 5.b of Schedule RC–T, respectively, 

would be revised to indicate that 

employee benefit accounts for which the 

trust institution serves as a directed 

trustee should be reported as nonmanaged accounts. 

The instructions for reporting on the 

number of and market value of assets 

held in collective investment funds and 

common trust funds in Memorandum 

item 3 would be clarified by stating that 

the number of funds should be reported, 

not the number of assets held by these 

funds, the number of participants, or the 

number of accounts invested in the 

funds. 

V. Request for Comment 

Public comment is requested on all 

aspects of this joint notice. 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. 

Dated: September 17, 2008. 

Michele Meyer, 

Assistant Director, Legislative and Regulatory 

Activities Division, Office of the Comptroller 

of the Currency. 

Board of Governors of the Federal Reserve 

System, September 17, 2008. 

Jennifer J. Johnson, 

Secretary of the Board. 

Dated at Washington, DC, this 16th day of 

September 2008. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E8–22258 Filed 9–22–08; 8:45 am] 

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

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

Guidelines for Appeals of Material 

Supervisory Determinations 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of guidelines. 

SUMMARY: On September 16, 2008, the 

Federal Deposit Insurance Corporation 

(FDIC) Board of Directors (Board) 

adopted revised Guidelines for Appeals 

of Material Supervisory Determinations 

(Guidelines). The revisions to the 

Guidelines were adopted to better align 

the FDIC’s Supervisory Appeals Review 

Committee (SARC) process with the 

material supervisory determinations 

appeals procedures at the other Federal 

banking agencies. The amendments 

modify the supervisory determinations 

eligible for appeal to eliminate the 

ability of an FDIC-supervised institution 

to file an appeal with the SARC with 

respect to determinations or the facts 

and circumstances underlying a 

recommended or pending formal 

enforcement-related action or decision, 

including the initiation of an 

investigation and the referral to the 

Attorney General or a notice to the 

Secretary of Housing and Urban 

Development for apparent violations of 

the Equal Credit Opportunity Act or the 

Fair Housing Act. The amendments also 

include limited technical amendments. 

The revised Guidelines are effective 

upon adoption. 

DATES: The Guidelines became effective 

on September 16, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Frank Gray, Section Chief, FDIC, 550 

17th Street, NW., Washington, DC 20429 

[F–4054]; on detail; telephone: (678) 

916–2200; or electronic mail: 

fgray@fdic.gov; Patricia A. Colohan, 

Section Chief, FDIC, 550 17th Street, 

NW., Washington, DC 20429 [F–4080]; 

telephone: (202) 898–7283; or electronic 

mail: pcolohan@fdic.gov; or Richard 

Bogue, Counsel, FDIC, 550 17th Street, 

NW., Washington, DC 20429 [MB– 

3014]; telephone: (202) 898–3726; 

facsimile: (202) 898–3658; or electronic 

mail: rbogue@fdic.gov. 

SUPPLEMENTARY INFORMATION: On May 

27, 2008, the FDIC published in the 

Federal Register, for a 60-day comment 

period, a notice and request for 

comments respecting the proposed 

revisions to the Guidelines for Appeals 

of Material Supervisory Determinations. 

(73 FR 30393). The comment period 

closed July 28, 2008. The FDIC 

considered it desirable in this instance 

to garner comments regarding the 

Guidelines, although notice and 

comment rulemaking was not required 

and need not be employed should the 

FDIC make future amendments. 

The FDIC received five comment 

letters in total from one depository 

institution, three banking associations, 

and one lawyer on behalf of interested 

clients, all of whom opposed the 

proposed revisions. The comments 

received, and FDIC’s responses, are 

summarized below. 

Background 

Section 309(a) of the Riegle 

Community Development and 

Regulatory Improvement Act of 1994 

(Pub. L. 103–325, 108 Stat. 2160) (Riegle 

Act), required the FDIC (as well as the 

other Federal banking agencies and the 

National Credit Union Administration 

Board (NCUA)) to establish an 

independent intra-agency appellate 

process to review material supervisory 

determinations. The Riegle Act defines 

the term ‘‘independent appellate 

process’’ to mean a review by an agency 

official who does not directly or 

indirectly report to the agency official 

who made the material supervisory 

determination under review. In the 

appeals process, the FDIC is required to 

ensure that (1) an appeal of a material 

supervisory determination by an 

insured depository institution is heard 

and decided expeditiously; and (2) 

appropriate safeguards exist for 


jlentini on PROD1PC65 with NOTICES