This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

45023 

Vol. 87, No. 143 

Wednesday, July 27, 2022 

1For deposit insurance assessment purposes, 

large IDIs are generally those that have $10 billion 

or more in total assets. A highly complex IDI is 

generally defined as an institution that has $50 

billion or more in total assets and is controlled by 

a parent holding company that has $500 billion or 

more in total assets, or is a processing bank or trust 

company. See 12 CFR 327.8(f) and (g). As used in 

this proposed rule, the term ‘‘large bank’’ is 

synonymous with ‘‘large institution,’’ and the term 

‘‘highly complex bank’’ is synonymous with 

‘‘highly complex institution,’’ as those terms are 

defined in 12 CFR 327.8. 

2FASB Accounting Standards Update No. 2022– 

02, ‘‘Financial Instruments—Credit Losses (Topic 

326): Troubled Debt Restructurings and Vintage 

Disclosures,’’ March 2022 available at https://

www.fasb.org/page/getarticle?uid=fasb_Media_

Advisory_03-31-22. 

3 12 U.S.C. 1817(b). 

4See 12 CFR 327.3(b)(1). 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AF85 

Assessments, Amendments To 

Incorporate Troubled Debt 

Restructuring Accounting Standards 

Update 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Deposit 

Insurance Corporation seeks comment 

on a proposed rule that would 

incorporate updated accounting 

standards in the risk-based deposit 

insurance assessment system applicable 

to all large insured depository 

institutions (IDIs), including highly 

complex IDIs. The FDIC calculates 

deposit insurance assessment rates for 

large and highly complex IDIs based on 

supervisory ratings and financial 

measures, including the 

underperforming assets ratio and the 

higher-risk assets ratio, both of which 

are determined, in part, using 

restructured loans or troubled debt 

restructurings (TDRs). The FDIC is 

proposing to include modifications to 

borrowers experiencing financial 

difficulty, an accounting term recently 

introduced by the Financial Accounting 

Standards Board (FASB) to replace 

TDRs, in the underperforming assets 

ratio and higher-risk assets ratio for 

purposes of deposit insurance 

assessments. 

DATES: Comments must be received no 

later than August 26, 2022. 

ADDRESSES: You may submit comments 

on the notice of proposed rulemaking 

using any of the following methods: 

• Agency Website: https://

www.fdic.gov/resources/regulations/ 

federal-register-publications/. Follow 

the instructions for submitting 

comments on the agency website. 

• Email: comments@fdic.gov. Include 

RIN 3064–AF85 on the subject line of 

the message. 

• Mail: James P. Sheesley, Assistant 

Executive Secretary, Attention: 

Comments—RIN 3064–AF85, 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 NW 

building (located on F Street NW) on 

business days between 7 a.m. and 5 p.m. 

• Public Inspection: Comments 

received, including any personal 

information provided, may be posted 

without change to https://www.fdic.gov/ 

resources/regulations/federal-registerpublications/. Commenters should 

submit only information that the 

commenter wishes to make available 

publicly. The FDIC may review, redact, 

or refrain from posting all or any portion 

of any comment that it may deem to be 

inappropriate for publication, such as 

irrelevant or obscene material. The FDIC 

may post only a single representative 

example of identical or substantially 

identical comments, and in such cases 

will generally identify the number of 

identical or substantially identical 

comments represented by the posted 

example. All comments that have been 

redacted, as well as those that have not 

been posted, that contain comments on 

the merits of this document will be 

retained in the public comment file and 

will be considered as required under all 

applicable laws. All comments may be 

accessible under the Freedom of 

Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Scott Ciardi, Chief, Large Bank Pricing, 

202–898–7079, sciardi@fdic.gov; Ashley 

Mihalik, Chief, Banking and Regulatory 

Policy, 202–898–3793, amihalik@

fdic.gov; Kathryn Marks, Counsel, 202– 

898–3896, kmarks@fdic.gov. 

SUPPLEMENTARY INFORMATION: 

I. Policy Objective 

The FDIC’s objective in setting forth 

this proposal is to ensure that the riskbased deposit insurance assessment 

system applicable to large and highly 

complex banks conforms to recently 

updated accounting standards.1 In 

March 2022, FASB issued Accounting 

Standards Update No. 2022–02 (ASU 

2022–02), ‘‘Financial Instruments— 

Credit Losses (Topic 326): Troubled 

Debt Restructurings and Vintage 

Disclosures,’’ that eliminates the 

recognition and measurement guidance 

of TDRs and, instead, introduces new 

requirements related to financial 

statement disclosure of certain 

modifications of receivables made to 

borrowers experiencing financial 

difficulty, or ‘‘modifications to 

borrowers experiencing financial 

difficulty.’’ 2 Risk-based deposit 

insurance assessments for large and 

highly complex banks are determined, 

in part, using TDRs. Therefore, to 

incorporate the updated accounting 

standards, the proposed amendment 

would include modifications to 

borrowers experiencing financial 

difficulty in the description of the 

underperforming assets ratio, which 

includes restructured loans, and 

definitions used in the higher-risk assets 

ratio, which reference TDRs. Both of 

these ratios are used to determine riskbased deposit insurance assessments for 

large and highly complex banks. 

II. Background 

A. Deposit Insurance Assessments 

The Federal Deposit Insurance Act 

(FDI Act) requires that the FDIC 

establish a risk-based deposit insurance 

assessment system.3 The FDIC charges 

all IDIs an assessment for deposit 

insurance equal to the IDI’s deposit 

insurance assessment base multiplied 

by its risk-based assessment rate.4 An 

IDI’s assessment base and assessment 

rate are determined each quarter using 

supervisory ratings and information 

collected from the Consolidated Reports 

of Condition and Income (Call Report) 

or the Report of Assets and Liabilities of 

U.S. Branches and Agencies of Foreign 


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45024 Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 

5See 12 CFR 327.5. 

6See 12 CFR 327.8(e), (f), and (g). 

7See 12 CFR 327.16(b); see also 76 FR 10672 

(Feb. 25, 2011) and 77 FR 66000 (Oct. 31, 2012). 

8See 12 CFR 327.16(b)(1)(ii)(A)(2)(iv). 

9See 12 CFR part 327, appendix B. 

10See 12 CFR part 327, appendix A. 

11See 12 CFR 327.16(b)(1)(ii)(A)(2)(iii). 

12See 12 CFR part 327, appendix C. 

13 Id. 

14FASB Accounting Standards Update No. 2022– 

02, ‘‘Financial Instruments—Credit Losses (Topic 

326): Troubled Debt Restructurings and Vintage 

Disclosures’’ available at https://www.fasb.org/ 

Page/ShowPdf?path=ASU+2022-02.pdf. 

15FASB Accounting Standards Update No. 2016– 

13, ‘‘Financial Instruments—Credit Losses (Topic 

326): Measurement of Credit Losses on Financial 

Instruments,’’ available at https://www.fasb.org/ 

Page/ShowPdf?path=ASU+2016-13.pdf. 

16FASB Accounting Standards Update No. 2022– 

02, at BC19, pp. 57–58. 

Banks (FFIEC 002), as appropriate. 

Generally, an IDI’s assessment base 

equals its average consolidated total 

assets minus its average tangible 

equity.5

An IDI’s assessment rate is calculated 

using different methods dependent 

upon whether the IDI is classified for 

deposit insurance assessment purposes 

as a small, large, or highly complex 

bank.6 Large and highly complex banks 

are assessed using a scorecard approach 

that combines CAMELS ratings and 

certain forward-looking financial 

measures to assess the risk that a large 

or highly complex bank poses to the 

Deposit Insurance Fund (DIF).7 The 

score that each large or highly complex 

bank receives is used to determine its 

deposit insurance assessment rate. One 

scorecard applies to most large banks 

and another applies to highly complex 

banks. Both scorecards use quantitative 

financial measures that are useful for 

predicting a large or highly complex 

bank’s long-term performance. Two of 

the measures in the large and highly 

complex bank scorecards, the credit 

quality measure and the concentration 

measure, are determined using 

restructured loans or TDRs. These 

measures are described in more detail 

below. 

B. Credit Quality Measure 

Both the large bank and the highly 

complex bank scorecards include a 

credit quality measure. The credit 

quality measure is the greater of (1) the 

criticized and classified items to the 

sum of Tier 1 capital and reserves score 

or (2) the underperforming assets to the 

sum of Tier 1 capital and reserves 

score.8 Each risk measure, including the 

criticized and classified items ratio and 

the underperforming assets ratio, is 

converted to a score between 0 and 100 

based upon minimum and maximum 

cutoff values.9

The underperforming assets ratio is 

described identically in the large and 

highly complex bank scorecards as the 

sum of loans that are 30 days or more 

past due and still accruing interest, 

nonaccrual loans, restructured loans 

(including restructured 1–4 family 

loans), and other real estate owned 

(ORE), excluding the maximum amount 

recoverable from the U.S. Government, 

its agencies, or Government-sponsored 

agencies, under guarantee or insurance 

provisions, divided by a sum of Tier 1 

capital and reserves.10

The specific data used to identify the 

‘‘restructured loans’’ referenced in the 

above description are those items that 

banks disclose in their Call Report on 

Schedule RC–C, Part I, Memorandum 

items 1.a. through 1.g, ‘‘Loans 

restructured in troubled debt 

restructurings that are in compliance 

with their modified terms.’’ The portion 

of restructured loans that is guaranteed 

or insured by the U.S. Government are 

excluded from underperforming assets. 

This data is collected in Call Report 

Schedule RC–O, Memorandum item 16, 

‘‘Portion of loans restructured in 

troubled debt restructurings that are in 

compliance with their modified terms 

and are guaranteed or insured by the 

U.S. government.’’ 

C. Concentration Measure 

Both the large and highly complex 

bank scorecards also include a 

concentration measure. The 

concentration measure is the greater of 

(1) the higher-risk assets to the sum of 

Tier 1 capital and reserves score or (2) 

the growth-adjusted portfolio 

concentrations score.11 Each risk 

measure, including the criticized and 

classified items ratio and the 

underperforming assets ratio, is 

converted to a score between 0 and 100 

based upon minimum and maximum 

cutoff values.12 The higher-risk assets 

ratio captures the risk associated with 

concentrated lending in higher-risk 

areas. Higher-risk assets include 

construction and development (C&D) 

loans, higher-risk commercial and 

industrial (C&I) loans, higher-risk 

consumer loans, nontraditional 

mortgage loans, and higher-risk 

securitizations.13

Higher-risk C&I loans are defined, in 

part, based on whether the loan is owed 

to the bank by a higher-risk C&I 

borrower, which includes, among other 

things, a borrower that obtains a 

refinance of an existing C&I loan, 

subject to certain conditions. Higherrisk consumer loans are defined as all 

consumer loans where, as of origination, 

or, if the loan has been refinanced, as of 

refinance, the probability of default 

within two years is greater than 20 

percent, excluding those consumer 

loans that meet the definition of a 

nontraditional mortgage loan. A 

refinance for purposes of higher-risk C&I 

loans and higher-risk consumer loans is 

defined in the assessment regulations 

and explicitly does not include 

modifications to a loan that would 

otherwise meet the definition of a 

refinance, but that result in the 

classification of a loan as a TDR. 

D. FASB’s Elimination of Troubled Debt 

Restructurings 

On March 31, 2022, FASB issued ASU 

2022–02.14 This update eliminated the 

recognition and measurement guidance 

for TDRs for all entities that have 

adopted ASU 2016–13, ‘‘Financial 

Instruments—Credit Losses (Topic 326): 

Measurement of Credit Losses on 

Financial Instruments’’ and the Current 

Expected Credit Losses (CECL) 

methodology.15 The rationale was that 

ASU 2016–13 requires the measurement 

and recording of lifetime expected 

credit losses on an asset that is within 

the scope of ASU 2016–13, and as a 

result, credit losses from TDRs have 

been captured in the allowance for 

credit losses. Therefore, stakeholders 

observed and asserted that the 

additional designation of a loan 

modification as a TDR and the related 

accounting were unnecessarily complex 

and provided less meaningful 

information than under the incurred 

loss methodology.16

The update eliminates the recognition 

of TDRs and, instead, introduces new 

financial statement disclosure 

requirements related to certain 

modifications of receivables made to 

borrowers experiencing financial 

difficulty, or ‘‘modifications to 

borrowers experiencing financial 

difficulty.’’ Such modifications are 

limited to those that result in principal 

forgiveness, interest rate reductions, 

other-than-insignificant payment delays, 

or term extensions in the current 

reporting period. Modifications to 

borrowers experiencing financial 

difficulty may be different from those 

previously captured in TDR disclosures 

because an entity no longer would have 

to determine whether the creditor has 

granted a concession, which is a current 

requirement to determine whether a 

modification represents a TDR. The 

update requires entities to disclose 

information about (a) the types of 

modifications provided, disaggregated 

by modification type, (b) the expected 


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Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 45025 

17 Generally speaking, entities that are U.S. 

Securities and Exchange Commission (SEC) filers, 

excluding smaller reporting companies as defined 

by the SEC, were required to adopt CECL beginning 

in January 2020. Most other entities are required to 

adopt CECL beginning in January 2023. 

18See Financial Institution Letter (FIL) 17–2022, 

Consolidated Reports of Condition and Income for 

First Quarter 2022. See also Supplemental 

Instructions, March 2022 Call Report Materials, 

First 2022 Call, Number 299, available at https://

www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_

FFIEC041_FFIEC051_suppinst_202203.pdf. 19FDIC Call Report data December 31, 2021. 

financial effect of those modifications, 

and (c) the performance of the loans 

after modification. 

For entities that have adopted CECL, 

ASU 2022–02 is effective for fiscal years 

beginning after December 15, 2022.17

FASB also permitted the early adoption 

of ASU 2022–02 by any entity that has 

adopted CECL. For regulatory reporting 

purposes, if an institution chooses to 

early adopt ASU 2022–02 during 2022, 

Supplemental Instructions to the Call 

Report specify that the institution 

should implement ASU 2022–02 for the 

same quarter-end report date and report 

‘‘modifications to borrowers 

experiencing financial difficulty’’ in the 

current TDR Call Report line items.18

These line items include Schedule RC– 

C, Part I, Memorandum items 1.a. 

through 1.g., which are used to identify 

‘‘restructured loans’’ for the 

underperforming asset ratio used in the 

large and highly complex bank 

scorecards, described above. As a result, 

a large or highly complex institution 

that has early adopted ASU 2022–02 

and is reporting modifications to 

borrowers experiencing financial 

difficulty in the current TDR Call Report 

line items will be assigned a deposit 

insurance assessment rate that relies, in 

part, on this reporting. The FDIC and 

other members of the Federal Financial 

Institutions Examination Council 

(FFIEC) are planning to revise the Call 

Report forms and instructions to replace 

the current TDR terminology with 

updated language from ASU 2022–02 

for the first quarter of 2023. 

III. Proposed Rule 

A. Summary 

The FDIC proposes to incorporate into 

the large and highly complex bank 

assessment scorecards the updated 

accounting standard that eliminates the 

recognition of TDRs and, instead, 

requires new financial statement 

disclosures on ‘‘modifications to 

borrowers experiencing financial 

difficulty.’’ The FDIC is proposing to 

expressly define restructured loans in 

the underperforming assets ratio to 

include ‘‘modifications to borrowers 

experiencing financial difficulty.’’ The 

FDIC is also proposing to amend the 

definition of a refinance for the 

purposes of determining whether a loan 

is a higher-risk C&I loan or a higher-risk 

consumer loan, both elements of the 

higher-risk assets ratio. Under the 

proposal, a refinance would not include 

modifications to a loan that otherwise 

would meet the definition of a 

refinance, but that result in the 

classification of a loan as a modification 

to borrowers experiencing financial 

difficulty. This proposal would not 

affect the small bank deposit insurance 

assessment system. 

B. Underperforming Assets Ratio 

The FDIC proposes to amend the 

underperforming assets ratio used in the 

large and highly complex bank pricing 

scorecards to conform to the updated 

accounting standards in ASU 2022–02. 

The amended text explicitly defines 

restructured loans for large and highly 

complex banks that have adopted CECL 

and ASU 2022–02 as modifications to 

borrowers experiencing financial 

difficulty. For the remaining large and 

highly complex banks that have not yet 

adopted CECL and ASU 2022–02, the 

FDIC would continue to use TDRs for 

restructured loans, and the amended 

text would explicitly define restructured 

loans for these banks as TDRs. 

The FDIC has included restructured 

loans in the underperforming assets 

ratio since the introduction of the large 

and highly complex bank scorecards in 

2011. Restructured loans, in the context 

of the underperforming assets measure, 

typically present an elevated level of 

credit risk because they represent loans 

to borrowers unable to perform 

according to the original contractual 

terms. The FDIC believes it is important 

to capture such elevated credit risk in 

its measurement of credit quality. The 

FDIC believes the accounting term 

introduced by FASB in ASU 2022–02, 

‘‘modifications to borrowers 

experiencing financial difficulty,’’ will 

provide a similar and meaningful 

indicator of credit risk. 

C. Higher-Risk Assets Ratio 

The FDIC proposes to amend the 

definition of a refinance, in determining 

whether a loan is a higher-risk C&I loan 

or a higher-risk consumer loan for 

deposit insurance assessment purposes, 

to conform to the updated accounting 

standards in ASU 2022–02. Specifically, 

a refinance of a C&I loan would not 

include a modification or series of 

modifications to a commercial loan that 

would otherwise meet the definition of 

a refinance, but that result in the 

classification of a loan as a modification 

to borrowers experiencing financial 

difficulty, for a large or highly complex 

bank that has adopted CECL and ASU 

2022–02, or that result in the 

classification of a loan as a TDR, for all 

remaining large and highly complex 

banks. For purposes of higher-risk 

consumer loans, a refinance would not 

include modifications to a loan that 

would otherwise meet the definition of 

a refinance, but that result in the 

classification of a loan as a modification 

to borrowers experiencing financial 

difficulty, for a large or highly complex 

bank that has adopted CECL and ASU 

2022–02, or that result in the 

classification of a loan as a TDR, for all 

remaining large and highly complex 

banks. 

Question 1: The FDIC invites 

comment on its proposal to include 

modifications to borrowers experiencing 

financial difficulty in the definition of 

restructured loans, used in part to 

determine the underperforming assets 

ratio, and in the definition of refinance, 

used in part to determine the higher-risk 

assets ratio. Does the proposal 

appropriately meet the objective to 

incorporate updated accounting 

standards under ASU 2022–02 into the 

large and highly complex bank 

scorecards? 

IV. Expected Effects 

As of December 31, 2021, the FDIC 

insured 148 banks that were classified 

as large or highly complex for deposit 

insurance assessment purposes, and that 

would be affected by this proposed 

rule.19 The FDIC expects most of these 

institutions will adopt CECL by January 

1, 2023, the proposed effective date of 

the rule. 

The primary expected effect of the 

proposed rule is the change in 

underperforming assets, and consequent 

change in assessment rates, that could 

occur as a result of the difference 

between the amount of TDRs that most 

banks are currently reporting and the 

amount of modifications to borrowers 

experiencing financial difficulty that 

banks will report upon adoption of ASU 

2022–02. The effect of this proposed 

rule on assessments paid by large and 

highly complex banks is difficult to 

estimate since most banks are not yet 

reporting modifications to borrowers 

experiencing financial difficulty, and 

the FDIC does not know how the 

amount of reported modifications to 

borrowers experiencing financial 

difficulty will compare to the amount of 

TDRs that affected banks report. 

In general, the FDIC expects that the 

initial amount of modifications made to 

borrowers experiencing financial 

difficulty will be lower than previously 


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45026 Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 

20On March 27, 2020, the Coronavirus Aid, 

Relief, and Economic Security Act (CARES Act) was 

signed into law. Section 4013 of the CARES Act, 

‘‘Temporary Relief From Troubled Debt 

Restructurings,’’ provided banks the option to 

temporarily suspend certain requirements under 

U.S. GAAP related to TDRs to account for the 

effects of COVID–19. Division N of the Consolidated 

Appropriations Act, 2021 (Title V, subtitle C, 

section 541) was signed into law on December 27, 

2020, extending the provisions in Section 4013 of 

the CARES Act to January 1, 2022. This relief 

applied to certain loans modified between March 1, 

2020 and January 1, 2022. 

reported TDRs. This is because under 

ASU 2022–02, reporting of 

modifications to borrowers experiencing 

financial difficulty should be applied 

prospectively and would therefore 

apply only to modifications made after 

a bank adopts the standard. However, in 

the long term it is possible that the 

amount of modifications to borrowers 

experiencing financial difficulty could 

be higher or lower than the amount of 

TDRs that banks would have reported 

prior to adoption of ASU 2022–02. 

Therefore, under the proposed rule, the 

underperforming assets ratio could be 

higher or lower due to the adoption of 

ASU 2022–02, and the resulting ratio 

may or may not affect an individual 

bank’s assessment rate, depending on 

whether it is the binding ratio for the 

credit quality measure. 

The FDIC does not have the 

information necessary to estimate the 

expected effects of the proposal to 

incorporate the new accounting 

standard into the large and highly 

complex bank scorecards. However, the 

following analysis illustrates a range of 

potential outcomes based on TDRs 

reported prior to ASU 2022–02, as the 

amount of modifications to borrowers 

experiencing financial difficulty could 

be higher, lower, or similar to 

previously reported TDRs. The analysis 

shows the effect on assessments of 

higher or lower TDRs in calculating the 

underperforming assets ratio for deposit 

insurance assessment purposes. 

The FDIC calculated some illustrative 

examples of the effect on assessments if 

modifications made to borrowers 

experiencing financial difficulty are 

lower than certain amounts of 

previously reported TDRs. For example, 

if all large and highly complex banks 

had reported zero TDRs as of December 

31, 2021, before FASB issued ASU 

2022–02, the impact on the 

underperforming assets ratio would 

have reduced total deposit insurance 

assessment revenue by an annualized 

amount of approximately $90 million; if 

modifications were 50 percent lower 

than TDRs reported as of December 31, 

2021, annualized assessments would 

have decreased by $52 million. 

Alternatively, as an extreme and 

unlikely scenario, if all large and highly 

complex banks had reported zero TDRs 

during a period when overall risk in the 

banking industry was higher, such as 

December 31, 2011, the resulting 

underperforming assets ratio would 

have reduced total deposit insurance 

assessment revenue by an annualized 

amount of approximately $957 million. 

Between 2015 and 2019, if TDRs were 

zero, the resulting underperforming 

assets ratio would have reduced total 

deposit insurance assessment revenue 

by about $279 million annually, on 

average. 

Over time, however, under ASU 

2022–02 large and highly complex 

banks will begin to report modifications 

to borrowers experiencing financial 

difficulties. As noted above, the effect 

on assessments will depend on how the 

newly reported modifications compare 

to the TDRs that would have been 

reported under the prior accounting 

standard. For example, if all large and 

highly complex banks had reported 

modifications to borrowers experiencing 

financial difficulty that were 25 percent 

greater than the TDRs reported as of 

December 31, 2021, the impact on the 

underperforming assets ratio would 

have increased total deposit insurance 

assessment revenue by an annualized 

amount of approximately $30 million; if 

the modifications exceeded TDRs by 50 

percent, annualized assessments would 

have increased by $65 million; and if 

the modifications exceeded TDRs by 

100 percent, annualized assessments 

would have increased by $137 million. 

The analysis presented above serves 

as an illustrative example of potential 

effects of the proposed rule. The 

analysis does not estimate potential 

future modifications to borrowers 

experiencing financial difficulty or how 

those amounts, once reported, will 

compare to previously reported TDRs 

for a few reasons. First, banks were 

granted temporary relief from reporting 

TDRs that were modified due to the 

COVID–19 pandemic, so recent 

reporting of TDRs is likely lower than it 

may otherwise have been.20 Second, the 

amount of modifications or 

restructurings made by large or highly 

complex banks vary based on economic 

conditions and future economic 

conditions are uncertain. Third, a 

restructuring of a debt constitutes a TDR 

if the creditor for economic or legal 

reasons related to the debtor’s financial 

difficulties grants a concession to the 

debtor that it would not otherwise 

consider, while a modification to 

borrowers experiencing financial 

difficulty is not evaluated based on 

whether or not a concession has been 

granted. Finally, future Call Report 

revisions and instructions on how 

modifications to borrowers experiencing 

financial difficulties should be reported 

will affect the future reported amount of 

modifications to borrowers experiencing 

financial difficulty. 

With regard to the higher-risk assets 

ratio, the effect on assessments paid by 

large and highly complex banks is likely 

to be more muted. The assessment 

regulations define a higher-risk C&I or 

consumer loan as a loan or refinance 

that meets certain risk criteria. The 

proposed rule would exclude 

modifications to borrowers experiencing 

financial difficulty from the definition 

of a refinance for purposes of the higherrisk assets ratio. As a result, if a 

modification to a C&I or consumer loan 

results in the classification of the loan 

as a TDR, under the current regulations, 

or as a modification to borrowers 

experiencing financial difficulty, under 

the proposed rule, a large or highly 

complex bank would not have to reevaluate whether the modified loan 

meets the definition of a higher-risk 

asset. For example, if a higher-risk C&I 

loan was subsequently modified as a 

TDR or modification to borrowers 

experiencing financial difficulty, it 

would not be considered a refinance 

and, therefore, would continue to be 

considered a higher-risk asset. 

Conversely, if a C&I loan that does not 

meet the definition of a higher-risk asset 

was subsequently modified as a TDR or 

modification to borrowers experiencing 

financial difficulty, it would not be 

considered a refinance and, therefore, 

would not have to be re-evaluated to 

determine if it meets the definition of a 

higher-risk asset. The FDIC assumes that 

these possible outcomes are offsetting 

and the change to the rule will have 

minimal to no effect on deposit 

insurance assessments for large and 

highly complex banks. 

The proposed rule would pose no 

additional reporting burden for large 

and highly complex banks. 

Question 2: The FDIC invites 

comments on the expected effects of the 

proposal on large and highly complex 

institutions. 

V. Alternatives Considered 

The FDIC considered two reasonable 

and possible alternatives as described 

below. On balance, the FDIC believes 

the current proposal would determine 

deposit insurance assessment rates for 

large and highly complex banks in the 

most appropriate, accurate, and 

straightforward manner. 

One alternative would be to require 

banks to continue to report TDRs 

specifically for deposit insurance 


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Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 45027 

21 5 U.S.C. 601 et seq. 

22The SBA defines a small banking organization 

as having $750 million or less in assets, where an 

organization’s ‘‘assets are determined by averaging 

the assets reported on its four quarterly financial 

statements for the preceding year.’’ See 13 CFR 

121.201 (as amended by 87 FR 18627, effective May 

2, 2022). In its determination, the SBA counts the 

receipts, employees, or other measure of size of the 

concern whose size is at issue and all of its 

domestic and foreign affiliates. See 13 CFR 121.103. 

Following these regulations, the FDIC uses a 

covered entity’s affiliated and acquired assets, 

averaged over the preceding four quarters, to 

determine whether the covered entity is ‘‘small’’ for 

the purposes of RFA. 

23 5 U.S.C. 601. 

24FDIC Call Report data, December 31, 2021. 

25 12 U.S.C. 4802(a). 

26 12 U.S.C. 4802(b). 

assessment purposes, even after they 

have adopted CECL and ASU 2022–02. 

This alternative would maintain 

consistency of the data used in the 

underperforming assets ratio and 

higher-risk assets ratio with prior 

reporting periods. However, this 

alternative would impose additional 

reporting burden on large and highly 

complex banks. This alternative would 

also fail to recognize the potential 

usefulness of the new data on 

modifications to borrowers experiencing 

financial difficulty. Ultimately, the FDIC 

does not believe any benefits from 

continued reporting of TDRs expressly 

for assessment purposes would justify 

the cost to affected banks. 

The FDIC also considered a second 

alternative: removing restructured loans 

from the definition of underperforming 

assets entirely and not incorporating the 

new data on modifications to borrowers 

experiencing financial difficulty. 

Similar to the first alternative, this 

second alternative would apply 

uniformly to all large and highly 

complex banks, regardless of their early 

adoption status. However, this 

alternative fails to recognize that data on 

modifications to borrowers experiencing 

financial difficulty provide a 

meaningful indicator of credit risk 

throughout economic cycles and should 

be captured in credit quality measures 

such as the underperforming assets ratio 

and the higher-risk assets ratio. The 

FDIC believes that the new 

modifications data required under ASU 

2022–02 can provide valuable 

information and would not impose 

additional reporting burden. 

Incorporating this new data in place of 

TDRs would be the most reasonable 

option to ensure that large and highly 

complex banks are assessed fairly and 

accurately, all else equal. 

Question 3: The FDIC invites 

comment on the reasonable and 

possible alternatives described in this 

proposed rule. Are there other 

reasonable and possible alternatives 

that the FDIC should consider? 

VI. Comment Period, Effective Date, 

and Application Date 

The FDIC is issuing this proposal with 

a 30-day comment period. Following the 

comment period, the FDIC expects to 

issue a final rule with an effective date 

of January 1, 2023, and applicable to the 

first quarterly assessment period of 2023 

(i.e., January 1–April 1, 2023). Most 

institutions that have implemented 

CECL, will adopt FASB’s ASU 2022–02 

in 2023, unless an institution chooses to 

early adopt in 2022. Institutions (those 

with a calendar year fiscal year) 

implementing CECL on January 1, 2023, 

will also adopt, FASB’s ASU 2022–02 at 

that time. Therefore, by the first quarter 

of 2023, ASU 2022–02 also will be in 

effect for most, if not all, large and 

highly complex banks. The FDIC 

believes that coordinating the 

assessment system amendments to 

conform to the new accounting 

standards will promote a more efficient 

transition and will result in affected 

banks reporting their data in a 

consistent manner based on the correct 

accounting concepts. 

VII. Request for Comment 

The FDIC is requesting comment on 

all aspects of the notice of proposed 

rulemaking, in addition to the specific 

requests for comment above. 

VIII. Administrative Law Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

generally requires an agency, in 

connection with a proposed rule, to 

prepare and make available for public 

comment an initial regulatory flexibility 

analysis that describes the impact of a 

proposed rule on small entities.21

However, a regulatory flexibility 

analysis is not required if the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The U.S. Small Business Administration 

(SBA) has defined ‘‘small entities’’ to 

include banking organizations with total 

assets of less than or equal to $750 

million.22 Certain types of rules, such as 

rules relating to rates, corporate or 

financial structures, or practices relating 

to such rates or structures, are expressly 

excluded from the definition of ‘‘rule’’ 

for purposes of the RFA.23 Because the 

proposed rule relates directly to the 

rates imposed on IDIs for deposit 

insurance and to the deposit insurance 

assessment system that measures risk 

and determines each bank’s assessment 

rate, the proposed rule is not subject to 

the RFA. Nonetheless, the FDIC is 

voluntarily presenting information in 

this RFA section. 

Based on Call Report data as of 

December 31, 2021, the FDIC insures 

4,848 IDIs, of which 3,478 are defined 

as small entities by the terms of the 

RFA.24 The proposed rule, however, 

would apply only to institutions with 

$10 billion or greater in total assets 

which, by definition, do not meet the 

criteria to be considered small entities 

for the purposes of the RFA. Since no 

small entities would be affected by the 

proposed rule, the FDIC certifies that 

the proposed rule would not have a 

significant economic effect on a 

substantial number of small entities. 

B. Riegle Community Development and 

Regulatory Improvement Act 

Section 302(a) of the Riegle 

Community Development and 

Regulatory Improvement Act (RCDRIA) 

requires that the Federal banking 

agencies, including the FDIC, in 

determining the effective date and 

administrative compliance requirements 

of new regulations that impose 

additional reporting, disclosure, or other 

requirements on IDIs, consider, 

consistent with principles of safety and 

soundness and the public interest, any 

administrative burdens that such 

regulations would place on depository 

institutions, including small depository 

institutions, and customers of 

depository institutions, as well as the 

benefits of such regulations.25 In 

addition, section 302(b) of RCDRIA 

requires new regulations and 

amendments to regulations that impose 

additional reporting, disclosures, or 

other new requirements on IDIs 

generally to take effect on the first day 

of a calendar quarter that begins on or 

after the date on which the regulations 

are published in final form, with certain 

exceptions, including for good cause.26

The proposed rule would not impose 

additional reporting, disclosure, or other 

new requirements on insured depository 

institutions, including small depository 

institutions, or on the customers of 

depository institutions. Accordingly, 

section 302 of RCDRIA does not apply. 

Nevertheless, the requirements of 

RCDRIA have been considered in setting 

the proposed effective date. The FDIC 

invites comments that will further 

inform its consideration of RCDRIA. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) states that no agency may 

conduct or sponsor, nor is the 

respondent required to respond to, an 

information collection unless it displays 


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45028 Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 

27 44 U.S.C. 3501–3521. 28Public Law 106–102, section 722, 113 Stat. 

1338, 1471 (1999), 12 U.S.C. 4809. 

a currently valid Office of Management 

and Budget (OMB) control number.27

The FDIC’s OMB control numbers for its 

assessment regulations are 3064–0057, 

3064–0151, and 3064–0179. The 

proposed rule does not revise any of 

these existing assessment information 

collections pursuant to the PRA and 

consequently, no submissions in 

connection with these OMB control 

numbers will be made to the OMB for 

review. However, the proposed rule 

affects the agencies’ current information 

collections for the Call Report (FFIEC 

031 and FFIEC 041, but not FFIEC 051). 

The agencies’ OMB control numbers for 

the Call Reports are: OCC OMB No. 

1557–0081; Board OMB No. 7100–0036; 

and FDIC OMB No. 3064–0052. 

Proposed changes to the Call Report 

forms and instructions will be 

addressed in a separate Federal Register 

notice. 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act 28 requires the Federal 

banking agencies to use plain language 

in all proposed and final rulemakings 

published in the Federal Register after 

January 1, 2000. The FDIC invites your 

comments on how to make this 

proposed rule easier to understand. For 

example: 

• Has the FDIC organized the material 

to suit your needs? If not, how could the 

material be better organized? 

• Are the requirements in the 

proposed regulation clearly stated? If 

not, how could the regulation be stated 

more clearly? 

• Does the proposed regulation 

contain language or jargon that is 

unclear? If so, which language requires 

clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the regulation 

easier to understand? 

List of Subjects in 12 CFR Part 327 

Bank deposit insurance, Banks, 

Banking, Savings associations. 

Authority and Issuance 

For the reasons stated in the 

preamble, the Federal Deposit Insurance 

Corporation proposes to amend 12 CFR 

part 327 as follows: 

PART 327—ASSESSMENTS 

■ 1. The authority for 12 CFR part 327 

continues to read as follows: 

Authority: 12 U.S.C. 1813, 1815, 1817–19, 

1821. 

■ 2. Amend appendix A to subpart A in 

section IV, as proposed to be 

redesignated on July 1, 2022, at 87 FR 

39409, by: 

■ a. In the entries for ‘‘Balance Sheet 

Liquidity Ratio’’, ‘‘Potential Losses/ 

Total Domestic Deposits (Loss Severity 

Measure)’’, and ‘‘Market Risk Measure 

for Highly Complex Institutions’’, 

redesignating footnotes 5, 6, and 7 as 

footnotes 6, 7, and 8, respectively; 

■ b. Redesignating footnotes 5, 6, and 7 

as footnotes 6, 7, and 8 at the end of the 

table; 

■ c. Revising the entry for ‘‘Credit 

Quality Measure’’; and 

■ d. Adding a new footnote 5 at the end 

of the table. 

The revision and addition read as 

follows: 

Appendix A to Subpart A of Part 327— 

Method To Derive Pricing Multipliers 

and Uniform Amount 

* * * * * 

VI. DESCRIPTION OF SCORECARD MEASURES

Scorecard measures 1 Description 

*******

Credit Quality Measure ................... The credit quality score is the higher of the following two scores: 

(1) Criticized and Classified Items/ 

Tier 1 Capital and Reserves 2.

Sum of criticized and classified items divided by the sum of Tier 1 capital and reserves. Criticized and 

classified items include items an institution or its primary Federal regulator have graded ‘‘Special Mention’’ or worse and include retail items under Uniform Retail Classification Guidelines, securities, funded 

and unfunded loans, other real estate owned (ORE), other assets, and marked-to-market counterparty 

positions, less credit valuation adjustments.4 Criticized and classified items exclude loans and securities 

in trading books, and the amount recoverable from the U.S. Government, its agencies, or Governmentsponsored enterprises, under guarantee or insurance provisions. 

(2) Underperforming Assets/Tier 1 

Capital and Reserves 2.

Sum of loans that are 30 days or more past due and still accruing interest, nonaccrual loans, restructured 

loans 5 (including restructured 1–4 family loans), and ORE, excluding the maximum amount recoverable 

from the U.S. Government, its agencies, or government-sponsored enterprises, under guarantee or insurance provisions, divided by a sum of Tier 1 capital and reserves. 

* * * * * * * 

1The FDIC retains the flexibility, as part of the risk-based assessment system, without the necessity of additional notice-and-comment rulemaking, to update the minimum and maximum cutoff values for all measures used in the scorecard. The FDIC may update the minimum and 

maximum cutoff values for the higher-risk assets to Tier 1 capital and reserves ratio in order to maintain an approximately similar distribution of 

higher-risk assets to Tier 1 capital and reserves ratio scores as reported prior to April 1, 2013, or to avoid changing the overall amount of assessment revenue collected. 76 FR 10672, 10700 (February 25, 2011). The FDIC will review changes in the distribution of the higher-risk assets 

to Tier 1 capital and reserves ratio scores and the resulting effect on total assessments and risk differentiation between banks when determining 

changes to the cutoffs. The FDIC may update the cutoff values for the higher-risk assets to Tier 1 capital and reserves ratio more frequently than 

annually. The FDIC will provide banks with a minimum one quarter advance notice of changes in the cutoff values for the higher-risk assets to 

Tier 1 capital and reserves ratio with their quarterly deposit insurance invoice. 2The applicable portions of the current expected credit loss methodology (CECL) transitional amounts attributable to the allowance for credit 

losses on loans and leases held for investment and added to retained earnings for regulatory capital purposes pursuant to the regulatory capital 

regulations, as they may be amended from time to time (12 CFR part 3, 12 CFR part 217, 12 CFR part 324, 85 FR 61577 (Sept. 30, 2020), and 

84 FR 4222 (Feb. 14, 2019)), will be removed from the sum of Tier 1 capital and reserves. 

* * * * * * * 


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Federal Register / Vol. 87, No. 143 / Wednesday, July 27, 2022 / Proposed Rules 45029 

[12]Among other things, for a loan to be 

considered for re-aging, the following must be true: 

(1) The borrower must have demonstrated a 

renewed willingness and ability to repay the loan; 

(2) the loan must have existed for at least nine 

months; and (3) the borrower must have made at 

least three consecutive minimum monthly 

payments or the equivalent cumulative amount. 

4A marked-to-market counterparty position is equal to the sum of the net marked-to-market derivative exposures for each counterparty. The 

net marked-to-market derivative exposure equals the sum of all positive marked-to-market exposures net of legally enforceable netting provisions 

and net of all collateral held under a legally enforceable CSA plus any exposure where excess collateral has been posted to the counterparty. 

For purposes of the Criticized and Classified Items/Tier 1 Capital and Reserves definition a marked-to-market counterparty position less any 

credit valuation adjustment can never be less than zero. 5 Restructured loans include troubled debt restructurings and modifications to borrowers experiencing financial difficulty, as these terms are defined in the glossary to the Call Report, as they may be amended from time to time. 

* * * * * 

■ 3. Amend appendix C to subpart A by: 

■ a. In section I.A.2., under the heading 

‘‘Definitions’’, revising the entry for 

‘‘Refinance’’; and 

■ b. In section I.A.3., revising the 

‘‘Refinance’’ section preceding section 

I.A.4. 

The revisions read as follows: 

Appendix C to Subpart A of Part 327— 

Description of Concentration Measures 

I. * * * 

A. * * * 

2. * * * 

Definitions 

* * * * * 

Refinance 

For purposes of a C&I loan, a refinance 

includes: 

(a) Replacing an original obligation by a 

new or modified obligation or loan 

agreement; 

(b) Increasing the master commitment of 

the line of credit (but not adjusting sub-limits 

under the master commitment); 

(c) Disbursing additional money other than 

amounts already committed to the borrower; 

(d) Extending the legal maturity date; 

(e) Rescheduling principal or interest 

payments to create or increase a balloon 

payment; 

(f) Releasing a substantial amount of 

collateral; 

(g) Consolidating multiple existing 

obligations; or 

(h) Increasing or decreasing the interest 

rate. 

A refinance of a C&I loan does not include 

a modification or series of modifications to 

a commercial loan other than as described 

above or modifications to a commercial loan 

that would otherwise meet this definition of 

refinance, but that result in the classification 

of a loan as a troubled debt restructuring 

(TDR) or a modification to borrowers 

experiencing financial difficulty, as these 

terms are defined in the glossary of the Call 

Report instructions, as they may be amended 

from time to time. 

* * * * * 

3. * * * 

Refinance 

For purposes of higher-risk consumer 

loans, a refinance includes: 

(a) Extending new credit or additional 

funds on an existing loan; 

(b) Replacing an existing loan with a new 

or modified obligation; 

(c) Consolidating multiple existing 

obligations; 

(d) Disbursing additional funds to the 

borrower. Additional funds include a 

material disbursement of additional funds or, 

with respect to a line of credit, a material 

increase in the amount of the line of credit, 

but not a disbursement, draw, or the writing 

of convenience checks within the original 

limits of the line of credit. A material 

increase in the amount of a line of credit is 

defined as a 10 percent or greater increase in 

the quarter-end line of credit limit; however, 

a temporary increase in a credit card line of 

credit is not a material increase; 

(e) Increasing or decreasing the interest rate 

(except as noted herein for credit card loans); 

or 

(f) Rescheduling principal or interest 

payments to create or increase a balloon 

payment or extend the legal maturity date of 

the loan by more than six months. 

A refinance for this purpose does not 

include: 

(a) A re-aging, defined as returning a 

delinquent, open-end account to current 

status without collecting the total amount of 

principal, interest, and fees that are 

contractually due, provided: 

(i) The re-aging is part of a program that, 

at a minimum, adheres to the re-aging 

guidelines recommended in the interagency 

approved Uniform Retail Credit 

Classification and Account Management 

Policy; [12]

(ii) The program has clearly defined policy 

guidelines and parameters for re-aging, as 

well as internal methods of ensuring the 

reasonableness of those guidelines and 

monitoring their effectiveness; and 

(iii) The bank monitors both the number 

and dollar amount of re-aged accounts, 

collects and analyzes data to assess the 

performance of re-aged accounts, and 

determines the effect of re-aging practices on 

past due ratios; 

(b) Modifications to a loan that would 

otherwise meet this definition of refinance, 

but result in the classification of a loan as a 

TDR or modification to borrowers 

experiencing financial difficulty; 

(c) Any modification made to a consumer 

loan pursuant to a government program, such 

as the Home Affordable Modification 

Program or the Home Affordable Refinance 

Program; 

(d) Deferrals under the Servicemembers 

Civil Relief Act; 

(e) A contractual deferral of payments or 

change in interest rate that is consistent with 

the terms of the original loan agreement (e.g., 

as allowed in some student loans); 

(f) Except as provided above, a 

modification or series of modifications to a 

closed-end consumer loan; 

(g) An advance of funds, an increase in the 

line of credit, or a change in the interest rate 

that is consistent with the terms of the loan 

agreement for an open-end or revolving line 

of credit (e.g., credit cards or home equity 

lines of credit); 

(h) For credit card loans: 

(i) Replacing an existing card because the 

original is expiring, for security reasons, or 

because of a new technology or a new 

system; 

(ii) Reissuing a credit card that has been 

temporarily suspended (as opposed to 

closed); 

(iii) Temporarily increasing the line of 

credit; 

(iv) Providing access to additional credit 

when a bank has internally approved a 

higher credit line than it has made available 

to the customer; or 

(v) Changing the interest rate of a credit 

card line when mandated by law (such as in 

the case of the Credit CARD Act). 

* * * * * 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on July 19, 2022. 

James P. Sheesley, 

Assistant Executive Secretary. 

[FR Doc. 2022–15763 Filed 7–26–22; 8:45 am] 

BILLING CODE 6714–01–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 748 

[NCUA–2022–0099] 

RIN 3133–AF47 

Cyber Incident Notification 

Requirements for Federally Insured 

Credit Unions 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed rule. 

SUMMARY: Due to the increased 

frequency and severity of cyberattacks 

on the financial services sector, the 

NCUA Board is proposing to require a 

federally insured credit union that 

experiences a reportable cyber incident 

to report the incident to the NCUA as 

soon as possible and no later than 72 

hours after the federally insured credit 

union reasonably believes that it has 

experienced a reportable cyber incident. 

This notification requirement provides 

an early alert to the NCUA and does not 

require credit unions to provide a 


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