Document ID: SEC-2019-1417-0001
Agency: sec
Document Type: Proposed Rule
Title: Update of Statistical Disclosures for Bank and Savings and Loan Registrants
Posted Date: 2019-10-03T04:00Z

[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Proposed Rules]
[Pages 52936-52980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20491]

[[Page 52935]]

Vol. 84

Thursday,

No. 192

October 3, 2019

Part II

 Securities and Exchange Commission

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17 CFR Parts 210, 229, and 249

 Update of Statistical Disclosures for Bank and Savings and Loan 
Registrants; Proposed Rule

  Federal Register / Vol. 84 , No. 192 / Thursday, October 3, 2019 / 
Proposed Rules  

[[Page 52936]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 229, and 249

[Release No. 33-10688; 34-86984; File No. S7-02-17]
RIN 3235-AL79

Update of Statistical Disclosures for Bank and Savings and Loan 
Registrants

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing rules to update our statistical disclosures 
for banking registrants. These registrants currently provide many 
disclosures in response to the items set forth in Industry Guide 3 
(``Guide 3''), Statistical Disclosure by Bank Holding Companies, which 
are not Commission rules. The proposed rules would update the 
disclosures that investors receive, codify certain Guide 3 disclosures 
and eliminate other Guide 3 disclosures that overlap with Commission 
rules, U.S. Generally Accepted Accounting Principles (``U.S. GAAP''), 
or International Financial Reporting Standards (``IFRS''). In addition, 
we propose to relocate the codified disclosures to a new subpart of 
Regulation S-K and to rescind Guide 3.

DATES: Comments should be received on or before December 2, 2019.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number S7-02-17 on the subject line.

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number S7-02-17. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method of submission. The Commission will post all comments on the 
Commission's website (http://www.sec.gov/rules/proposed.shtml). 
Comments also are available for website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make publicly available.
    Studies, memoranda or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the Commission's website. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notification by email.

FOR FURTHER INFORMATION CONTACT: Stephanie Sullivan, Associate Chief 
Accountant, or Dana Hartz, Accountant, Division of Corporation Finance, 
at (202) 551-3400, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing to amend 17 CFR 
229.404 (``Item 404 of Regulation S-K'') under the Securities Act of 
1933 (``Securities Act'') \1\ and the Securities Exchange Act of 1934 
(``Exchange Act''); \2\ 17 CFR 210.9-03 (``Rule 9-03 of Regulation S-
X'') under the Securities Act and the Exchange Act; and 17 CFR 249.220f 
(``Form 20-F'') under the Exchange Act. In addition, the Commission is 
proposing to add a new subpart, 17 CFR 229.1400 (``Item 1400 of 
Regulation S-K''), which would include 17 CFR 229.1401 through 17 CFR 
229.1406, and is proposing to rescind 17 CFR 229.801(c) and 229.802(c) 
Guide 3 Securities Act Industry Guide and Guide 3 Exchange Act Industry 
Guide (``Guide 3'') under the Securities Act and Exchange Act.
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
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Table of Contents

I. Introduction and Backgrounds
    A. Background
    B. Issuance of the Request for Comment
II. Proposed New Subpart 1400 of Regulation S-K
    A. Codification
    B. Proposed Scope
    C. Proposed Applicability to Domestic Registrants and Foreign 
Registrants
    D. Reporting Periods
    E. Distribution of Assets, Liabilities, and Stockholders' 
Equity; Interest Rate and Interest Differential (Average Balance, 
Interest and Yield/Rate Analysis and Rate/Volume Analysis)
    F. Investment Portfolio
    G. Loan Portfolio
    H. Allowance for Credit Losses
    I. Deposits
III. Certain Existing Guide 3 Disclosures That Would Not Be Codified 
in Proposed Subpart 1400 of Regulation S-K
    A. Return on Equity and Assets
    B. Short-Term Borrowings
IV. Proposed Changes to Article 9 of Regulation S-X
V. General Request for Comments
VI. Economic Analysis
    A. Introduction
    B. Baseline
    C. Economic Effects
    D. Effects on Efficiency, Competition, and Capital Formation
    E. Request for Comment
VII. Paperwork Reduction Act
    A. Background
    B. Burden and Cost Estimates Related to the Proposed Rules
    C. Request for Comment
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Regulatory Flexibility Act Certification
X. Statutory Authority and Text of Proposed Rules

I. Introduction and Backgrounds

A. Background

    Guide 3 was first published in 1976 as ``a convenient reference to 
the statistical disclosures sought by the staff of the Division of 
Corporation Finance in registration statements and other disclosure 
documents filed by bank holding companies (``BHCs'').'' \3\ Guide 3 
calls for disclosure in seven areas: (1) ``distribution of assets, 
liabilities and stockholders' equity; interest rates and interest 
differential'', (2) investment portfolios, (3) loan portfolios, (4) 
summary of loan loss experience, (5) deposits, (6) return on equity and 
assets, and (7) short-term borrowings. Guide 3 applies to BHCs,\4\ 
although other registrants, including savings and loan holding 
companies, provide Guide 3 disclosures to the extent applicable. The 
Guide 3 Release noted that ``as the

[[Page 52937]]

operations of bank holding companies have diversified, it has become 
increasingly difficult for investors to identify the sources of income 
of such companies.'' \5\ The Division believed that disclosure of the 
same statistical information about BHCs on a regular, periodic basis 
would assist in assessing their future earning potential and enable 
investors to compare BHCs more easily.\6\ Guide 3 has been amended over 
time to provide more consistency with Article 9 of Regulation S-X 
(``Article 9'') \7\ and to elicit additional information about various 
risk elements involved in lending and deposit activities.\8\
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    \3\ Guides for Statistical Disclosure by Bank Holding Companies, 
Release No. 33-5735 (Aug. 31, 1976) [41 FR 39007] (``Guide 3 
Release''). When it published the Guide 3 Release, the Commission 
stated that ``[t]he Guides are not Commission rules nor do they bear 
the Commission's official approval; they represent policies and 
practices followed by the Commission's Division of Corporation 
Finance in administering the disclosure requirements of the federal 
securities laws.'' Guide 3 was originally published as Securities 
Act Guide 61 and Exchange Act Guide 3. In 1982, Securities Act Guide 
61 and Exchange Act Guide 3 were redesignated as Securities Act 
Industry Guide 3 and Exchange Act Industry Guide 3. See Rescission 
of Guides and Redesignation of Industry Guides, Release No. 33-6384 
(Mar. 16, 1982) [47 FR 11476].
    \4\ Rule 1-02(e) of Regulation S-X [17 CFR 210.1-02(e)] defines 
a BHC as ``a person who is engaged, either directly or indirectly, 
primarily in the business of owning securities of one or more banks 
for the purpose, and with the effect, of exercising control.''
    \5\ See supra note 3.
    \6\ Id.
    \7\ 17 CFR 210.9-01 through 9-07. Article 9 sets forth the form 
and content of the consolidated financial statements filed for bank 
holding companies and for any financial statements of banks that are 
included in filings with the Commission.
    \8\ Amendments to Guides for Statistical Disclosure by Bank 
Holding Companies, Release No. 33-6221 (July 8, 1980) [45 FR 47138] 
(``1980 Guide 3 Release''); Revision of Financial Statement 
Requirements and Industry Guide Disclosure for Bank Holding 
Companies, Release No. 33-6458 (Mar. 7, 1983) [48 FR 11104]; 
Revision of Industry Guide Disclosures for Bank Holding Companies, 
Release No. 33-6478 (Aug. 11, 1983) 48 FR 37609 (together with 
Release 33-6458 the ``1983 Guide 3 Releases''); Notification of 
Technical Amendments to Securities Act Industry Guides, Release No. 
33-9337 (Jul. 13, 2012) [77 FR 42175] (``2012 Guide 3 Release'').
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    Since the last substantive revision to Guide 3 in 1986,\9\ the 
Commission has adopted disclosure requirements \10\ and the Financial 
Accounting Standards Board (``FASB'') \11\ and International Accounting 
Standards Board (``IASB'') \12\ have issued accounting standards that 
have changed the financial reporting obligations for registrants 
engaged in financial services. Consequently, some of the disclosures 
called for by Guide 3 overlap with subsequently adopted Commission 
rules, U.S. GAAP, or IFRS.\13\
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    \9\ This revision added disclosures regarding loans and 
extensions of credit to borrowers in countries experiencing 
liquidity problems. See Amendments to Industry Guide Disclosures by 
Bank Holding Companies, Release No. 33-6677 (Nov. 25, 1986) [51 FR 
43594].
    \10\ For example, the Commission adopted Item 305 of Regulation 
S-K [17 CFR 229.305] in 1997. Disclosure of Accounting Policies for 
Derivative Financial Instruments and Derivative Commodity 
Instruments and Disclosure of Quantitative and Qualitative 
Information about Market Risk Inherent in Derivative Financial 
Instruments, Other Financial Instruments and Derivative Commodity 
Instruments, Release No. 33-7386 (Jan. 31, 1997) [62 FR 6044] 
(``Disclosure of Market Risk Sensitive Instruments Release'').
    \11\ The Commission has broad authority and responsibility under 
the federal securities laws to prescribe the methods to be followed 
in the preparation of accounts and the form and content of financial 
statements to be filed under those laws. See, e.g., Sections 7 [15 
U.S.C. 77g], 19(a) [15 U.S.C. 77s(a)] and Schedule A, Items (25) and 
(26) [15 U.S.C. 77aa(25) and (26)] of the Securities Act and 
Sections 3(b) [15 U.S.C. 78c(b)], 12(b) [17 CFR 781(b)] and 13(b) 
[17 CFR 78m(b)] of the Exchange Act. To assist it in meeting this 
responsibility, the Commission historically has looked to private 
sector standard-setting bodies designated by the accounting 
profession to develop accounting principles and standards. In 2003, 
in accordance with criteria established by the Sarbanes-Oxley Act, 
the Commission designated the FASB as the private sector accounting 
standard setter for U.S. financial reporting. See Policy Statement: 
Reaffirming the Status of the FASB as a Designated Private-Sector 
Standard Setter, Release No. 33-8221 (Apr. 25, 2003) [68 FR 23333].
    \12\ The IASB, which is subject to oversight by the IFRS 
Foundation, is responsible for IFRS. For further information, see 
http://www.ifrs.org/About-us/Pages/IFRS-Foundation-and-IASB.aspx.
    \13\ References to IFRS throughout are to IFRS as issued by the 
IASB.
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B. Issuance of the Request for Comment

    On March 1, 2017, the Commission published a request for comment on 
possible changes to Industry Guide 3 (the ``Request for Comment'').\14\ 
The Request for Comment sought feedback on a number of areas, 
including:
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    \14\ See Request for Comment on Possible Changes to Industry 
Guide 3 (Statistical Disclosures by Bank Holding Companies); Release 
No. 33-10321 (Mar. 1, 2017) [82 FR 12757].
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     Whether, and in which respects, the specific quantitative 
and qualitative disclosures called for by Guide 3 should be modified, 
including elimination due to overlapping disclosure requirements in 
U.S. GAAP, IFRS, or other regulatory disclosure regimes;
     The types of information about registrants in the 
financial services industry that investors find important and the 
degree to which other disclosure regimes, such as those instituted by 
U.S. banking agencies, may be used by investors;
     Whether Guide 3 disclosures should be applicable to 
registrants other than BHCs; and
     Whether the reporting periods for Guide 3 disclosures 
should be modified.
    In response to the Request for Comment, commenters expressed a 
range of views. Most commenters expressed support for an update to 
Guide 3.\15\ Many of these commenters stated that Guide 3 disclosures 
that overlap with Commission rules, U.S. GAAP, and IFRS should be 
eliminated.\16\ Some commenters stated there are overlapping 
disclosures contained in the U.S. banking agencies public regulatory 
reports.\17\ However, one commenter noted the U.S. banking agencies 
information may be of limited use to investors given the volume and 
level of detail of it.\18\ Furthermore, several commenters noted that 
the primary purpose of U.S. banking agencies reporting is different 
from the Commission's disclosure objectives.\19\ Several commenters 
called for the Guide 3 disclosures to be less prescriptive and more 
principles-based.\20\
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    \15\ See letters from American Bankers Association (``ABA'') 
(June 28, 2017); American Express Company (``AmEx'') (July 7, 2017); 
BDO USA LLP (``BDO'') (May 4, 2017); Berry Dunn McNeil & Parker LLC 
(``BerryDunn'') (July 6, 2017); Center for American Progress 
(``CAP'') (July 7, 2017); Center for Audit Quality (``CAQ'') (May 8, 
2017); Canadian Bankers Association (``CBA'') (June 2, 2017); 
Clearing House Association L.L.C., Securities Industry and Financial 
Markets Association (``CH/SIFMA'') (June 29, 2017); Crowe Horwath 
LLP (``Crowe'') (July 6, 2017); Deloitte & Touche (``Deloitte'') 
(June 1, 2017); Ernst & Young LLP (``EY'') (May 24, 2017); 
International Bancshares Corporation (``IBC'') (July 7, 2017); 
Independent Community Bankers of America (``ICBA'') (May 8, 2017); 
KPMG LLP (``KPMG'') (July 7, 2017); PNC Financial Services Group 
Inc. (``PNC'') (July 6, 2017); Public Citizen (July 7, 2017); RSM US 
LLP (``RSM'') (April 25, 2017); PricewaterhouseCoopers LLP (``PwC'') 
(June 28, 2017); Sumitomo Mitsui Financial Group, Inc. (submitted by 
Davis Polk & Wardwell LLP) (``SMFG'') (June 30, 2017); and XBRL US 
(``XBRL US'') (July 7, 2017).
    \16\ See letters from ABA; AmEx; BDO; BerryDunn; CAQ; CBA; CH/
SIFMA; Crowe; Deloitte; EY; IBC; ICBA; KPMG; Mizuho Financial Group 
Inc. (``MFG'') (submitted by Simpson Thacher & Bartlett) (July 7, 
2017); Mitsubishi UFJ Financial Group (``MUFG'') (submitted by Paul 
Weiss) (July 7, 2017); PNC; PwC; and RSM.
    \17\ See letters from ABA; Amex; CH/SIFMA; Deloitte; IBC; KPMG; 
and PNC.
    \18\ See letter from CH/SIFMA.
    \19\ See letters from ABA; Amex; CAQ; CH/SIFMA; Crowe; Deloitte; 
EY; PwC; and RSM.
    \20\ See letters from ABA; AmEx; BDO; CAQ; Crowe; Deloitte; EY; 
KPMG; and PNC.
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    A few commenters recommended that we consider addressing items such 
as (1) market risk and derivatives disclosures, (2) regulatory capital 
and other information currently required to be reported to U.S. banking 
agencies, (3) implementation and compliance with the Volcker Rule,\21\ 
and (4) merchant banking and commercial assets information.\22\ Some of 
these items affect a broader population of registrants than those 
addressed in this release and are activities for which Commission 
rules, U.S. GAAP, or IFRS already require detailed disclosures, such as 
derivatives. In addition, some of the recommended disclosures would 
likely give rise to confidentiality concerns related to confidential 
supervisory information \23\ under the federal banking regulations.\24\
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    \21\ See Prohibitions and Restrictions on Proprietary Trading 
and Certain Interests In, and Relationships With, Hedge Funds and 
Private Equity Funds; Release No. BHCA-1 (Dec. 10, 2013) [79 FR 
5535], which is commonly referred to as the Volcker Rule. The 
Volcker Rule is intended to prohibit banks from engaging in 
proprietary trading, which involves the bank using its funds to make 
short term trades in securities, derivatives, or commodity futures.
    \22\ See letters from CAP; Public Citizen; Ethics Metrics, LLC 
(``EM'') (May 8, 2017); and RSM.
    \23\ See 12 CFR 261.20.
    \24\ The U.S. banking agencies have rules that address the 
disclosure of confidential supervisory information. Except in very 
limited circumstances, financial institutions are prohibited by law 
from disclosing nonpublic supervisory information to nonrelated 
third parties without written permission from the appropriate U.S. 
banking agency.

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[[Page 52938]]

    In developing our proposal, we considered the above 
recommendations, as well as the other comments received in response to 
the Request for Comment. Although the Request for Comment asked for 
feedback on a number of areas, in this release we focus on commenter 
feedback relevant to our proposals. We welcome additional feedback and 
encourage interested parties to submit comments on any or all aspects 
of the proposed amendments. When commenting, it would be most helpful 
if you include the reasoning behind your position or recommendation.

II. Proposed New Subpart 1400 of Regulation S-K

A. Codification

    In the Request for Comment, the Commission sought input on whether 
any of the Guide 3 disclosures should be codified as Commission 
rules.\25\ Some commenters recommended codifying these disclosures,\26\ 
while others recommended that they not be codified.\27\ Most of the 
latter commenters cited the ease of updating as the reason for not 
codifying the disclosures.\28\ One commenter further stated that 
codification would not enhance adherence by registrants and that 
retaining Guide 3 as guidance would continue to allow registrants 
flexibility in their approach to disclosure.\29\
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    \25\ In 1996, the Commission's Task Force on Disclosure 
Simplification recommended relocating the industry guides, including 
Guide 3, into Regulation S-K. See Report of the Task Force on 
Disclosure Simplification (Mar. 5, 1996), available at http://www.sec.gov/news/studies/smpl.htm. Currently, Instruction 13 to 
Regulation S-K Item 303(a) [17 CFR 229.303(a)] directs the attention 
of bank holding companies to the information called for by Guide 3. 
Additionally, an Instruction to Item 4 of Form 20-F indicates that 
the information specified in any industry guide that applies to the 
registrant should be furnished, and Item 7(c) of Form 1-A states 
that the disclosure guidelines in all Securities Act Industry Guides 
must be followed, and to the extent the industry guides are codified 
into Regulation S-K, the Regulation S-K industry disclosure items 
must be followed. We propose to amend Item 4 of Form 20-F to refer 
to proposed Items 1400 through 1406 of Regulation S-K.
    \26\ See letters from Crowe; Deloitte; and EY.
    \27\ See letters from ABA; AmEx; CBA; and CH/SIFMA.
    \28\ See letters from ABA; AmEx; and CH/SIFMA.
    \29\ See letter from CH/SIFMA.
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    We propose updating and codifying certain Guide 3 disclosures in a 
new Subpart 1400 of Regulation S-K.\30\ This is consistent with the 
approach taken by the Commission when it has modernized other Industry 
Guides.\31\ This proposed approach would mitigate uncertainty about 
when these disclosures must be included in Commission filings and 
enhance comparability across banking registrants, both foreign and 
domestic. Furthermore, the process to update an Industry Guide is the 
same as amendments to disclosure requirements. While there may be a 
decrease in flexibility driven by codification of the proposed rules 
into Regulation S-K, we believe this reduced flexibility is outweighed 
by the benefits of certainty about whether the disclosures are 
required. We also believe codification would streamline compliance by 
including these disclosures in Regulation S-K along with other non-
financial statement disclosure requirements.
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    \30\ The Industry Guides, or Guide 3 specifically, are 
referenced in instructions to Forms 20-F and 1-A, as well as in 
instructions to Items 303 and 404 of Regulation S-K. We have 
proposed to replace these references, as applicable, with a 
reference to the proposed Subpart 1400 of Regulation S-K. We also 
propose to delete the reference to potential problem loans in Item 
III.C.1 and 2 of Guide 3 and Instruction 4(c) of Item 404 of 
Regulation S-K because we are not proposing to codify these 
disclosures. See Section II.G for further discussion.
    \31\ For example, Industry Guide 2 was revised and codified in 
Subpart 1200 of Regulation S-K (17 CFR 229.1201 through 1208), 
Modernization of Oil and Gas Reporting, Release No. 33-8995 [74 FR 
2157]. The Commission also recently consolidated the property 
disclosure requirements for mining registrants in a new Subpart 1300 
of Regulation S-K, Modernization of Property Disclosures for Mining 
Registrants, Release No. 33-10570 (October 31, 2018) [83 FR 66344].
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    Request for Comment:
    1. Should we codify the Guide 3 disclosures in new subpart 1400 of 
Regulation S-K, generally as proposed? Should some disclosures remain 
in Guide 3? If so, which ones?

B. Proposed Scope

i. Background
    By its terms, Guide 3 applies to BHCs. However, the disclosures 
called for by Guide 3 are also provided by other registrants with 
material lending and deposit activities, including savings and loan 
holding companies.\32\ In the Request for Comment, the Commission 
acknowledged that BHCs today conduct a wider array of activities than 
at the time of Guide's publication.\33\ Moreover, a wider range of 
companies, such as insurance companies, online marketplace lenders,\34\ 
and other financial technology companies \35\ engage in some of the 
activities addressed by the Guide 3 disclosure areas. However, these 
companies normally do not engage in deposit-taking activities and 
therefore do not provide Guide 3 disclosures. Based on these 
observations, the Commission asked whether Guide 3 should employ an 
activity-based scope, rather than a scope based on the type of 
registrant. For example, the Commission asked whether the Guide 3 
investment disclosures should be extended to other registrants, such as 
those engaged in the financial services industry, regardless of whether 
the registrant is a BHC or has material lending and deposit-taking 
activities. The Commission also asked whether Guide 3 should employ a 
principles-based approach, instead of using bright-line percentages or 
dollar amount thresholds to trigger disclosure.
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    \32\ Many registrants refer to Staff Accounting Bulletin Topic 
11:K--Application of Article 9 and Guide 3 (``SAB 11:K''), which 
states that ``[t]he SEC staff believes [Guide 3 information] would 
be material to a description of business of [non-BHC] registrants 
with material lending and deposit activities . . .'' The Industry 
Guides and SAB 11:K are not rules, regulations or statements of the 
Commission. If the proposed rule is adopted, the staff intends to 
rescind SAB 11:K.
    \33\ For example, some BHCs engage in activities involving asset 
management, investment management, physical commodities, insurance, 
and broker-dealer activities.
    \34\ Online marketplace lending is a method of debt financing, 
generally through loans, that does not use a traditional financial 
institution as an intermediary.
    \35\ Financial technology companies develop or provide 
technological innovation in financial services. For example, a 
financial technology company may use computer programs and other 
technology to support or enable banking and financial services 
activities.
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ii. Comments on Scope
    Several commenters stated that the applicability of Guide 3 
disclosures to non-BHC registrants should be clarified.\36\ For 
example, a registrant with material lending or deposit-taking 
activities, but not both, may be uncertain about whether, and if so 
which, Guide 3 disclosures it should provide. Furthermore, uncertainty 
may exist about when investment, short-term borrowings, or return on 
equity and asset disclosures should be provided because those 
disclosures do not necessarily correspond to a ``material lending and 
deposit activity'' threshold. One commenter noted that this uncertainty 
could impede capital formation, because a registrant may incur costs to 
prepare Guide 3 disclosures that are not required.\37\ One commenter 
stated that Guide 3 should continue to apply to BHCs and other 
registrants with material lending and deposit activities as this 
provides useful information to investors.\38\ Another commenter stated 
that Guide 3

[[Page 52939]]

disclosures should apply to non-BHC registrants that have significant 
operations in which credit is provided.\39\ Several commenters 
recommended an activity-based approach for Guide 3 disclosures,\40\ and 
some of them recommended that it be specific to the material operations 
of the registrant.\41\ Another commenter stated that an activity-based 
approach could be based on numerical thresholds, such as the percentage 
of a registrant's revenues derived from interest or dividends.\42\
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    \36\ See letters from CAQ; Crowe; Deloitte; EY; KPMG; and PwC.
    \37\ See letter from Crowe.
    \38\ See letter from CH/SIFMA.
    \39\ See letter from ABA.
    \40\ See letters from BDO; CAQ; CH/SIFMA; Deloitte; EY; KPMG; 
and RSM.
    \41\ See letters from CAQ; EY; and KPMG.
    \42\ See letter from RSM.
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iii. Proposed Scope
    We are proposing that the proposed disclosure requirements continue 
to apply to BHCs, as well as include most of the registrants that under 
existing practice provide the disclosures called for by Guide 3.\43\ 
Proposed Item 1401 of Regulation S-K would apply to banks, BHCs, 
savings and loan associations, and savings and loan holding companies 
(together, ``bank and savings and loan registrants''). Most commenters 
focused on the need to clarify the existing practice of providing Guide 
3 disclosures when there are material lending and deposit-taking 
activities. We believe identifying and codifying the types of 
registrants within the scope of the proposed rules would provide this 
clarification. We also believe this scope would capture the majority of 
registrants that predominantly engage in the activities covered by 
existing Guide 3 and for which these activities are material.\44\ We do 
not believe there is a large population of non-banking registrants that 
are providing Guide 3 disclosure today that only engage in one or a few 
of the activities addressed by its disclosure areas, e.g., lending and 
deposit-taking. Furthermore, we believe registrants should be able to 
easily ascertain whether they are a bank or savings and loan 
registrant, reducing confusion regarding the applicability of the 
disclosures to non-BHCs.
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    \43\ See supra note 32.
    \44\ There are only four registrants that have loans and bank 
deposits on their balance sheet, but are not within the proposed 
scope. See Table 1: Registrants Currently Applying Guide 3 in the 
Economic Analysis.
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    We are not proposing to expand the scope to include other 
registrants, such as insurance companies, online marketplace lenders or 
other financial technology companies. While the proposed disclosures 
may be relevant to other registrants in the financial services 
industry, commenters provided limited feedback on the types of 
registrants, other than BHCs, that the Guide 3 disclosures would be 
applicable to and whether it would be material under an activities-
based approach. We believe additional feedback on how investors of 
registrants outside of the proposed scope would use the proposed 
disclosures would be valuable. Further, we would like to understand 
whether these other registrants are providing similar information in a 
different format. We encourage interested parties, including those 
outside of the banking industry, to provide feedback on the proposed 
disclosures as they relate to registrants outside of the proposed 
scope.
    Request for Comment:
    2. Is the proposed scope of the proposed rules sufficiently clear? 
If not, how should we revise the scope to make it clearer? Should the 
proposed rules specifically include banks, savings and loan 
associations, and savings and loan holding companies, as proposed? If 
not, why not?
    3. Are there other types of registrants that should be included? 
For example, should we expand the scope of the proposed rules to 
include credit unions or all financial services registrants with 
material operations in any of the activities covered by the proposed 
rules? What are the other types of registrants that have material 
operations in any of the activities covered by the proposed rules? 
Would expanding the scope in this way elicit information material to an 
investment decision or are these registrants providing similar 
information in a different format? Would it enhance comparability? Are 
there particular burdens that financial services registrants, including 
domestic and foreign registrants, other than those within the proposed 
scope, would face in providing the disclosures? If so, what are the 
burdens and would these burdens outweigh the benefits of the 
disclosures? Are there ways to modify the proposal to help alleviate 
the burdens of providing the disclosures for these registrants?
    4. If we expand the scope to include all financial services 
registrants, how should we define a financial services registrant for 
this purpose? For example, should we define a financial services 
registrant to include entities that fall within the scope of ASC 942 
Financial Services--Depository and Lending under U.S. GAAP? \45\ Or 
should we define a financial services registrant as one that directly, 
or indirectly through its subsidiaries, engages primarily in providing 
financial services, including banking, investment, asset management, or 
other financial services? If so, would any of the following types of 
financial registrants be included in the definition: banks and bank 
holding companies, savings associations and savings and loan 
association holding companies, insurance companies, broker dealers, 
finance companies, foreign financial institutions, mortgage companies, 
online marketplace lenders, real estate investment trusts (``REITs''), 
asset managers, investment advisers, or government-sponsored 
enterprises? If the scope was expanded to include all financial 
services registrants, are there types of registrants, such as business 
development companies, that should be excluded?
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    \45\ ASC 942 provides incremental industry-specific guidance to 
the entities within its scope. The guidance in the Financial 
Services--Depositary and Lending topic applies to the following 
entities: (a) Finance companies, including finance company 
subsidiaries, (b) depositary institutions insured by either (1) the 
FDIC's Deposit Insurance Fund, or (2) the National Credit Union 
Administration's National Credit Union Share Insurance Fund, (c) 
bank holding companies, (d) savings and loan association holding 
companies, (e) branches and agencies of foreign banks regulated by 
U.S. federal banking regulatory agencies, (f) state-chartered banks, 
credit unions, and savings institutions that are not federally 
insured, (g) foreign financial institutions whose financial 
statements are purported to be prepared in conformity with 
accounting principles generally accepted in the United States, (h) 
mortgage companies, and (i) corporate credit unions.
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    5. If the scope included all financial services registrants, should 
we require disclosure only for the activities that are material to the 
business or financial statements of a registrant, or should disclosure 
be required for each of the areas covered by the proposed rules? Would 
a bright-line threshold work better for determining when these 
disclosures should be provided? If so, what bright-line threshold would 
be appropriate?
    6. Should we consider an activity-based standard, such as one that 
captures material lending and deposit-taking activity, irrespective of 
registrant type? Should we consider a broader standard that would 
capture material lending or deposit-taking activity? What other 
activities could serve as the basis for such a standard? What 
additional types of registrants would be captured by an activity-based 
standard?
    7. Are there registrants currently providing the Guide 3 
disclosures that would not provide disclosures based on the proposed 
scope? If so, what types of registrants and which of the disclosures 
would they no longer provide? Would this change result in the loss of 
information material to an investment decision related to those 
registrants?

[[Page 52940]]

C. Proposed Applicability to Domestic Registrants and Foreign 
Registrants

i. Background
    General Instruction 1 to Guide 3 states that the disclosures apply 
to the description of business portions of those registration 
statements and other specified filings for which financial statements 
are required. General Instruction 6 to Guide 3 indicates that the 
disclosures also apply to foreign registrants to the extent the 
information is available or can be compiled without unwarranted or 
undue burden and expense. Instructions to Item 4 of Form 20-F also 
indicate that the information specified in any industry guide that 
applies to the registrant should be furnished.\46\ The staff has 
observed that bank and savings and loan registrants that are foreign 
registrants, including foreign private issuers, typically provide the 
Guide 3 disclosures.
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    \46\ Form 40-F [17 CFR 249.240f] does not have a similar 
requirement, but the staff has observed that Canadian foreign 
private issuers that are financial institutions typically provide 
Guide 3 disclosures in their Form 40-F filings.
     Foreign private issuers are a subset of foreign registrants, 
and include any foreign issuer other than a foreign government, 
except for an issuer that has more than 50% of its outstanding 
voting securities held of record by U.S. residents and any of the 
following: A majority of its officers or directors are citizens or 
residents of the United States; more than 50% of its assets are 
located in the United States; or its business is principally 
administered in the United States. See Rule 405 of Regulation C [17 
CFR 230.405] and Exchange Act Rule 3b-4(c) [17 CFR 240.3b-4(c)].
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    In the Request for Comment, the Commission asked whether these 
foreign registrants should provide the Guide 3 disclosures, whether 
IFRS disclosures provide the same or similar information as those 
called for by Guide 3, whether there are concepts or disclosures in 
Guide 3 that are not recognized under or contradict IFRS, and whether 
the unwarranted or undue burden or expense accommodation for foreign 
registrants was still necessary.
ii. Comments on Applicability to Domestic Registrants and Foreign 
Registrants
    One commenter stated that Guide 3 should not apply to foreign 
banking registrants.\47\ This commenter, along with several other 
commenters,\48\ stated that foreign registrants face challenges in 
providing certain Guide 3 disclosures because they are based on U.S. 
GAAP or U.S. banking concepts that do not exist under IFRS.\49\ Some 
commenters stated that the disclosures called for by Guide 3 should be 
aligned with the measurement and disclosure principles in IFRS, or 
provide more flexibility in accommodating accounting differences 
between U.S. GAAP and IFRS.\50\ These commenters recommended, at a 
minimum, that foreign private issuers that apply IFRS be permitted to 
provide disclosures that address the objectives of the Guide 3 
disclosure in a manner consistent with IFRS principles.\51\
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    \47\ See letter from CH/SIFMA.
    \48\ See letters from CAQ; CBA; Deloitte; EY; KPMG; SMFG; and 
PwC.
    \49\ In 2008 the Commission began accepting financial statements 
of foreign private issuers prepared in accordance with IFRS as 
issued by the IASB without reconciliation to U.S. GAAP. See Item 
17(c) of Form 20-F and Acceptance from Foreign Private Issuers of 
Financial Statements Prepared in Accordance with International 
Financial Reporting Standards Without Reconciliation to U.S. GAAP, 
Release No. 33-8879 (Dec. 21, 2007) [73 FR 985].
    \50\ See letters from CAQ; CBA; EY; and KPMG.
    \51\ The commenters that opposed applying Guide 3 to foreign 
registrants also recommended this approach if foreign private 
issuers continue to be scoped into the disclosures. See letter from 
CH/SIFMA.
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    Two commenters addressed circumstances where information called for 
by Guide 3 is unavailable and cannot be compiled without unwarranted or 
undue burden or expense \52\ and recommended the staff continue to 
evaluate requests for disclosure accommodations.\53\ For example, one 
of these commenters stated that, in some situations, the staff has not 
objected to a foreign private issuer providing information that is 
different from what a domestic registrant would provide under Guide 3 
as long as it achieves the same objective as the information called for 
by Guide 3.\54\ Another commenter stated that corresponding home 
country standards provide adequate protection to investors, and noted 
that the act of converting existing financial reporting systems into 
systems that would generate the information to provide the exact 
disclosures called for by Guide 3 would result in significant 
costs.\55\
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    \52\ General Instruction 6 to Guide 3 states that it should be 
brought to the staff's attention if Guide 3 information is 
unavailable to foreign registrants and cannot be compiled without 
undue burden or expense. The instruction further states that in 
evaluating the reasonableness of assertions by registrants that the 
compilation of requested information, such as historical data or 
daily averages, would involve an unwarranted or undue burden or 
expense, the staff takes into consideration, among other factors, 
the size of the registrant, the estimated costs of compiling the 
data, the electronic data processing capacity of the registrant, and 
efforts in process to obtain the information in future periods.
    \53\ See letters from SMFG and PwC.
    \54\ See letter from PwC.
    \55\ See letter from SMFG.
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iii. Proposed Rule--Applicability to Domestic Registrants and Foreign 
Registrants
    Our proposed rules would apply to both domestic registrants and 
foreign registrants. We recognize that there are significant 
differences between U.S. GAAP and IFRS in some of the items called for 
by Guide 3, such as the measurement of credit losses and disclosures of 
financial instruments, among other areas.\56\ As a result, the proposed 
rules would provide flexibility in identifying specific categories and 
classes of instruments that should be disclosed. In several instances, 
the proposed rules specifically link the disclosure requirements to the 
categories or classes of financial instruments disclosed in the 
registrant's U.S. GAAP or IFRS financial statements. Furthermore, the 
proposed rules explicitly exempt foreign private issuers applying IFRS 
(``IFRS registrants'') from certain of the disclosure requirements that 
are not applicable under IFRS.\57\ We believe these elements of the 
proposed rules substantially address the challenges foreign registrants 
may face in providing the required disclosures. We do not believe this 
flexibility for IFRS registrants will significantly change the level of 
information disclosed by these registrants because Guide 3 currently 
provides latitude in the categories used for certain of its disclosures 
and IFRS registrants generally do not provide Guide 3 disclosures that 
are not applicable under IFRS.
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    \56\ For example, currently under U.S. GAAP (ASC 310-10-35-4), 
impairment on a loan is recognized when it is probable that a loss 
has been incurred, while IFRS 9, effective January 1, 2018 for 
calendar year companies, requires a 12-month expected credit loss 
measurement unless there has been a significant increase in credit 
risk, in which case it is a lifetime expected credit loss 
measurement. Differences will continue to exist for credit loss 
measurement between U.S. GAAP and IFRS subsequent to the adoption of 
Accounting Standards Update (``ASU'') 2016-13- Financial 
Instruments--Credit Losses (Topic 326) (``New Credit Loss 
Standard''). When effective, the New Credit Loss Standard will 
replace the current U.S. GAAP incurred loss methodology with a 
methodology that reflects expected credit losses over the entire 
contractual terms of the financial instruments. This differs from 
the 12-month expected credit loss measurement methodology that may 
be applicable in IFRS 9. Additionally, U.S. GAAP has recognition and 
disclosure requirements related to troubled debt restructurings 
(TDRs) (ASC 310-40) and nonaccrual loans (ASC 310-10-50-6), but 
neither of these concepts exists in IFRS.
    \57\ For example, there is not a concept of nonaccrual loans in 
IFRS.
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    All registrants, not just foreign registrants, can avail themselves 
of relief from providing information that is ``unknown and not 
reasonably available to the registrant'' under 17 CFR 230.409 
(``Securities Act Rule 409'') and 17 CFR 240.12b-21 (``Exchange Act 
Rule 12b-21'').\58\ These rules also consider

[[Page 52941]]

whether obtaining the information would involve ``unreasonable effort 
or expense,'' which we believe is similar to the ``unwarranted or undue 
burden or expense'' threshold described in General Instruction 6 to 
Guide 3. Given that the proposed rules do not change the availability 
of Securities Act Rule 409 and Exchange Act Rule 12b-21 to foreign 
registrants, and because we believe the purpose of the thresholds 
overlap, we propose not to codify the Guide 3 accommodation for undue 
burden or expense.\59\
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    \58\ Securities Act Rule 409 and Exchange Act Rule 12b-21 state 
that information required need be given only insofar as it is known 
or reasonably available to the registrant. If any required 
information is unknown and not reasonably available to the 
registrant, either because the obtaining thereof would involve 
unreasonable effort or expense, or because it rests peculiarly 
within the knowledge of another person not affiliated with the 
registrant, the information may be omitted. The rule provides two 
additional conditions. The first is that the registrant must give 
such information on the subject that it possesses or can acquire 
without unreasonable effort or expense, together with the sources of 
that information. The second is that the registrant must include a 
statement either showing that unreasonable effort or expense would 
be involved or indicating the absence of any affiliation with the 
person within whose knowledge the information rests and stating the 
result of a request made to such person for the information.
    \59\ See supra note 52.
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    Request for Comment:
    8. Should foreign registrants be subject to the proposed rules?
    9. Should we, as proposed, not codify the Guide 3 accommodation for 
undue burden or expense? For which aspects of the proposed rules would 
foreign registrants need to rely on this accommodation that would not 
be covered by Securities Act Rule 409 and Exchange Act Rule 12b-21? 
Would foreign registrants still seek to discuss an accommodation or 
alternative presentation with the staff if this provision is not 
codified?
    10. Are there particular challenges or costs that foreign 
registrants would face in complying with the proposed rules as compared 
to domestic registrants? If so, what are those challenges or costs and 
are there ways the proposed rules could be modified to help alleviate 
those challenges and costs?
    11. Would IFRS registrants face any different or additional 
challenges in complying with the proposed rules relative to other 
foreign private issuers applying a different comprehensive basis of 
accounting along with an U.S. GAAP reconciliation? If so, what 
challenges would they face and why? Are there other proposed disclosure 
requirements that we should explicitly state do not apply to IFRS 
registrants? If so, which ones?
    12. Would there be a reduction in material information being 
disclosed due to the proposed flexibility for IFRS registrants, that 
is, reference to IFRS categories and exemption from disclosures that 
are not applicable under IFRS? Would the proposed flexibility for IFRS 
registrants impact the material information needed to make investment 
decisions and comparability of that information?

D. Reporting Periods

i. Background
    Guide 3 currently calls for five years of Loan Portfolio and 
Summary of Loan Loss Experience data and three years of all other 
information. However, Guide 3 states that registrants with less than 
$200 million of assets or $10 million of net worth \60\ may present 
only two years of the information. In addition, Guide 3 calls for 
interim period disclosures when there is a material change in the 
information presented or when a new trend has become evident.\61\ At 
the time Guide 3 was issued, only two years of financial statements 
were required as the current three year requirement was adopted in 
1980.\62\ Commenters of the Guide 3 Release stated that five years of 
historical information would be ``extremely difficult to obtain in some 
cases, especially where detailed breakdowns of certain assets or 
reserves are requested.'' \63\ Therefore, the Guide 3 Release also 
stated that historical information need not be provided if it's not 
presently available and cannot be compiled without unwarranted or undue 
burden or expense.
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    \60\ Net worth is the amount by which assets exceeds liabilities 
and thus represents the total stockholders' equity of a registrant.
    \61\ In practice, registrants that provide Guide 3 disclosures 
generally provide interim disclosures.
    \62\ Amendments to Annual Report Form, Related Forms, Rules, 
Regulations, and Guides; Integration of Securities Act Disclosure 
Systems, Release No. 33-6231 (Sept. 25, 1980) [45 FR 63630].
    \63\ See supra note 3.
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether the 
reporting periods called for by Guide 3 should be modified, and if so, 
how; whether the reporting periods should match Regulation S-X 
requirements for financial statements and scaled disclosure 
requirements for smaller reporting companies (``SRCs'') \64\ and 
emerging growth companies (``EGCs''); \65\ and whether the reporting 
periods should explicitly include interim periods.
---------------------------------------------------------------------------

    \64\ An SRC is a registrant that had a public float of less than 
$250 million as of the last business day of its most recently 
completed second fiscal quarter, or had annual revenues of less than 
$100 million during its most recently completed fiscal year and no 
public float or a public float of less than $700 million. See Rule 
405 of Regulation C, Rule 12b-2 of the Exchange Act [17 CFR 240.12b-
2], and Item 10(f) of Regulation S-K [17 CFR 229.10(f)].
    \65\ An EGC is a registrant with less than $1.07 billion in 
total annual gross revenues during its most recently completed 
fiscal year. If a registrant qualifies as an EGC on the first day of 
its fiscal year, it maintains that status until the earliest of: (1) 
The last day of the fiscal year of the registrant during which it 
has total annual gross revenues of $1.07 billion or more; (2) the 
last day of its fiscal year following the fifth anniversary of the 
first sale of its common equity securities pursuant to an effective 
registration statement; (3) the date on which the registrant has, 
during the previous 3-year period, issued more than $1.07 billion in 
non-convertible debt; or (4) the date on which the registrant is 
deemed to be a ``large accelerated filer'' (as defined in Exchange 
Act Rule 12b-2). See Rule 405 of Regulation C under the Securities 
Act and Rule 12b-2 of the Exchange Act.
---------------------------------------------------------------------------

ii. Comments on Reporting Periods
    Many commenters recommended reducing the Guide 3 reporting 
periods.\66\ Most of these commenters recommended using the reporting 
periods for which financial statements are required.\67\ A number of 
these commenters recommended reducing the reporting periods for certain 
types of registrants,\68\ including those that provide scaled 
disclosures under Commission rules.\69\ Several other commenters 
recommended the Commission evaluate the relevance of reporting periods 
that go beyond the financial statement periods.\70\
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    \66\ See letters from ABA; AmEx; CBA; CH/SIFMA; Crowe; EY; ICBA; 
KPMG; and RSM.
    \67\ See letters from ABA; AmEx; CBA; CH/SIFMA; Crowe; EY; and 
KPMG.
    \68\ Commenters recommended reduced reporting periods for SRCs, 
EGCs, foreign private issuers and non-issuer targets in Form S-4 [17 
CFR 239.25] registration statements.
    \69\ See letters from ABA; AmEx; Crowe; EY; and RSM.
    \70\ See letters from BDO; CAQ; Deloitte; and PwC.
---------------------------------------------------------------------------

    One commenter suggested that interim period disclosures should only 
be called for when such disclosures are necessary to reflect material 
changes since the issuance of the annual financial statements,\71\ 
while several others \72\ called for no interim period disclosures.
---------------------------------------------------------------------------

    \71\ See letter from CH/SIFMA.
    \72\ See letters from ABA; AmEx; CAQ; and CBA.
---------------------------------------------------------------------------

iii. Proposed Rule--Reporting Periods
    We propose defining the term ``reported period'' for purposes of 
new Subpart 1400 of Regulation S-K to mean each annual period required 
by Commission rules for a registrant's financial statements. Our rules 
generally require two years of balance sheets and three years of income 
statements,\73\ except that SRCs may present only two years of income 
statements \74\ and EGCs may present only two years of financial 
statements in initial public offerings of common equity securities.\75\ 
However,

[[Page 52942]]

with respect to the disclosure of credit ratios, the disclosure would 
be required for each of the last five fiscal years in initial 
registration statements by new bank and savings and loan registrants 
and in offering statements by new bank and savings and loan issuers 
under Regulation A (``Regulation A offering statements''). But, as 
discussed further in Section II.H.iv, pursuant to Securities Act Rule 
409 and Exchange Act Rule 12b-21 the information would only be required 
insofar as it is known or reasonably available to the registrant.\76\
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    \73\ 17 CFR 210.3 (``Article 3 of Regulation S-X'').
    \74\ 17 CFR 210.8 (``Article 8 of Regulation S-X'').
    \75\ Securities Act Sec.  7(a)(2)(A), 15 U.S.C. 77g(a)(2)(A).
    \76\ See discussion of proposed credit ratios disclosure in 
Section II.H.iv.
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    We are proposing to reduce the required reporting periods to align 
them with the relevant annual periods required by Commission rules for 
a registrant's financial statements because we believe the proposed 
disclosures are integrally related to the financial statements. We also 
believe this change is consistent with other Commission rulemakings 
over the years.\77\ There have been changes in technology since Guide 3 
was issued, in particular the availability of past financial statements 
and other disclosure made in filings on the Commission's Electronic 
Data Gathering, Analysis, and Retrieval system (``EDGAR''). As such, 
the historical information that would be omitted from the proposed 
disclosures will generally be accessible through registrant's prior 
filings on EDGAR. Furthermore, the reduction of repetitive disclosures, 
reduction in costs and burdens to registrants and leveraging the use of 
technology is in line with the 2015 Fixing America's Surface 
Transportation Act (the ``FAST Act'') mandate \78\ and the related 
rulemaking.\79\
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    \77\ For example, the Commission in 1980 eliminated the five-
year Summary of Operations disclosure and adopted the Management's 
Discussion and Analysis (``MD&A'') disclosure requirement for the 
periods covered by the financial statements. See supra note 62.
    \78\ Public Law 114-94, Sec. 72003, 129 Stat. 1312 (2015).
    \79\ FAST Act Modernization and Simplification of Regulation S-
K. Release No. 33-10618 (Mar. 20, 2019) [84 FR 12674].
---------------------------------------------------------------------------

    In addition, we propose to slightly modify the current interim 
period instruction to clarify that the threshold to include an 
additional interim period is based on whether there is a material 
change in the information or the trend evidenced thereby, which is 
consistent with the existing wording in General Instruction 3 and with 
the discussion of the interim period disclosure threshold added to 
Guide 3 in the 1980 Guide 3 Release.\80\ The proposed rules would not 
codify the existing language in General Instruction 3(d) which states 
that any additional interim period should be included if necessary to 
keep the information from being misleading because we believe this 
standard is encompassed within the general disclosure requirement in 17 
CFR 230.408 (``Securities Act Rule 408'') and 17 CFR 240.12b-20 
(``Exchange Act Rule 12b-20'').\81\
---------------------------------------------------------------------------

    \80\ The 1980 Guide 3 Release reduced the frequency of interim 
period Guide 3 disclosures by amending the reported period 
definition to only call for information for a subsequent interim 
period ``if a material change in the information presented or the 
trend evidenced thereby has occurred.'' See 1980 Guide 3 Release, 
supra note 8.
    \81\ Securities Act Rule 408 and Exchange Act Rule 12b-20 
require disclosure of material information that may be necessary to 
make the required statements, in light of the circumstances under 
which they are made, not misleading.
---------------------------------------------------------------------------

    Request for Comment:
    13. Would the proposed reporting periods provide the number of 
years of information an investor needs to analyze and comprehend 
changes in trends? If not, what additional information would be 
material for purposes of this analysis?
    14. Would the proposed change in reporting periods result in a loss 
of information material to an investment decision? If so, please 
explain how.
    15. Should the proposed rules require interim period disclosures 
even if there is not a material change in the information or a trend 
that has become evident? If so, why?
    16. Should we, as proposed, require five years of Credit Ratio 
disclosures in initial registration statements or initial Regulation A 
offering statements of bank and savings and loan registrants or should 
we align the number of required years to those in other Commission 
rules? Would a requirement to provide five years of Credit Ratio 
disclosure impose undue burdens on registrants considering an initial 
registration statement or initial Regulation A offering statement? 
Should initial registration statements and initial Regulation A 
offering statements include additional reporting period information for 
any of the other proposed disclosures? If so, which ones, and for which 
reporting periods?

E. Distribution of Assets, Liabilities and Stockholders' Equity; 
Interest Rate and Interest Differential (Average Balance, Interest and 
Yield/Rate Analysis and Rate/Volume Analysis)

i. Background
    For registrants with material net interest earnings, like bank and 
savings and loan registrants, future earnings depend significantly on 
present and future economic conditions, as changes in interest rates 
can have a significant impact on these registrants' performance. As 
such, investors and other users of registrant disclosures would benefit 
from understanding the components of net interest earnings in order to 
evaluate the impact of potential changes in interest rates on future 
income of these registrants.
    Average balance sheets provide investors with an indication of the 
balance sheet items that have been, and have the potential to be, most 
affected by changes in interest rates as well as an indication of a 
registrant's ability to move into or out of positions with favorable or 
unfavorable risk/return characteristics.\82\ For example, an average 
balance sheet may provide an indication of whether a registrant is 
asset-sensitive or liability-sensitive.\83\ Liability-sensitive 
registrants that rely heavily on short-term and other rate-sensitive 
funding sources may experience significant increases in future funding 
costs in a rising interest rate environment. Such registrants may be 
unable to offset an increase in funding costs with a higher yield on 
assets, which could result in an adverse impact on net interest 
earnings.
---------------------------------------------------------------------------

    \82\ See Guide 3 Release, supra note 3.
    \83\ A registrant is asset sensitive when the impact of the 
change in its assets is larger than the impact of the change in its 
liabilities after a change in prevailing interest rates. An asset-
sensitive registrant's earnings or net income increases when 
prevailing rates rise and declines when prevailing rates fall. A 
liability-sensitive registrant has a long-term asset maturity and 
repricing structure, relative to a shorter-term liability structure. 
For example, liability-sensitive registrants may have significant 
exposure to longer-term mortgage-related assets that reprice slowly 
while relying heavily on rate-sensitive funding sources that reprice 
more quickly.
---------------------------------------------------------------------------

    Item I.A of Guide 3 calls for balance sheets that show the average 
daily balances \84\ of significant categories of assets and 
liabilities, including all major categories of interest-earning assets 
and interest-bearing liabilities.\85\ Item I.B of Guide 3 calls for the 
disclosure of:
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    \84\ Guide 3 indicates that if the collection of data on a daily 
average basis would involve unwarranted or undue burden or expense, 
weekly or month end averages may be used, provided they are 
representative of the operations of the registrant. The basis used 
for presenting averages should be disclosed when not presented on a 
daily average basis.
    \85\ Item I.A of Guide 3 indicates that major categories of 
interest-earning assets should include loans, taxable investment 
securities, non-taxable investment securities, interest-bearing 
deposits in other banks, federal funds sold and securities purchased 
with agreements to resell, other short-term investments and other 
assets. Major categories of interest-bearing liabilities should 
include savings deposits, other time deposits, short-term debt, 
long-term debt and other liabilities.
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     Interest earned or paid \86\ on the average amount of each 
major category

[[Page 52943]]

of interest-earning asset and interest-bearing liability;
---------------------------------------------------------------------------

    \86\ The interest earned and interest paid reported on the 
average balance sheet is based on the amounts reported in the 
audited financial statements. Under U.S. GAAP and IFRS, reported 
interest expense may differ from the cash paid for interest during 
the period.
---------------------------------------------------------------------------

     Average yield for each major category of interest-earning 
asset;
     Average rate paid for each major category of interest-
bearing liability;
     Average yield on all interest-earning assets;
     Average effective rate paid on all interest-bearing 
liabilities; and
     Net yield on interest-earning assets.\87\
---------------------------------------------------------------------------

    \87\ Net yield is net interest earnings divided by total 
interest-earning assets, with net interest earnings equaling the 
difference between total interest earned and total interest paid.
---------------------------------------------------------------------------

    Item I.C of Guide 3 calls for a rate and volume analysis of 
interest income and interest expense for the last two fiscal years. 
This analysis is segregated by each major category of interest-earning 
asset and interest-bearing liability into amounts attributable to:
     Changes in volume (changes in volume multiplied by the old 
rate);
     Changes in rates (changes in rates multiplied by the old 
volume); and
     Changes in rates and volume (changes in rates multiplied 
by changes in volume).
    Lastly, Instruction 5 to Item I states that if disclosure regarding 
foreign activities is required pursuant to General Instruction 7 of 
Guide 3,\88\ the information required by paragraphs A, B and C of Item 
I should be further segregated between domestic and foreign activities 
for each significant category of assets and liabilities disclosed 
pursuant to Item I.A, as well as disclosure of the percentage of total 
assets and total liabilities attributable to foreign activities.
---------------------------------------------------------------------------

    \88\ Instruction 7 of Guide 3 clarifies that foreign data need 
not be presented if the registrant is not required to make separate 
disclosures concerning its foreign activities pursuant to the test 
set forth in Rule 9-05 of Regulation S-X [17 CFR 210.9-05]. Rule 9-
05 requires disclosure when foreign activities, which include loans 
and other revenue producing assets, exceed 10% of (1) assets, (2) 
revenue, (3) income (loss) before income tax expense, or (4) net 
income (loss).
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether the 
existing disclosures called for by Guide 3 provide investors with 
information material to an investment decision and whether the 
disclosures would otherwise overlap with information required by 
Commission rules, U.S. GAAP or IFRS.
ii. Comments on Distribution of Assets, Liabilities and Stockholders' 
Equity; Interest Rate and Interest Differential (Average Balance, 
Interest and Yield/Rate Analysis and Rate/Volume Analysis)
    Many commenters stated that the existing distribution of ``assets, 
liabilities and stockholders' equity; interest rate and interest 
differential'' disclosures called for by Item I of Guide 3 may be of 
value to investors and others.\89\ Most of these commenters indicated 
that Item I does not overlap in its entirety with Commission rules or 
U.S. GAAP.\90\ However, one commenter stated that the presentation of 
the change in interest income and expense called for by Item I.C is 
duplicative of disclosures in MD&A and that the rate/volume analysis is 
not representative of how financial institutions currently manage 
interest rate risk and, thus, should be eliminated.\91\ Several 
commenters stated that the disclosures called for by Items I.A and I.B 
of Guide 3 are not specifically required by IFRS unless the period-end 
balances are not representative of activity during the period,\92\ and 
indicated that the disclosures called for by Item I.C are unique to 
Guide 3.\93\
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    \89\ See letters from ABA; AmEx; CAQ; CH/SIFMA; Crowe; Deloitte; 
EY; KPMG; PNC; PwC; and RSM.
    \90\ See letters from ABA; AmEx; CAQ; Crowe; Deloitte; EY; KPMG; 
PNC; PwC; and RSM.
    \91\ See letter from CH/SIFMA.
    \92\ IFRS 7.35, IFRS 7.BC48 and IFRS 7.IG20 require this 
additional disclosure if period-end information is unrepresentative 
of a registrant's exposure during the period.
    \93\ See letters CAQ; EY; KPMG; and PwC.
---------------------------------------------------------------------------

iii. Proposed Rule--Distribution of Assets, Liabilities and 
Stockholders' Equity; Interest Rate and Interest Differential (Average 
Balance, Interest and Yield/Rate Analysis and Rate/Volume Analysis)
    Proposed Item 1402 of Regulation S-K would codify all of the 
disclosures currently called for by Item I of Guide 3 and further 
disaggregate the categories of interest-earning assets and interest-
bearing liabilities required for disclosure. The new categories of 
interest-earning assets represent the separation of federal funds \94\ 
sold and securities purchased with agreements to resell. The new 
categories of interest-bearing liabilities represent the separation of 
federal funds purchased and securities sold under agreements to 
repurchase,\95\ and the disclosure of commercial paper.\96\ We believe 
these more disaggregated categories would provide investors with 
further detail of the drivers of the changes in net interest earnings 
and the sources of funding.\97\ Furthermore, the proposed rules would 
also codify the instructions related to foreign activities contained in 
General Instruction 7 and Instruction 5 of Item I of Guide 3. We 
believe the distinction between foreign and domestic activities 
continues to provide relevant information regarding registrants' 
activities and can provide insight into drivers of changes in business 
focus as well as factors driving material changes in interest-earning 
assets and interest-bearing liabilities, and the related interest 
rates.
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    \94\ The federal funds rate is the interest rate that banks 
charge one another for borrowing funds overnight. Federal funds are 
excess funds that banks deposit with the Federal Reserve Bank for 
lending to other banks.
    \95\ ASC 860-10 defines a repurchase agreement as an arrangement 
under which a transferor (repo party) transfers a security to a 
transferee (repo counterparty or reverse party) in exchange for cash 
and concurrently agrees to reacquire the security at a future date 
for an amount equal to the cash exchanged plus a stipulated interest 
factor.
    \96\ Commercial paper consists of short-term promissory notes 
issued primarily by corporations. Maturities range up to 270 days 
but average about 30 days.
    \97\ Item VII of Guide 3 currently call for disclosures related 
to short-term borrowings and requires disclosure for (1) Federal 
funds purchased and securities sold under agreements to repurchase; 
(2) commercial paper; and (3) other short-term borrowings, to the 
extent the average balance of those categories meet or exceed 30 
percent of stockholders' equity at the end of the period. As 
discussed in Section III.B below, we are proposing not to codify all 
of those disclosures. However, given that the proposed Item 1402 of 
Regulation S-K would require disaggregated disclosure for federal 
funds purchased, securities sold under agreements to repurchase, and 
commercial paper, including the average amount outstanding and the 
average effective rate paid on these liabilities, the proposed rule 
effectively would codify the disclosure currently called for by Item 
VII.3. We believe the average outstanding balance and yield of these 
short-term borrowing categories could be material for investors.
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    While some bank and savings and loan registrants manage interest 
rate risk using more complex models or systems than a rates and volume 
analysis, we believe this disclosure nevertheless provides material and 
comparable information to investors about the drivers of the changes in 
net interest earnings across registrants in a simple format. 
Furthermore, we do not believe that all bank and savings and loan 
registrants would provide these disclosures, in the same format and 
level of detail, under the existing principles-based MD&A \98\ 
requirements to discuss whether material increases in net sales \99\ 
are due to increases in

[[Page 52944]]

prices,\100\ or increases in volume,\101\ or due to the introduction of 
new products or services. We believe the proposed level of detail for 
these disclosures strikes a balance between providing sufficient 
information to help investors understand the changes in interest 
earning income and expense from period to period, and excessive amount 
of information that could make it difficult to understand the material 
drivers. We are therefore proposing to codify these disclosures.
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    \98\ See Item 303(a)(3)(iii) of Regulation S-K.
    \99\ For registrants preparing their income statement in 
accordance with Rule 9-04 of Regulation S-X, the closest equivalent 
to net sales is net interest income. Net interest income represents 
interest revenue less interest expense. Net interest income is 
typically the primary component of sales revenue for financial 
institutions.
    \100\ For registrants preparing their income statement in 
accordance with Rule 9-04 of Regulation S-X, the closest equivalent 
to increases in prices is increases in interest rates.
    \101\ For registrants preparing their income statement in 
accordance with Rule 9-04 of Regulation S-X, the closest equivalent 
to increases in volume is increases in net interest earning assets 
such as securities or loans.
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    Request for Comment:
    17. Should we codify, as proposed, all of the disclosures currently 
called for by Item I of Guide 3? If not, which disclosures should not 
be codified?
    18. Should we codify, as proposed, the rate and volume analysis 
called for by Item I.C?
    19. Are the additional categories of interest-earning assets and 
interest-bearing liabilities proposed for disclosure appropriate? Are 
there other categories for which disclosure should be required?
    20. Should we codify, as proposed, General Instruction 7 of Guide 3 
and General Instruction 5 of Item I regarding disclosure of foreign 
activities? Is the threshold for disclosure of foreign activities 
appropriate? If not, how should it be revised?

F. Investment Portfolio

i. Background
    The investment portfolio disclosures currently called for by Item 
II of Guide 3 provide investors with information about the types of 
investments a registrant holds, the earnings potential of those 
investments, and their risk characteristics. Item II.A of Guide 3 calls 
for disclosure of the book value \102\ of investments by specified 
categories \103\ as of the end of each reported period. Item II.B calls 
for a maturity analysis for each category of investment as of the end 
of the latest reported period, as well as the weighted average yield 
for each range of maturities.\104\ When the aggregate book value of 
securities from a single issuer exceeds 10% of stockholders' equity as 
of the end of the latest reported period, Item II.C calls for 
disclosure of the name of the issuer and the aggregate book value and 
aggregate market value of those securities.
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    \102\ At the time Guide 3 was issued, most securities were 
accounted for at cost with the exception of certain marketable 
securities, which were carried at the lower of aggregate cost or 
market value. The FASB issued FASB Statement No. 115, Accounting for 
Certain Investments in Debt and Equity Securities, an accounting 
standard creating three types of investment securities categories 
and the related accounting for each, in 1993.
    \103\ The specified categories are obligations of: (1) U.S. 
Treasury and other U.S. Government agencies and corporations; (2) 
States of the U.S and political subdivisions; and (3) other 
securities including bonds, notes, debentures and stock of business 
corporations, foreign governments and political subdivisions, 
intergovernmental agencies and the Federal Reserve Bank.
    \104\ The ranges of maturities are securities due (1) in one 
year or less, (2) between one and five years, (3) between five and 
ten years, and (4) after ten years.
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    Subsequent to the last substantive revisions to Guide 3, the FASB 
and IASB have issued accounting standards that require disclosures that 
are similar to many of the investment portfolio disclosures called for 
by Guide 3. For example, U.S. GAAP requires disclosure, by major 
security type,\105\ of the amortized cost basis, aggregate fair value 
and information about the contractual maturities \106\ as of the date 
of the most recent balance sheet presented, among other disclosures, 
for both held-to-maturity (``HTM'') and available-for-sale (``AFS'') 
debt securities, which overlaps with the disclosures called for by 
Items II.A and II.B.\107\ IFRS requires disclosure of the fair value 
and carrying value of each class \108\ of a registrant's financial 
instruments, but only requires a maturity analysis of financial 
instruments held for managing liquidity risk if necessary for users to 
evaluate the nature and extent of liquidity risk.\109\ Additionally, 
both U.S. GAAP \110\ and IFRS \111\ require disclosure of significant 
concentrations of credit risk, which we believe substantially overlaps 
with the disclosure called for by Item II.C related to the issuer name 
and aggregate book value and market value of securities exceeding 10% 
of stockholders equity. Neither U.S. GAAP nor IFRS requires disclosure 
of the weighted average yield information for each maturity category 
called for by Item II.B.
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    \105\ ASC 320-10-50-1B states that major security types should 
be based on the nature and risks of the security and that an entity 
should consider all of the following when considering whether 
disclosure for a particular security type is necessary: (a) Shared 
activity or business sector, (b) vintage, (c) geographic 
concentration, (d) credit quality, and (e) economic characteristics. 
Financial institutions, including banks, savings and loan 
associations, savings banks, credit unions, finance companies and 
insurance entities are required to include the nine securities 
categories listed in ASC 942-320-50-2, although additional types may 
also be necessary: (a) Equity securities, segregated by either (1) 
industry type or (2) registrant size, or (3) investment objective; 
(b) debt securities issued by U.S. Treasury and other U.S. 
government corporations and agencies; (c) debt securities issued by 
states of the United States and political subdivisions of the 
states; (d) debt securities issued by foreign governments; (e) 
corporate debt securities; (f) residential mortgage-backed 
securities; (g) commercial mortgage-backed securities; (h) 
collateralized debt obligations; and (i) other debt obligations.
    \106\ ASC 320-10-50-3 and ASC 320-10-50-5(f) both indicate that 
maturity information may be combined in appropriate groupings. Those 
paragraphs also both state that in complying with these 
requirements, financial institutions (see paragraph ASC 942-320-50-
1) shall disclose the fair value and net carrying amount (if 
different from fair value) of debt securities on the basis of at 
least the following four maturity groupings: (a) Within one year, 
(b) after one year through five years, (c) after five years through 
ten years, and (d) after ten years.
    \107\ ASC 320-10-50-2 and ASC 320-10-50-5.
    \108\ IFRS 7.6 requires disclosures by classes of financing 
instruments, which are defined as ``. . . classes that are 
appropriate to the nature of the information disclosed and that take 
into account the characteristics of those financial instruments.''
    \109\ IFRS 7.25 and IFRS 7.B11E.
    \110\ ASC 825-10-50-20 and 21 requires disclosure of significant 
concentrations of credit risk arising from all financial 
instruments, including information about the (shared) activity, 
region, or economic characteristic that identifies the 
concentration, the maximum amount of loss due to credit risk, that, 
based on the gross fair value of the financial instrument, the 
registrant would incur if the parties to the financial instruments 
that make up the concentration failed completely to perform 
according to the terms of the contracts and the collateral or other 
security, information related to any collateral and policies 
regarding master netting arrangements
    \111\ IFRS 7.34(a) requires disclosure of risks based on 
information provided internally to management and IFRS 7.34(c) 
requires disclosure of concentrations of risk if not apparent from 
the other disclosure requirements. IFRS 7.B8 states that disclosure 
of concentration of credit risk should include: (a) A description of 
how management determines concentrations, (b) a description of the 
shared characteristic that identifies each concentration (e.g. 
counterparty, geographical area, currency or market), and, (c) the 
amount of the risk exposure associated with all financial 
instruments sharing that characteristic.
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether the 
investment portfolio disclosures called for by Guide 3 provide 
information material to an investment decision and whether Commission 
rules, U.S. GAAP, or IFRS require the same or similar information.
ii. Comments on the Investment Portfolio
    Many commenters indicated that a substantial portion of the 
investment portfolio disclosures called for by Guide 3 overlap with 
Commission rules and U.S. GAAP.\112\ Most of these commenters stated 
that the overlap

[[Page 52945]]

should be eliminated,\113\ while one indicated, given the substantial 
overlap, that Guide 3 should be eliminated in its entirety.\114\
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    \112\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; 
Crowe; Deloitte; EY; KPMG; MFG; MUFG; PNC; and PwC.
    \113\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; 
Crowe; Deloitte; EY; KPMG; MUFG; and PwC.
    \114\ See letter from PNC.
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    Many commenters noted that the book value of investments 
disclosures called for by Item II.A of Guide 3 overlap with U.S. 
GAAP.\115\ Most of these commenters also stated that the maturity 
disclosure called for by Item II.B overlaps with U.S. GAAP.\116\ By 
contrast, most of these commenters indicated that the weighted average 
yield disclosure called for by Item II.B is not redundant with U.S. 
GAAP requirements.\117\ Two of these commenters further stated that the 
weighted average yield disclosure may be of value to investors and 
others.\118\ Regarding the disclosures called for by Item III.C 
relating to investments exceeding 10% of stockholders' equity, several 
commenters characterized this disclosure as unique to Guide 3.\119\ 
However, one commenter \120\ said the disclosure is largely duplicative 
of the U.S. GAAP significant concentrations of credit risk arising from 
financial instruments disclosures.\121\ Lastly, a few commenters noted 
that there is some overlap between the investment portfolio disclosures 
called for by Guide 3 and IFRS disclosure requirements, and stated that 
the overlap should be eliminated.\122\
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    \115\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; EY; 
KPMG; MFG; MUFG; PNC; and PwC.
    \116\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; EY; 
KPMG; MFG; PNC; and PwC.
    \117\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; EY; 
KPMG; PNC; and PwC.
    \118\ See letters from ABA and AmEx.
    \119\ See letters from CAQ; EY; KPMG; PNC; and PwC.
    \120\ See letter from CH/SIFMA.
    \121\ See supra note 110.
    \122\ See letters from CAQ; EY; KPMG; and PwC.
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iii. Proposed Rule--Investment Portfolio
    The proposed rules would not codify the following disclosures in 
Item II: (a) Book value information; (b) the maturity analysis of book 
value information; and (c) the disclosures related to investments 
exceeding 10% of stockholders' equity. We are proposing not to codify 
these disclosures because they substantially overlap with U.S. GAAP and 
IFRS disclosure requirements. Therefore, the proposed rules should not 
result in the loss of information material to an investment decision. 
We also note that this proposal is generally consistent with the 
Commission's recent efforts to streamline its disclosure requirements 
when they overlap with reasonably similar U.S. GAAP or IFRS disclosure 
requirements.\123\
---------------------------------------------------------------------------

    \123\ See Disclosure Update and Simplification, Release No. 33-
10532 (Aug. 17, 2018) [83 FR 50148].
---------------------------------------------------------------------------

    Proposed Item 1403 of Regulation S-K would codify the weighted 
average yield disclosure for each range of maturities by category of 
debt securities currently called for by Item II.B, with a change to the 
categories presented. Specifically, the categories of debt securities 
in the proposed rules would be the categories required to be disclosed 
in the registrant's U.S. GAAP \124\ or IFRS \125\ financial statements. 
The proposed rules would only apply to debt securities that are not 
carried at fair value through earnings. Guide 3 calls for disclosures 
about both debt and equity securities and does not specifically exclude 
debt securities that are carried at fair value through earnings.\126\ 
We believe this change is appropriate given that maturity and yield 
disclosures are not applicable to equity securities. Furthermore, we 
believe the weighted average yield disclosure is most relevant for debt 
securities that are not carried at fair value through earnings because 
these debt securities are often held longer than debt securities 
carried at fair value through the income statement (such as trading 
securities),\127\ and thus the weighted average yield and maturity 
information would appear to be more meaningful for these 
securities.\128\ We believe the proposed weighted average yield 
disclosure does not overlap with U.S. GAAP or IFRS requirements and 
provides investors with information to better evaluate the performance 
of the portfolio. Furthermore, revising the categories of debt 
securities to conform to the categories presented in accordance with 
U.S. GAAP or IFRS would enhance the consistency of the investment 
disclosures in a registrant's filing and increase their usefulness to 
investors. This also would ease the preparation burden on registrants 
because they would no longer have to present separate or additional 
categories between the Guide 3 disclosures and the financial 
statements.
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    \124\ See supra note 105.
    \125\ See supra note 108.
    \126\ Guide 3 was last amended in 1986 and at that time, most 
investment securities were accounted for at cost, except for certain 
marketable securities. As such, the Guide 3 investment disclosures 
were applicable to most investment securities and thus it was 
unnecessary to limit the disclosure by type or accounting model of 
investment. SFAS 115 ``Accounting for Certain Investments and Debt 
and Equity Securities'' was issued 1993 and created three categories 
of investment securities: HTM, AFS, and trading securities. These 
same categories exist in U.S. GAAP today (ASC 320-10-25-1). Of these 
categories, only trading securities are carried at fair value 
through earnings and thus would not be subject to the proposed rule. 
However, debt securities classified as HTM and AFS would be subject 
to the proposed rule. Additionally, U.S. GAAP (ASC 825-10-15-4) 
allows registrants to elect to measure certain eligible items, e.g., 
investment securities, at fair value, with changes in fair value 
recognized through earnings. Thus, where a registrant made this 
election to measure debt securities at fair value through earnings, 
those debt securities would also not be subject to the proposed 
rule. For IFRS registrants, only debt securities that are 
subsequently measured at amortized cost, or fair value through other 
comprehensive income, would be subject to the proposed rule.
    \127\ ASC 320-10-25-1(a) states that if a security is acquired 
with the intent of selling it within hours or days, the security 
shall be classified as trading. However, at acquisition, an entity 
is not precluded from classifying as trading a security it plans to 
hold for a longer period.
    \128\ ASC 320-10-50 only requires information about the 
contractual maturities of securities that are classified as either 
HTM or AFS, and does not require similar disclosure for securities 
classified as trading.
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    Request for Comment:
    21. The proposed rules would not codify the investment portfolio 
book value disclosures currently called for by Item II.A. Would this 
result in the loss of information material to an investment decision 
not readily available elsewhere in Commission filings? If so, what 
material information would be lost and how should we codify it?
    22. The proposed rules would not codify the maturity analysis of 
book value disclosures called for by Item II.B, but would codify the 
weighted average yield for each range of maturities. Would this result 
in the loss of information material to an investment decision not 
readily available elsewhere in Commission filings? Would the more 
principles-based IFRS maturity disclosure \129\ result in the loss of 
material information about IFRS registrants, or would IFRS registrants 
within the scope of the proposed rules continue to provide the maturity 
analysis for debt securities absent a specific requirement? Are there 
additional disclosures related to a maturity analysis that we should 
codify to avoid the potential loss of information material to an 
investment decision?
---------------------------------------------------------------------------

    \129\ IFRS 7.B11E requires a maturity analysis of financial 
instruments that registrants hold for managing liquidity risk if 
necessary for users to evaluate the nature and extent of liquidity 
risk; whereas U.S. GAAP requires contractual maturities disclosure 
for HTM and AFS debt securities without an ``if necessary'' concept.
---------------------------------------------------------------------------

    23. Should we codify, as proposed, the weighted average yield 
disclosure for each range of maturities in Item II.B of Guide 3 for 
debt securities not carried at fair value through earnings? Should the 
proposed rules also require this disclosure for debt securities carried 
at

[[Page 52946]]

fair value through earnings, including trading securities or debt 
securities where the fair value option is elected? If so, how would 
this information be used by investors?
    24. The proposed weighted average yield disclosure would only apply 
to debt securities. Should this proposed rule require disclosures 
related to equity securities? If so, what additional disclosures should 
be required? Would this information be available without undue cost or 
burden?
    25. Should the categories for the weighted average yield disclosure 
in the proposed rules be conformed to those presented in the U.S. GAAP 
or IFRS financial statements as proposed? Given that U.S. GAAP and IFRS 
do not require the same categories to be disclosed,\130\ would the lack 
of standardization of the categories disclosed among registrants result 
in confusion for investors? If so, how should we revise the proposed 
rules to avoid such confusion? For example, should we codify the Guide 
3 investment categories?
---------------------------------------------------------------------------

    \130\ U.S. GAAP and IFRS have a principles-based approach for 
determining the categories of investments to be disclosed. See supra 
notes 105 and 108. Thus, both U.S. GAAP and IFRS registrants will 
make judgments about the categories to be disclosed and there likely 
will not be consistency amongst all registrants.
---------------------------------------------------------------------------

    26. The proposed rules would not codify disclosure of the name of 
any issuer and aggregate book value and market value of the securities 
of such issuer that exceeds 10% of stockholders' equity as called for 
in Item II.C of Guide 3. Would this result in the loss of information 
material to an investment decision in light of the fact that U.S. GAAP 
\131\ and IFRS \132\ require reasonably similar disclosure about 
significant concentrations of credit risk? Would the ``significant'' 
threshold in U.S. GAAP and IFRS likely result in the same or nearly the 
same population of securities being disclosed as the current 10% 
bright-line threshold in Item II.C. of Guide 3?
---------------------------------------------------------------------------

    \131\ See supra note 110.
    \132\ See supra note 111.
---------------------------------------------------------------------------

    27. Is there additional information material to an investment 
decision related to investment securities that should be disclosed? If 
so, what information should be disclosed and how would this information 
be used by investors? Would there be a significant cost or burden to 
registrants in providing this additional information?

G. Loan Portfolio

i. Background
    A registrant's loan portfolio may consist of various categories of 
loans, including consumer loans, such as residential real estate, 
credit card and auto loans, as well as commercial loans, such as 
commercial real estate, lease financings, and wholesale loans. Loan 
portfolio compositions differ considerably among registrants because 
lending activities are influenced by many factors, including the type 
of organization, management's objectives and philosophies about 
diversification and credit risk management, the availability of funds, 
credit demands, interest rate margins and regulations, among others. 
Different types of loans have different characteristics. For example, 
commercial loans tend to have shorter maturities than residential real 
estate loans and are more likely to have balloon payments at maturity. 
Further, the composition of a registrant's loan portfolio may vary 
substantially over time due to factors such as changes in regulation or 
management strategy. For example, if management expects interest rates 
to rise, it may seek to increase the registrant's holdings of variable-
rate mortgages.
    The loan portfolio disclosures in Item III of Guide 3 provide 
investors with information about the registrant's loan investment 
policies and lending practices, including: (1) The types of lending in 
which a registrant engages; (2) the nature of credit risk inherent in 
the loan portfolio, including types of loans and portfolio maturity; 
(3) indications of loan collectibility risks; and (4) portfolio 
concentrations.
    Item III.A of Guide 3 calls for disclosure of the amount of loans 
in specified categories \133\ as of the end of each period. Item III.B 
calls for a maturity analysis \134\ for each category of loans as of 
the end of the latest reported period, along with a separate 
presentation of all loans due after one year with fixed interest rates 
versus those with floating or adjustable interest rates.\135\ Item 
III.C.1 calls for disclosure of the aggregate amount of domestic and 
foreign \136\ loans in each of the following categories:
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    \133\ The specified categories are, for domestic loans: (1) 
Commercial, financial and agricultural, (2) real estate--
construction, (3) real estate--mortgage, (4) installment loans to 
individuals, and (5) lease financing, and for foreign loans: (6) 
governments and official institutions, (7) banks and other financial 
institutions, (8) commercial and industrial, and (9) other. The 
instructions to Item III.A indicate that registrants may present a 
series of loan categories other than those specified if considered a 
more appropriate presentation.
    \134\ The range of maturities are loans due (1) in one year or 
less, (2) between one and five years, (3) between five and ten 
years, and (4) after ten years. This information need not be 
presented for mortgage real estate loans, installment loans to 
individuals and lease financing. Foreign loan categories may be 
aggregated.
    \135\ Instruction 3 to Item III.B states that determinations 
should be based upon contract terms. However, such terms may vary 
due to the registrant's ``rollover policy,'' in which case the 
maturity should be revised as appropriate and the rollover policy 
should be briefly discussed.
    \136\ See supra note 88.
---------------------------------------------------------------------------

     loans accounted for on a nonaccrual basis; \137\
---------------------------------------------------------------------------

    \137\ The term ``nonaccrual'' is not defined in U.S. GAAP or 
Commission rules. U.S. banking agencies require their regulated 
financial institutions to file publicly available Consolidated 
Reports of Condition and Income (Call Reports). Call Report 
instructions generally require an asset to be reported as nonaccrual 
if: (1) It is maintained on a cash basis because of deterioration in 
the financial condition of the borrower, (2) payment in full of 
principal or interest is not expected, or (3) principal or interest 
has been in default for a period of 90 days or more unless the asset 
is both well secured and in the process of collection. Certain 
loans, such as consumer loans and purchased credit-impaired loans, 
are not placed on nonaccrual status as discussed in the nonaccrual 
definitions section of Call Report Schedule RC-N-2. Guide 3 also 
currently calls for and U.S. GAAP also requires disclosure of the 
registrant's nonaccrual policy.
---------------------------------------------------------------------------

     loans accruing but contractually past due 90 days or more 
as to principal or interest payments; and
     loans classified as troubled debt restructurings 
(``TDRs'') \138\ that are not otherwise disclosed as being on 
nonaccrual status or past due 90 days or more.\139\
---------------------------------------------------------------------------

    \138\ Under U.S. GAAP, a restructuring of a debt is 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. See ASC 310-40-15-5.
    \139\ Guide 3 originally called for disclosure of nonperforming 
loans and a discussion of the risk elements associated with those 
loans for which there were serious doubts as to the ability of the 
borrowers to comply with the present loan payment terms. The current 
Item III.C.1 disclosures reflect amendments made in 1980 and 1983 to 
promote consistency with bank regulatory disclosure requirements and 
comparability among registrants. See 1980 Guide 3 Release, supra 
note 8; and 1983 Guide 3 Releases, supra note 8.
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    Item III.C.2 calls for descriptions of the nature and extent of any 
potential problem loans \140\ at the end of the most recent reported 
period and the policy for placing loans on nonaccrual status. The 
instructions to Item III.C.2 call for disclosure of the foregone 
interest income and recognized interest income for nonaccrual loans and 
TDRs during the period.
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    \140\ Potential problem loans are loans not disclosed pursuant 
to Item III.C.1, except where known information about possible 
credit problems of borrowers (which are not related to transfer risk 
inherent in cross-border lending activities) causes management to 
have serious doubts as to the ability of the borrowers to comply 
with the present loan repayment terms and which may result in 
disclosure of the loans pursuant to Item III.C.1.
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    If material amounts of the loans described above are outstanding to 
borrowers in any foreign country, Guide 3 states that each country 
should be identified and that the amounts

[[Page 52947]]

outstanding should be quantified.\141\ Item III.C.3 calls for 
disclosure of the aggregate amount of cross-border outstandings \142\ 
to borrowers in each foreign country where they exceed 1% of total 
assets.\143\ These disclosures should be provided by category of 
foreign borrower specified by Item III.A. Where current conditions in a 
foreign country give rise to liquidity problems that are expected to 
have a material impact on the timely repayment of principal or interest 
on the country's private or public sector debt, Guide 3 calls for:
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    \141\ For purposes of determining the amount of outstandings to 
be reported, loans made to or deposits placed with a branch of a 
foreign bank located outside the foreign bank's home country should 
be considered as loans to or deposits with the foreign bank.
    \142\ Cross-border outstandings are defined as loans (including 
accrued interest), acceptances, interest-bearing deposits with other 
banks, other interest-bearing investments and any other monetary 
assets which are denominated in dollars or other nonlocal currency. 
The foreign outstandings disclosure was added in 1983 to consolidate 
all risk-related disclosure guidelines in one section of Guide 3 and 
to emphasize the risks present in cross-border lending activities. 
See 1983 Guide 3 Releases, supra note 8.
    \143\ For countries whose outstandings are between 0.75% and 1% 
of total assets, the names of the countries and the aggregate amount 
of outstandings attributable to them should be disclosed.
---------------------------------------------------------------------------

     A description of the nature and impact of the 
developments;
     An analysis of the changes in aggregate outstandings to 
borrowers in each country for the most recent reported period;
     Quantitative information about interest income and 
interest collected during the most recent period; and
     Quantitative information about any outstandings that may 
be subject to a restructuring.
    Item III.C.4 calls for disclosure as of the end of the most recent 
reported period of any concentration of loans exceeding 10% of total 
loans not otherwise disclosed as a category of loans pursuant to Item 
III.A.\144\ Item III.D calls for disclosure as of the end of the most 
recent reported period of the nature and amounts of any other interest-
bearing assets that would be disclosed under Item III.C.1 or III.C.2 if 
those assets were loans.
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    \144\ Loan concentrations are considered to exist when there are 
amounts loaned to multiple borrowers engaged in similar activities 
which would cause them to be similarly affected by economic or other 
conditions. For example, loans may be concentrated in a specific 
industry, such as the energy sector, and exceed the 10% threshold.
---------------------------------------------------------------------------

    Subsequent to the last substantive revisions to Guide 3, the FASB 
and IASB have issued accounting standards that have resulted in 
similar, and sometimes overlapping, loan disclosure. For example, U.S. 
GAAP requires major categories of loans to be presented separately 
either on the balance sheet or in the financial statement 
footnotes,\145\ similar to the disclosure called for by Item III.A of 
Guide 3. U.S. GAAP also requires disclosure, by class of financing 
receivable,\146\ of nearly all of the same information related to loans 
accounted for as nonaccrual and accruing loans contractually past due 
90 days or more, as specified by Item III.C.1(a) and (b) and Item 
III.C.3 of Guide 3.\147\ There are two main differences between the 
disclosures called for by the Instructions to Item III.C.1 and U.S. 
GAAP. The first is that U.S. GAAP does not require disclosure of the 
amount of gross interest income that would have been recorded during 
the period for the loans classified as nonaccrual or TDRs if they had 
been current in accordance with their original terms and had been 
outstanding throughout the period or since origination. The second 
difference is that U.S. GAAP does not explicitly require disclosure 
separately between domestic and foreign nonaccrual loans, accruing 
loans contractually past due 90 days or more and TDRs. Furthermore, 
U.S. GAAP requires information about TDRs, although there is a 
difference between the U.S. GAAP disclosures and those called for by 
Item III.C.1(c).\148\ Specifically, U.S. GAAP only requires disclosure 
of TDRs occurring during each period that an income statement is 
presented and does not provide a cumulative level of TDRs existing on 
the balance sheet, similar to the disclosure called for by Item 
III.C.1(c). However, U.S. GAAP requires additional TDR disclosures 
beyond those called for by Guide 3.\149\
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    \145\ ASC 310-10-45-2 and ASC 310-10-50-3.
    \146\ U.S. GAAP uses the term ``financing receivable,'' and a 
loan is considered a type of financing receivable. A class of 
financing receivable is defined as a group of financing receivables 
determined on the basis of all of the following: (a) Initial 
measurement attribute (for example, amortized cost), (b) risk 
characteristics of the financing receivable, and (c) a registrant's 
method for monitoring and assessing credit risk.
    \147\ ASC 310-10-50-6 requires disclosure of the policy for 
placing financing receivables on nonaccrual, as well as the policy 
for resuming accrual of interest. ASC 310-10-50-7 requires 
disclosure of nonaccrual loans and loans 90 days or more past due 
and still accruing by class of financing receivable. ASC 310-10-50-
7A requires disclosure of an analysis of the age of the recorded 
investment in financing receivables at the end of the reporting 
period that are past due, as determined by the entity's policy. ASC 
310-10-50-15 requires disclosure of impaired loans and of the 
related amount of interest income that was recognized during the 
time the loans were impaired.
    \148\ ASC 310-10-50-33 requires disclosure, by class of 
financing receivable, of quantitative and qualitative information 
about TDRs occurring during the period.
    \149\ ASC 310-10-50-33 requires disclosure, by class of 
financing receivable, of qualitative and quantitative information 
about how the financing receivables were modified, the financial 
effects of the modifications, and by portfolio segment, qualitative 
information about how such modifications were factored into the 
determination of the allowance for credit losses. ASC 310-10-50-34 
requires, by class of financing receivable, qualitative and 
quantitative information about TDRs that were modified within the 
previous 12 months and for which there was a payment default 
occurring during the period, including the types of financing 
receivables that defaulted, the amount of financing receivables that 
defaulted, and by portfolio segment, qualitative information about 
how such defaults are factored into the determination of the 
allowance for credit losses.
---------------------------------------------------------------------------

    In addition, while certain of the disclosures currently called for 
by Guide 3 are not completely duplicative of U.S. GAAP requirements, we 
believe that in certain cases U.S. GAAP requires reasonably similar 
disclosures. For example, while there is not a specific disclosure 
requirement in U.S. GAAP analogous to the potential problem loans 
disclosure called for by Item III.C.2, U.S. GAAP requires disclosure of 
credit quality indicators \150\ by class of financing receivable.\151\ 
Additionally, Item 303 of Regulation S- K\152\ requires a discussion of 
known trends and uncertainties in MD&A that may help supplement the 
U.S. GAAP disclosures.

[[Page 52948]]

When considered together, we believe these U.S. GAAP and MD&A 
disclosures allow an investor to evaluate loans where management has 
doubts about the borrowers' ability to comply with loan repayment 
terms. Additionally, while U.S. GAAP does not require the exact 
disclosures called for by Item III.C.3 regarding cross-border 
outstanding loans to countries where conditions give rise to liquidity 
problems expected to have a material impact on repayment of principal 
or interest, or by Item III.C.4 regarding other concentrations of 
loans, we believe the combination of certain U.S. GAAP \153\ and 
Regulation S-X \154\ disclosure requirements call for reasonably 
similar information.
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    \150\ A credit quality indicator is defined as a statistic about 
the credit quality of financing receivables. ASC 310-10-55-19 
provides the following examples of credit quality indicators: 
Consumer credit risk scores, credit-rating-agency ratings, a 
registrant's internal credit risk grades, loan-to-value ratios, 
collateral, collection experience, or other internal metrics.
    \151\ ASC 310-10-50-29 and 30 requires a description of the 
credit quality indicator, the recorded investment in financing 
receivables by credit quality indicator, the date or range of dates 
in which the information was updated for each credit quality 
indicator, and qualitative information on how internal risk ratings, 
if disclosed, relate to the likelihood of loss.
    \152\ Item 303(a) of Regulation S-K requires a registrant to 
discuss its financial condition, changes in financial condition, and 
results of operations. Instruction 3 to paragraph 303(a) states that 
the discussion should focus on the material events and uncertainties 
known to management that would cause reported financial information 
not to be necessarily indicative of future operating results or of 
future financial condition. The instruction further states that it 
would include descriptions and amounts of (A) matters that would 
have an impact on future operations and have not had an impact in 
the past, and (B) matters that have had an impact on reported 
operations and are not expected to have an impact upon future 
operations.
     Similarly, for foreign private issuers, Item 5.D. of Form 20-F 
requires a foreign private issuer to discuss, for at least the 
current financial year, any known trends, uncertainties, demands, 
commitments or events that are reasonably likely to have a material 
effect on the company's net sales or revenues income from continuing 
operations, profitability, liquidity, or capital resources, or that 
would cause reported financial information not necessarily to be 
indicative of future operating results or financial condition.
    \153\ See supra note 110.
    \154\ Rule 9-05 requires disclosure when foreign activities, 
which include loans and other revenue producing assets, exceed 10% 
of (1) assets, (2) revenue, (3) income (loss) before income tax 
expense, or (4) net income (loss).
---------------------------------------------------------------------------

    Lastly, while U.S. GAAP does not require specific disclosure 
related to other interest bearing assets that would be required to be 
disclosed by Item III.C.1 or Item C.2 if they were loans, it does 
require disclosure of nonaccrual and past due financing receivables, 
including items such as credit cards, notes receivables and trade 
receivables with maturities of more than one year, consistent with the 
disclosures currently called for by Item III.D of Guide 3.\155\ When it 
takes effect, the New Credit Loss Standard \156\ will increase the 
credit quality-related disclosures for loans. For example, it will 
require registrants to present credit quality indicator disclosures by 
year of origination and require additional disclosures about loans on 
nonaccrual status.\157\
---------------------------------------------------------------------------

    \155\ ASC 310-10-50-5B.
    \156\ The FASB has an ongoing project to reconsider the 
effective dates for major standards, including the New Credit Loss 
Standard. As currently issued, the New Credit Loss Standard is 
effective for public business entities that meet the definition of 
an SEC filer for fiscal years beginning after December 15, 2019, 
including interim periods within those fiscal years. Entities that 
are not public business entities are provided a delayed effective 
date of two years. Thus, an EGC that chooses to elect the private 
company timeline for adopting new or revised accounting standards 
may defer adopting the New Credit Loss Standard until their fiscal 
year beginning after December 15, 2021. As part of its ongoing 
project, available at: https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage&cid=1176173010144, the FASB has proposed to 
amend the New Credit Loss Standard effective dates so that SEC 
filers that are eligible to be a SRC, as defined by the SEC, and 
entities that are not SEC filers would be provided a delayed 
effective date of three years. Thus, SRCs, EGCs and non-SEC filers 
would be able to elect to defer adopting the New Credit Loss 
Standard until their fiscal year beginning after December 15, 2022.
    \157\ ASC 326-20-50-6 and ASC 326-20-50-16 and 17.
---------------------------------------------------------------------------

    IFRS often requires similar loan disclosure to that called for by 
Item III of Guide 3, as follows:
     IFRS requires the disclosure of the carrying value (and 
fair value) of each class of financial instruments, similar to the 
disclosure called for by Item III.A.\158\
---------------------------------------------------------------------------

    \158\ See supra note 108.
---------------------------------------------------------------------------

     IFRS requires disclosure of the credit risk management 
process, credit exposure, and how changes in the gross carrying amount 
of financial instruments contributed to the changes in the loss 
allowance, which is similar to the types of information called for by 
Items III.C.1 and 2.\159\ Additionally, Item 5.D of Form 20-F \160\ 
requires a discussion of known trends and uncertainties that may 
supplement the IFRS disclosures. When considered together, we believe 
these disclosures allow an investor to evaluate loans where management 
has doubts about the borrowers' ability to comply with repayment terms. 
The nonaccrual and TDR disclosures called for by Items III.C.1 and 2 
are not applicable under IFRS because, unlike in U.S. GAAP, there is no 
concept of TDRs or nonaccrual loans in IFRS. However, IFRS does require 
disclosure related to the nature and effect of modifications of 
contractual cash flows on financial instruments that have not resulted 
in derecognition from the balance sheet.\161\
---------------------------------------------------------------------------

    \159\ IFRS 7.35I, IFRS 7.IG20B, and IFRS 7.35M.
    \160\ See supra note 152.
    \161\ IFRS 7.35J.
---------------------------------------------------------------------------

     IFRS requires disclosure about significant concentrations 
of credit risk, which is similar to the types of disclosures called for 
by Item III.C.3 related to cross-border outstanding loans or to 
countries where conditions give rise to liquidity problems expected to 
have a material impact on repayment of principal or interest, the Item 
III.C.4 disclosure regarding other concentrations of loans, and the 
Item III.D disclosure related to other interest bearing assets.\162\
---------------------------------------------------------------------------

    \162\ See supra note 111.
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether Commission 
rules, U.S. GAAP or IFRS require the same or similar information as 
called for by Guide 3 and whether the disclosures provide investors 
with information material to an investment decision.
ii. Comments on the Loan Portfolio
    Many commenters indicated that substantial portions of the Item III 
disclosures overlap with U.S. GAAP or Commission rules.\163\ For 
example, a number of commenters stated that the disclosures called for 
by Item III.A--Types of Loans--overlap with U.S. GAAP \164\ and that 
the disclosures called for by Item III.C.1 related to nonaccrual, past 
due and restructured loans overlap with U.S. GAAP.\165\ One commenter 
noted that, while U.S. GAAP requires similar, but not identical, 
information, its requirements are more extensive than the Guide 3 
disclosures.\166\
---------------------------------------------------------------------------

    \163\ See letters from ABA; AmEx; BerryDunn; CAQ; CBA; CH/SIFMA; 
Crowe; Deloitte; EY; KPMG; ICBA; MFG; MUFG; PNC; PwC; and RSM.
    \164\ See letters from BerryDunn; CAQ; CH/SIFMA; EY; KPMG; MFG; 
MUFG; PNC; and PwC.
    \165\ See letters from BerryDunn; CAQ; CH/SIFMA; Deloitte; EY; 
KPMG; MFG; MUFG; PNC; and PwC.
    \166\ See letter from Deloitte.
---------------------------------------------------------------------------

    Several commenters indicated that U.S. GAAP addresses the objective 
of the potential problem loans disclosure called for by Item 
III.C.2.\167\ Additionally, a few commenters indicated that while U.S. 
GAAP may not require the same information about potential problem 
loans, this disclosure would appear to be more appropriate for 
MD&A.\168\ These commenters also noted that the relevance of problem 
loans could change significantly upon the effectiveness of the New 
Credit Loss Standard. Several commenters stated that the disclosure 
related to foreign outstandings called for by Item III.C.3 Risk 
Elements and the loan concentrations disclosure called for by Item 
III.C.4 are similar to disclosures required by U.S. GAAP.\169\
---------------------------------------------------------------------------

    \167\ See letters from CAQ; CH/SIFMA; EY; KPMG; MFG; PNC; and 
PwC.
    \168\ See letters from ABA and AMEX.
    \169\ See letters from CAQ; CH/SIFMA; Deloitte; EY; KPMG; MFG; 
PNC; and PwC.
---------------------------------------------------------------------------

    A few commenters stated that the disclosures called for by Item 
III.D relating to other (i.e., non-loan) interest bearing assets, while 
not explicitly required by U.S. GAAP, likely overlap with areas of U.S. 
GAAP that address credit risk disclosures for financial 
instruments.\170\ However, two other commenters thought that this 
disclosure is only called for by Item III.D of Guide 3 and is not 
required by U.S. GAAP and ``may be useful'' to some investors.\171\ 
While commenter feedback on this point was mixed, no commenter pointed 
to specific material information that would be lost if Item III.D 
disclosures were not codified.
---------------------------------------------------------------------------

    \170\ See letters from CAQ; EY; KPMG; PNC; and PwC.
    \171\ See letters from ABA and AmEx.
---------------------------------------------------------------------------

    Several commenters did not view the maturity and sensitivities to 
changes in interest rate disclosures called for by Item III.B as 
redundant with Commission rules or U.S. GAAP,\172\ and a few of these 
commenters said the information ``may be useful'' to some

[[Page 52949]]

investors.\173\ However, a number of these commenters noted that Item 
305 of Regulation S-K--Quantitative and Qualitative Disclosures about 
Market Risk, requires similar disclosure to that called for by Guide 
3.\174\
---------------------------------------------------------------------------

    \172\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; 
KPMG; PNC; and PwC.
    \173\ See letters from ABA; AmEx; and CH/SIFMA.
    \174\ See letters from CAQ; EY; KPMG; PNC; and PwC.
---------------------------------------------------------------------------

    Several commenters indicated that there is some overlap between the 
disclosures called for by Item III of Guide 3 and IFRS.\175\ For 
example, several commenters noted that IFRS \176\ calls for disclosure 
of financial instruments by class, but acknowledged that the classes 
disclosed would require judgment by management versus the prescriptive 
categories in Guide 3.\177\ Commenters also highlighted certain areas 
where there are potential differences. For example, several commenters 
said that IFRS does not align with the maturities and sensitivities to 
changes in interest rate disclosures called for by Item III.B because 
IFRS includes a threshold that must be met before disclosure is 
required.\178\ Specifically, IFRS requires disclosure of a maturity 
analysis of financial instruments a registrant holds for managing 
liquidity risk if that information is necessary to enable users of the 
financial statements to evaluate the nature and extent of liquidity 
risk.\179\ Additionally, many commenters stated that IFRS and Guide 3 
differ in the treatment and presentation of past due and nonaccrual/
impaired loans, given that there is no concept of nonaccrual or TDRs 
under IFRS.\180\ Lastly, several commenters stated that there is no 
specific disclosure requirement under IFRS similar to that called for 
by Items III.C.2-C.4 and III.D.\181\ However, these commenters also 
indicated that the disclosure framework under IFRS is consistent with 
the Guide 3 instructions and that any significant concentration risk 
(by class of financial instrument) should be disclosed under IFRS.
---------------------------------------------------------------------------

    \175\ See letters from CAQ; EY; KPMG; and PwC.
    \176\ See supra note 108.
    \177\ See letters from CAQ; EY; KPMG; and PwC.
    \178\ Id.
    \179\ See supra note 129.
    \180\ See letters from CAQ; CBA; CH/SIFMA; Deloitte; EY; KPMG; 
and PwC.
    \181\ See letters from CAQ; EY; KPMG; and PwC.
---------------------------------------------------------------------------

iii. Proposed Rule--Loan Portfolio
    The proposed rules would not include the loan category disclosure 
currently called for by Item III.A of Guide 3, the loan portfolio risk 
elements disclosure called for by Item III.C and the other interest 
bearing assets disclosure called for by Item III.D,\182\ as we believe 
reasonably similar disclosures are required by Commission rules, U.S. 
GAAP, or IFRS as discussed in more detail above. Proposed Item 1404 of 
Regulation S-K would codify the maturity by loan category disclosure 
currently called for by Item III.B, but the loan categories may 
increase as it would be the categories required to be disclosed in the 
registrant's U.S. GAAP \183\ or IFRS \184\ financial statements. 
Existing Guide 3 provided latitude to registrants to use loan 
categories outside of those identified in Guide 3 ``if considered a 
more appropriate presentation.'' Therefore, we believe some registrants 
may already be using the U.S. GAAP or IFRS loan categories for the 
Guide 3 disclosures. Additionally, the proposed rules would codify the 
existing Guide 3 instruction stating that the determination of 
maturities should be based on contractual terms. We also propose to 
clarify the ``rollover policy'' for these disclosures by stating that, 
to the extent non-contractual rollovers or extensions are included for 
purposes of measuring the allowance for credit losses under U.S. GAAP 
or IFRS, such non-contractual rollovers or extensions should be 
considered for purposes of the maturities classification and that the 
policy should be briefly disclosed. This clarification may represent a 
change from existing Guide 3 application, which provides that the 
determination of maturities should be revised as appropriate to comply 
with the registrant's ``rollover policy'' and makes no reference to 
U.S. GAAP or IFRS.\185\ The proposed rules also would codify the 
disclosure currently called for by Item III.B of the total amount of 
loans due after one year that have (a) predetermined interest rates and 
(b) floating or adjustable interest rates and would specify that this 
disclosure should also be segregated by the loan categories disclosed 
in the registrant's U.S. GAAP or IFRS financial statements. Item III.B 
currently permits the exclusion of certain loan categories (real 
estate-mortgage, installment loans to individuals and lease financing) 
and the aggregation of other loan categories (foreign loans to 
governments and official institutions, banks and other financial 
institutions, commercial and industrial and other loans) from the 
maturity and sensitivity to changes in interest rates disclosure. The 
proposed rule would not provide any exclusion of loan categories, or 
permit the aggregation of any loan categories, for purposes of this 
disclosure. We are not aware of any reason why the proposed disclosure 
would be less relevant or useful for these specific loan categories, 
nor do we think the information would be any more burdensome for 
registrants to produce, or for investors to evaluate, for these 
categories.
---------------------------------------------------------------------------

    \182\ The proposed rule also deletes the loan presentation 
disclosure required under Rule 9-03(7)(a)-(c) of Regulation S-X. See 
Section IV below.
    \183\ See supra notes 145 and 146.
    \184\ See supra note 108.
    \185\ See supra note 135.
---------------------------------------------------------------------------

    The proposed rules would codify the Guide 3 loan disclosures that 
we believe elicit information material to an investment decision and do 
not overlap with other existing disclosure requirements or principles. 
Furthermore, we believe revising the current loan categories to conform 
to the loan categories required by U.S. GAAP or IFRS would promote 
consistency of loan portfolio disclosures throughout a registrant's 
filing. Lastly, we believe that specifically linking the maturities 
guidance to whether the rollovers or extensions are included for 
purposes of measuring the allowance for credit losses under U.S. GAAP 
or IFRS promotes comparability and consistency amongst U.S. GAAP or 
IFRS registrants and provides a more objective basis to make the 
maturities determination. The proposed changes would thereby assist 
investors in evaluating the disclosures while also reducing the burdens 
on registrants to prepare such disclosures because registrants should 
be able to derive this information from their existing books and 
records.
    Request for Comment:
    28. The proposed rules would not codify the loan portfolio 
disclosures currently called for by Item III.A of Guide 3. Would this 
result in the loss of information material to an investment decision 
not readily available from other publicly available disclosures? If so, 
what material information would be lost and how should we modify the 
proposed rules to preserve this information?
    29. Should we codify, as proposed, the disclosures currently called 
for by Item III.B related to maturities and sensitivities to changes in 
interest rates? Are the maturity categories in the proposed rules 
appropriate? If not, what maturity categories should be required?
    30. Should we, as proposed, require that maturity category 
determinations take into account non-contractual rollovers or 
extensions that are included for purposes of measuring the allowance 
for credit losses under U.S. GAAP or IFRS? If not, what approach should 
be required?

[[Page 52950]]

    31. Should the loan categories for the maturities and sensitivities 
to changes in interest rate disclosures in the proposed rules be 
conformed to those presented in the registrant's U.S. GAAP or IFRS 
financial statements as proposed? Given that U.S. GAAP and IFRS do not 
require the same categories to be disclosed,\186\ would the lack of 
standardization of the categories disclosed between registrants 
applying U.S. GAAP (``U.S. GAAP registrants'') and IFRS registrants 
result in confusion for investors? If so, how should we revise the 
proposed rules to avoid such confusion? For example, should we codify 
the Guide 3 loan categories?
---------------------------------------------------------------------------

    \186\ U.S. GAAP and IFRS have a principles-based approach for 
determining the categories of loans to be disclosed. See supra notes 
108 and 145. Thus, both U.S. GAAP and IFRS registrants will make 
judgments about the loan categories to be disclosed and there likely 
will not be consistency amongst all registrants.
---------------------------------------------------------------------------

    32. Unlike current Guide 3, the proposed rules would require 
disclosure for loans due after one year with predetermined interest 
rates and floating or adjustable interest rate for all loan categories, 
and not exclude or aggregate certain loan categories.\187\ Would this 
information be material to an investment decision? Should we permit 
certain categories of loans to be excluded or aggregated? If so, which 
categories?
---------------------------------------------------------------------------

    \187\ Item III.B currently permits the exclusion of certain loan 
categories (real estate-mortgage, installment loans to individuals 
and lease financing) and the aggregation of other loan categories 
(foreign loans to governments and official institutions, banks and 
other financial institutions, commercial and industrial and other 
loans) from the maturity and sensitivity to changes in interest 
rates disclosure.
---------------------------------------------------------------------------

    33. The proposed rules would not codify disclosure of the period 
end amount of TDRs as called for by Item III.C.1 even though the U.S. 
GAAP disclosure requirement is not substantially the same.\188\ Is the 
disclosure of the TDR balance at period-end material to an investment 
decision and should it be codified?
---------------------------------------------------------------------------

    \188\ U.S. GAAP only requires disclosure of TDRs occurring 
during each period that an income statement is presented, and does 
not provide a cumulative level of TDRs existing on the balance 
sheet, similar to the disclosure called for by Item III.C.1(c).
---------------------------------------------------------------------------

    34. Under the proposed rules, IFRS registrants would not be 
required to provide disclosure of nonaccrual loans or TDRs because IFRS 
does not recognize the concept of nonaccrual or TDRs. Should the 
proposed rules require IFRS registrants to disclose these amounts, 
calculated on a U.S. GAAP basis, in order to aid in comparability with 
U.S. GAAP registrants?
    35. The proposed rules would not codify the potential problem loans 
disclosure called for by Item III.C.2 even though the U.S. GAAP and 
IFRS disclosure requirements are not substantially the same. Is the 
disclosure of potential problem loans material to an investment 
decision and should it be codified? How would investors use this 
disclosure? Can the information provided by the potential problem loan 
disclosure be obtained from other disclosures required by U.S. GAAP 
\189\ or IFRS,\190\ or from the trends and uncertainties disclosures 
called for by Item 303 of Regulation S-K? \191\
---------------------------------------------------------------------------

    \189\ See supra note 151.
    \190\ IFRS 7.35M.
    \191\ See supra note 152.
---------------------------------------------------------------------------

    36. The proposed rules would not codify the disclosures in Item 
III.C.3 of Guide 3 related to foreign outstandings, which currently 
calls for disclosure of the name of the country and aggregate amount of 
cross-border outstandings to borrowers in each foreign country where 
such outstandings exceed one percent of total assets. Would this result 
in the loss of information material to an investment decision in light 
of the fact that U.S. GAAP \192\ and IFRS \193\ require disclosure 
about significant concentrations of credit risk? Would the 
``significant'' threshold in U.S. GAAP and IFRS likely result in 
substantially the same population of countries being disclosed as the 
one percent bright-line threshold currently called for by Guide 3? 
Should we instead codify the one-percent bright-line threshold? If so, 
why? Are there additional disclosures related to foreign outstandings 
that we should codify to avoid potential loss of information material 
to an investment decision? If so, what are those disclosures?
---------------------------------------------------------------------------

    \192\ See supra note 110.
    \193\ See supra note 111.
---------------------------------------------------------------------------

    37. The proposed rules would not codify the Item III.C.4 of Guide 3 
disclosure of loan concentrations that exceed 10% of total loans. Would 
this result in the loss of information material to an investment 
decision in light of the fact that U.S. GAAP \194\ and IFRS \195\ 
require disclosure about significant concentrations of credit risk? 
Would the ``significant'' threshold in U.S. GAAP and IFRS likely result 
in substantially the same categories of loans being disclosed as the 
10% bright-line threshold currently called for by Guide 3? Should we 
instead codify the 10% bright-line threshold? If so, why? Are there 
additional disclosures related to loan concentrations that we should 
codify or propose to avoid potential loss of information material to an 
investment decision? If so, what are those disclosures?
---------------------------------------------------------------------------

    \194\ See supra note 110.
    \195\ See supra note 111.
---------------------------------------------------------------------------

    38. The proposed rules would not codify the disclosure in Item 
III.D of Guide 3 disclosure related to other interest bearing assets. 
Would this result in the loss of information material to an investment 
decision in light of the fact that U.S. GAAP \196\ and IFRS \197\ 
require disclosure of reasonably similar information for assets likely 
to have been disclosed under this item? Should we instead codify the 
current interest-bearing assets disclosure?
---------------------------------------------------------------------------

    \196\ See supra note 155.
    \197\ IFRS 7.35B and M.
---------------------------------------------------------------------------

    39. Is there additional information related to loans that should be 
disclosed? If so, what information and how would this information be 
used by investors? Would there be a significant cost or burden to bank 
and savings and loan registrants in providing this additional 
information?

H. Allowance for Credit Losses

i. Background
    Item IV.A of Guide 3 calls for a five-year analysis of loan loss 
experience,\198\ including the beginning and ending balances of the 
allowance for loan losses, charge-offs and recoveries by loan category 
\199\ and additions charged to operations. Item IV.A also calls for 
disclosure of the ratio of net charge-offs to average loans outstanding 
during the period, as well as a brief discussion of the factors that 
influenced management's judgment in determining the amount of the 
additions to the allowance charged to operating expense.
---------------------------------------------------------------------------

    \198\ This analysis of activity in the allowance for loan losses 
is known as a ``rollforward'' of the allowance for loan losses.
    \199\ The loan categories presented in Item IV.A are the same as 
in Item III of Guide 3.
---------------------------------------------------------------------------

    Item IV.B calls for a breakdown of the allowance for loan losses by 
category \200\ along with the percentage of loans in each category. 
Registrants may, however, furnish a narrative discussion of the loan 
portfolio's risk elements and the factors considered in determining the 
amount of the allowance in lieu of providing a breakdown. The staff has 
observed that BHC registrants generally elect to use a tabular format 
to present the allocation of allowance for loan losses instead of a 
narrative discussion.
---------------------------------------------------------------------------

    \200\ The specified categories for domestic loans are: (1) 
Commercial, financial and agricultural, (2) real estate 
construction, (3) real estate-mortgage, (4) installment loans to 
individual, and (5) lease financing. The other categories for the 
breakdown are foreign and unallocated.
---------------------------------------------------------------------------

    Since Guide 3 was last amended, a number of new disclosures related 
to credit losses of financial instruments have been added to U.S. GAAP 
and

[[Page 52951]]

IFRS. For example, U.S. GAAP \201\ requires a rollforward of the 
activity in the allowance for loan losses for each period by portfolio 
segment,\202\ as well as a description of the factors that influenced 
management's judgment, which overlaps with the disclosure called for by 
Item IV.A of Guide 3.\203\ Similarly, IFRS requires reconciliation, by 
class of financial instrument, of the opening balance to the closing 
balance of the allowance, as well a discussion of the inputs, 
assumptions, and estimation techniques used to determine the 
allowance.\204\ The staff has observed that, since the IFRS 
reconciliation of the allowance is by class\205\ of financial 
instrument, the disclosure of this information is typically more 
disaggregated than the reconciliation by portfolio segment under U.S. 
GAAP. Furthermore, this more detailed allowance reconciliation provides 
information consistent with the breakdown of the allowance for loan 
losses by loan category called for by Item IV.B.
---------------------------------------------------------------------------

    \201\ ASC 310-10-50-11B (and ASC 326-20-50-11 and ASC 326-20-50-
13 upon the adoption of the New Credit Loss Standard).
    \202\ ASC 310-20 defines a portfolio segment as the level at 
which an entity develops and documents a systematic methodology to 
determine its allowance for credit losses.
    \203\ The staff has observed that some BHC registrants present 
their Guide 3 rollforward using their U.S. GAAP portfolio segments 
instead of the loan categories specified in Guide 3 or Article 9 
because Guide 3 provides latitude in determining loan categories.
    \204\ IFRS 7.35G and H.
    \205\ See supra note 108.
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    There are differences in the credit loss impairment standards under 
U.S. GAAP \206\ and IFRS.\207\ Such differences will continue to exist 
subsequent to the adoption of the New Credit Loss Standard. Currently 
under U.S. GAAP, an impairment is recognized for certain financial 
instruments when it is probable that a loss has been incurred.\208\ 
When effective, the New Credit Loss Standard will replace the current 
incurred loss methodology with a methodology that reflects expected 
credit losses over the entire contractual term of the financial 
instruments.\209\ By contrast, IFRS \210\ requires a 12-month expected 
credit loss measurement for certain financial instruments unless there 
has been a significant increase in credit risk, in which case a 
lifetime expected credit loss measurement is required.
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    \206\ ASC 310-10 (and ASC 326 upon the adoption of the New 
Credit Loss Standard).
    \207\ IFRS 9.
    \208\ ASC 310-10-35-4.
    \209\ As discussed in paragraph BC46 of the New Credit Loss 
Standard, the FASB decided not to characterize expected credit 
losses as ``lifetime'' expected credit losses, even though a 
registrant must estimate credit losses over the entire contractual 
term of the financial instruments (recognizing that expected 
prepayments affect the estimated life). The FASB observed that the 
use of the term ``lifetime'' could be interpreted in many ways and 
could lead some to believe the standard was defining the model a 
registrant must use to estimate.
    \210\ See supra note 207.
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    The New Credit Loss Standard will require consideration of a 
broader range of reasonable and supportable information to inform 
credit loss estimates. The new methodology will require registrants to 
use forecasted information, in addition to past events and current 
conditions, when developing their estimates. Similar to current U.S. 
GAAP, it will not specify a method for measuring expected credit losses 
and will allow registrants to apply methods that reasonably reflect 
their expectations of the credit loss estimate. The New Credit Loss 
Standard and IFRS both require disclosure about how the registrant 
measures expected credit losses, as well as how it incorporates 
forward-looking information into the measurement.
    In the Request for Comment, the Commission asked whether Commission 
rules, U.S. GAAP, or IFRS require the same or similar loan loss 
information as that called for by Guide 3 as well as whether additional 
disclosures would be material to an investment decision upon the change 
from an accrual method to an expected loss method for credit losses.
ii. Comments on Allowance for Credit Losses
    Many commenters stated that all or a portion of the disclosures 
called for by Item IV relating to loan losses overlap with Commission 
rules or U.S. GAAP.\211\ Several of these commenters stated that the 
disclosures called for by Item IV overlap in their entirety with U.S 
GAAP requirements and should be eliminated.\212\ However, one commenter 
stated that the disclosure of the ratio of net charge-offs to average 
loans outstanding during the period is not a U.S. GAAP 
requirement.\213\ Several commenters stated that the disclosures called 
for by Item IV.B relating to the allocation of the allowance for loan 
losses overlap with U.S. GAAP.\214\ However, a few of those commenters 
observed that the disclosure breakdowns called for by Item IV.B are 
more prescriptive than the U.S. GAAP requirements.\215\ Several 
commenters also stated that IFRS addresses the objective of the 
disclosures called for by Item IV.\216\
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    \211\ See letters from ABA; AmEx; BerryDunn; CAQ; CH/SIFMA; 
Crowe; Deloitte; EY; KPMG; MFG; MUFG; PNC; PwC; and RSM.
    \212\ See letters from ABA; AmEx; Crowe; Deloitte; MFG; and 
MUFG.
    \213\ See letter from BerryDunn.
    \214\ See letters from CAQ; CH/SIFMA; EY; KPMG; MFG; MUFG; PNC; 
PwC; and RSM.
    \215\ See letters from CAQ; EY; KPMG; PNC; and PwC.
    \216\ See letters from CAQ; EY; KPMG; and PwC.
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    One commenter called for additional disclosure under U.S. GAAP 
regarding the allowance for credit losses under the New Credit Loss 
Standard.\217\ In contrast, two commenters stated that it would be 
premature for the Commission to add disclosure that relates to future 
accounting standards.\218\ These commenters generally noted that at a 
later time, after implementation has been reviewed, the Commission, 
FASB, registrants and investors can assess and determine whether 
additional disclosures may be necessary or useful.\219\ Lastly, one 
commenter observed that the financial asset disclosures under IFRS are 
qualitative in nature and a registrant has more discretion to 
disaggregate and provide information on investments and loan portfolios 
compared to the current disclosures called for by Guide 3.\220\
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    \217\ See letter from Capital Group. In this letter, the Capital 
Group requested that the FASB require more detailed disclosure about 
the assumptions being made in the accounting and how those judgments 
and actual experience occur and change over time. More specifically, 
the Capital Group viewed the following disclosures as crucial 
elements in making the new standard operational: (1) Transparency 
around loan loss reserves at origination, (2) change in estimate of 
the loan loss reserve disaggregated by year of loan origination and 
type of loan, (3) gross and net chargeoffs and recoveries each 
period by vintage, and (4) disaggregation of credit quality 
indicators by vintage, including loan-to-value, internal risk 
rating, and geography.
    \218\ See letters from CAQ and CH/SIFMA.
    \219\ Since the Request for Comment, IFRS 9 has become 
effective.
    \220\ See letter from Deloitte.

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[[Page 52952]]

iii. Proposed Rule--Allowance for Credit Losses
    The proposed rules would not require the analysis of loss 
experience disclosure currently called for by Item IV.A of Guide 3, but 
would codify in Item 1405 of Regulation S-K the ratio of net charge-
offs during the period to average loans outstanding as this disclosure 
does not overlap with existing Commission, U.S. GAAP, or IFRS 
requirements. The proposed rules would require the disclosure of the 
net charge-off ratio on a more disaggregated basis than the current 
Guide 3 disclosure, based on the loan categories required to be 
disclosed in the registrant's U.S. GAAP \221\ or IFRS \222\ financial 
statements. We believe this ratio, as well as the disaggregation of 
information that will be based on the loan categories disclosed in the 
financial statements would provide further insight into the performance 
of specific loan categories. The proposed rules would also codify the 
breakdown of the allowance disclosures called for by Item IV.B with 
some revisions, as we concur with commenter feedback that this 
disclosure provides more detailed information than that required by 
U.S. GAAP. Specifically, a tabular breakdown of the allowance would be 
required for registrants applying or reconciling to U.S. GAAP, rather 
than permitting an alternative option to provide a narrative 
discussion. We believe the tabular breakdown would provide for easier 
analysis by investors when reviewing these disclosures and note that 
the alternative narrative discussion is not widely used by registrants. 
The breakdown would be based on the loan categories presented in the 
U.S. GAAP financial statements, instead of the specified loan 
categories currently listed by Item IV.B.\223\ We are not proposing to 
apply this requirement to IFRS registrants because IFRS already 
requires this information at a similar level of disaggregation in the 
financial statements.\224\
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    \221\ See supra note 145.
    \222\ See supra note 108.
    \223\ See supra note 145.
    \224\ IFRS 7.35H.
---------------------------------------------------------------------------

    The proposed rules would not codify the existing overlap between 
the Item IV disclosures in Guide 3, U.S. GAAP and IFRS. At the same 
time, our proposal to link the proposed disclosures to the specific 
loan categories required by U.S. GAAP or IFRS would provide investors 
with consistent categories of disclosures throughout the filing without 
imposing undue cost or burden on registrants to prepare the disclosure, 
because registrants should be able to derive this information from 
their existing books and records.
    We are not proposing any disclosures related to the New Credit Loss 
Standard at this time. Consistent with the recommendation of several 
commenters, the staff will wait until after the effective date of the 
new standards before we assess the disclosures provided under the new 
standards and whether additional material information is necessary. 
Additionally, the FASB has a codification improvement project \225\ 
related to disclosures to be provided as part of the New Credit Loss 
Standard. In light of these ongoing efforts, we are requesting comment 
on whether there are allowance disclosures under an expected credit 
loss model that would be material to an to an investment decision that 
are not already required by Commission rules, the proposed rules, U.S. 
GAAP, or IFRS. This request for comment will help inform future 
Commission consideration of the information available regarding the New 
Credit Loss Standard and any changes that may arise from the FASB 
activities described above.
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    \225\ See Financial Instruments--Credit Losses (Vintage 
Disclosures: Gross Writeoffs and Gross Recoveries) available at: 
https://www.fasb.org/jsp/FASB/Page/TechnicalAgendaPage&cid=1175805470156.
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    Request for Comment:
    40. Would the proposed rules result in the loss of information 
material to an investment decision? If so, what additional disclosures 
should be codified to avoid such loss?
    41. Should we, as proposed, require a U.S. GAAP registrant to 
provide the tabular breakdown of the allowance for credit losses, and 
not codify the existing option of providing an alternative narrative 
discussion?
    42. Should we, as proposed, revise the allowance breakdown to be 
based on the U.S. GAAP loan categories? If not, what alternative 
breakdown would be more appropriate? Should the proposed rules also 
require a breakdown of the liability for credit losses on unfunded 
commitments? \226\
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    \226\ Unfunded commitments, such as revolving lines of credit or 
other unfunded loan commitments, represent off-balance sheet credit 
exposures. Because they are often legally binding agreements to 
extend credit under certain terms and conditions, loan commitments 
can expose an entity to credit losses.
---------------------------------------------------------------------------

    43. The proposed rules would not require IFRS registrants to 
provide the tabular breakdown of the allowance because IFRS already 
requires similar information. Would any information material to an 
investment decision be lost by not requiring this disclosure for IFRS 
registrants? If so, how should we revise the proposed rules to avoid 
such loss?
    44. The proposed rules would require the net charge off ratio to be 
disclosed on a more disaggregated basis than the level of charge off 
disclosure that currently exists in U.S. GAAP. Specifically, the 
proposed rules would require the ratio for each of the U.S. GAAP loan 
categories or IFRS loan classes disclosed in the registrant's financial 
statements. Is this level of disaggregation appropriate for this ratio?
    45. Should the proposed rules also require additional expected 
credit loss information by U.S. GAAP loan category, such as the 
provision for credit losses for each loan category? Would information 
at the U.S. GAAP loan category level be available to preparers without 
significant undue cost or burden?
    46. Are there additional disclosures that registrants with material 
portfolios of financial instruments with an allowance based on an 
expected credit loss model (e.g., the New Credit Loss Standard) should 
provide? If so, what additional disclosures should be required and why? 
Should these disclosures allow for scalability among registrants, and 
if so, how?
    47. Would disclosure of the key inputs and assumptions used in an 
expected credit loss model (e.g., the New Credit Loss Standard) provide 
information material to an investment decision? If so, what key inputs 
and assumptions would be material?
    48. Are there other disclosures about allowance for credit losses 
we should consider requiring? For example, should we require 
registrants to disclose the material qualitative adjustments used in 
the estimation of the allowance for credit losses and how those 
adjustments were determined? Should we require registrants to provide a 
description of any material changes in the key inputs/assumptions 
disclosed from period-to-period, including quantitative and/or 
directional information as to how the inputs and assumptions changed, 
and the factors driving the changes? If so, how would these disclosures 
be used? At what disaggregation level, for example, at a loan category 
level or portfolio segment level, should they be presented?
iv. Proposed New Disclosure--Credit Ratios
a. Background
    Guide 3 currently calls for the disclosure of one credit ratio, net 
charge-offs during the period to average loans outstanding, as outlined 
in Item IV.A. As discussed in Section 2.H.iii

[[Page 52953]]

above, we propose to codify this disclosure. Guide 3 currently calls 
for this disclosure on a consolidated basis. However, we are proposing 
to require it by the loan categories disclosed in the U.S. GAAP or IFRS 
financial statements. There is no requirement in Commission rules, U.S. 
GAAP, or IFRS to disclose other commonly used credit ratios by bank and 
savings and loan registrants, such as the allowance for credit losses 
to total loans, nonaccrual loans to total loans, or the allowance for 
credit losses to nonaccrual loans. Nevertheless, bank and savings and 
loan registrants commonly disclose other credit ratios and such 
information is generally readily available to them without undue cost 
or burden as the components are provided in Call Reports filed with the 
U.S. banking agencies. Furthermore, U.S. GAAP requires disclosure of 
many of the components of these ratios, such as nonaccrual loans, and 
the rollforward of the allowance for credit losses by portfolio 
segment, including separate line items showing writeoffs charged 
against the allowance and recoveries of amounts previously charged off 
(which together can be used to calculate net charge-offs).\227\ IFRS 
includes a similar requirement to provide disclosure of the rollforward 
of the allowance for credit losses \228\ at a more disaggregated class 
level compared to U.S. GAAP, but there is no requirement to disclose 
nonaccrual loans because nonaccrual loans are not a concept recognized 
in IFRS.
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    \227\ ASC 310-10-50-7 (and ASC 326-20-50-16 after the adoption 
of the New Credit Loss Standard) requires disclosure of nonaccrual 
loans by class of financing receivable. ASC 310-10-50-11B (and ASC 
326-20-50-13 upon the adoption of the New Credit Loss Standard) 
requires disclosure of a rollforward of the allowance for credit 
losses, by portfolio segment, showing the beginning and ending 
balance, the current period provision, writeoffs charged against the 
allowance and recoveries of amounts previously charged off.
    \228\ See supra note 224.
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    In the Request for Comment, the Commission asked whether it should 
require disclosure of financial services industry-specific ratios, such 
as nonaccrual loans to total loans. We did not, however, receive 
commenter feedback on this point.
b. Proposed Rule--Credit Ratios
    Proposed Item 1405 of Regulation S-K would require disclosure of 
the following credit ratios, along with each of the components used in 
their calculation: (1) Allowance for Credit Losses to Total Loans; (2) 
Nonaccrual Loans to Total Loans; (3) Allowance for Credit Losses to 
Nonaccrual Loans; and (4) Net Charge-offs \229\ to Average Loans,\230\ 
by loan category disclosed in the financial statements. The first three 
ratios would be disclosed on a consolidated basis, while the fourth 
ratio of Net Charge-Offs to Average Loans would be at the more 
disaggregated loan category level. The disaggregated loan category 
level is more detailed than the components to the ratios, net charge-
offs and average loans outstanding, are required to be disclosed under 
U.S. GAAP. The proposed rules would also require a discussion of the 
factors that drove material changes in the ratios, or related 
components, during the periods presented. In our experience, these 
credit ratios are commonly disclosed by bank and savings and loan 
registrants with material lending portfolios. Consequently, investors 
may already be evaluating these ratios in making investment decisions. 
We believe disclosure of the components used in the calculation of 
these ratios, along with the proposed narrative disclosure would 
further aid investors' understanding of the drivers of the changes in 
the ratios, particularly if both the numerator and denominator of the 
ratio have changed significantly during a period. If the related 
components are separately disclosed with the ratios, investors would be 
able to get a better sense of the magnitude of changes in each 
component. As discussed in Section II.D.ii, these ratios would be 
required for each of the last five years in initial registration 
statements under the Securities or Exchange Act and in initial 
Regulation A offering statements. For all other filings, the ratios and 
related disclosure of the components used in the calculation would be 
included for the same periods that financial statements are required by 
Commission rules.\231\
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    \229\ Net charge-offs should be based on current period net 
charge-offs.
    \230\ See discussion in Section II.H.iii above.
    \231\ Article 3 of Regulation S-X generally requires two years 
of balance sheets and three years of income statements, except that 
SRCs may present only two years of income statements under Article 8 
of Regulation S-X. EGCs may also present only two years of financial 
statements in initial public offerings of common equity securities. 
Issuers in Regulation A offerings will not be required to update the 
ratio disclosures in reports filed subsequent to the qualification 
of the initial registration statement since the ongoing reporting 
requirements under Regulation A do not require this information.
---------------------------------------------------------------------------

    We believe it is appropriate to require five years of this credit 
ratio information in initial registration and initial Regulation A 
offering statements given that investors would be seeing the loan 
portfolio and related credit history for the first time, and absent 
this requirement, investors would not have insight into the 
registrant's loan portfolio credit history beyond, at most, the last 
two years based on our proposed changes to the reporting period 
discussed in Section II.D.\232\ We believe the proposed disclosure 
could elicit information material to an investment decision regarding 
registrant-specific credit trends as credit trends often take several 
years to develop in the disclosed components. Additionally, if after 
reasonable effort, the registrant is unable to obtain the five years of 
credit ratio information, it would be able to rely on Securities Act 
Rule 409 and Exchange Act Rule 12b-21 to omit the information that is 
unknown and not reasonably available.
---------------------------------------------------------------------------

    \232\ Id.
---------------------------------------------------------------------------

    The proposed rules seek to balance the need for additional credit 
trend information when investors make an initial investment decision 
absent prior reporting about the registrant, with the added cost to the 
registrant of producing such information by requiring only information 
that is not available from prior period filings. The proposed rules 
would also include an instruction stating that IFRS registrants do not 
have to provide either of the nonaccrual ratios as there is no concept 
of nonaccrual in IFRS.
    Request for Comment:
    49. Are the proposed new disclosures appropriate? Would the 
proposed ratio disclosures help investors better understand how the 
credit trends in the loan portfolio change over time? Should different 
or additional credit ratios be included?
    50. Would there be a significant cost or burden to registrants in 
providing the proposed ratio disclosures, including for 5 years in 
initial registration and initial Regulation A offering statements? 
Would registrants have the information readily available from the 
information they report to the U.S. banking agencies?
    51. The proposed rules would require the ratio of Net Charge-offs 
to Average Loans to be provided on a disaggregated basis, with the 
other ratios provided on a consolidated basis. Should we require 
further disaggregation for the other credit ratios? If so, at what 
disaggregation level? Is there a significant cost or burden to 
registrants in providing this information?
    52. Should we require, as proposed, the disclosure of each of the 
components used in the calculation of the ratios for each period, along 
with a discussion of the drivers of the material changes in the ratios? 
If not, why not?
    53. Is the proposed five years of disclosure in initial 
registration and initial Regulation A offering statements

[[Page 52954]]

a sufficient time period for evaluation of the loan portfolio credit 
trends? Would a shorter time period capture the same credit trends? Are 
there other registration statements, Regulation A filings, or periodic 
filings that should include the five years of credit ratios?
    54. Should we require, as proposed, five years of credit ratios for 
initial registration or initial Regulation A offering statements filed 
by EGCs and SRCs or should we limit the requirement to the periods 
presented in the financial statements provided by those types of 
registrants?
    55. The proposed rules would not require disclosure of the ratio of 
Nonaccrual Loans to Total Loans or the Allowance for Credit Losses to 
Nonaccrual Loans for IFRS registrants since there is no concept of 
nonaccrual loans in IFRS. Should the proposed rules require disclosure 
of these ratios, calculated on a U.S. GAAP basis, to aid in 
comparability? Are there different ratios that should be required for 
IFRS registrants that would provide similar information?
    56. Would the ratio of the allowance for credit losses to total 
nonaccrual loans continue to be necessary upon the adoption of the New 
Credit Loss Standard by U.S. GAAP registrants?

I. Deposits

i. Background
    Deposit disclosures, together with the level of other disclosed 
funding sources,\233\ may provide transparency with respect to a 
registrant's sources of funding and liquidity risk profile. Insured 
retail deposits can be a reliable funding source and may play an 
integral role in mitigating liquidity risk. Disclosures about 
significant amounts of deposits from a small number of depositors or 
certain types of deposits, such as uninsured deposits, could provide 
investors with insight as to the registrant's reliance on particular 
sources of funding and risks related to those sources of funding.
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    \233\ ASC 942-470-50-3 requires disclosures related to debt 
agreements. ASC 942 and Rule 9-03 of Regulation S-X call for 
disclosures about short-term borrowings as described below in 
Section III.B.
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    Items V.A and V.B of Guide 3 call for the presentation of the 
average amounts of and the average rates paid for specified deposit 
categories that exceed 10% of average total deposits.\234\ Most 
registrants that currently provide Guide 3 disclosures present this 
disclosure by disaggregating the deposit categories in the average 
balance sheet called for by Item I of Guide 3. Item V.C calls for 
disclosure of the aggregate amount of deposits by foreign depositors in 
U.S. offices, if material. Items V.D and V.E of Guide 3 focus on the 
disclosure of time certificates of deposits and other time deposits in 
amounts of $100,000 or more.\235\ Item V.D calls for a maturity 
analysis of time deposits,\236\ and Item V.E calls for disclosure of 
time deposits in excess of $100,000 issued by foreign offices.\237\
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    \234\ The specified deposit categories are: (1) Noninterest-
bearing demand deposits, (2) interest-bearing demand deposits, (3) 
savings deposits, (4) time deposits, (5) deposits of banks located 
in foreign countries including foreign branches of other U.S. banks, 
(6) deposits of foreign governments and official institutions, (7) 
other foreign demand deposits, and (8) other foreign time and 
savings deposits. Categories (1) to (4) are deposits in U.S. bank 
offices and categories (5) to (8) are deposits in foreign bank 
offices. Other categories may be used for U.S. bank offices if they 
more appropriately describe the nature of the deposits.
    \235\ The $100,000 thresholds were established in 1976 when the 
FDIC insurance limit was $40,000 and has never changed.
    \236\ The ranges of maturities are by time remaining until 
maturity: (1) 3 months or less, (2) over 3 through 6 months, (3) 
over 6 through 12 months, and (4) over 12 months.
    \237\ If the aggregate of certificates of deposit and time 
deposits over $100,000 issued by foreign offices represents a 
majority of total foreign deposit liabilities, this disclosure need 
not be provided if a statement to that effect is provided.
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    U.S. GAAP and Commission rules require similar, but not the same, 
deposit disclosures as those called for by Guide 3. For example, U.S. 
GAAP \238\ requires disclosure of the aggregate amount of time deposits 
(including certificates of deposit) in denominations that meet or 
exceed the FDIC insurance limit at the balance sheet date.\239\ This 
disclosure is similar to that called for by Item V.D, but differs in 
that it is not broken out by different maturity categories. Moreover, 
Item V.D calls for disclosure based on a $100,000 threshold rather than 
linking to the FDIC insurance limit. In addition, Article 9 requires 
separate presentation on the balance sheet of noninterest-bearing 
deposits and interest-bearing deposits.\240\ IFRS does not specifically 
require deposit disclosures that overlap with those called for by Guide 
3.
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    \238\ ASC 942-405-50-1.
    \239\ See supra note 45.
    \240\ 17 CFR 201.9-03. If the disclosures about foreign 
activities in Rule 9-05 apply, the amount of noninterest-bearing 
deposits and interest-bearing deposits in foreign banking offices 
also must be presented separately.
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether Commission 
rules, U.S. GAAP or IFRS require the same or similar information as 
called for by Guide 3, whether the disclosures provide investors with 
information material to an investment decision, and requested 
recommendations for how the disclosures could be improved.
ii. Comments on Deposits
    Many commenters stated that a portion of the disclosures called for 
by Item V of Guide 3 overlap with Commission rules or U.S. GAAP.\241\ 
For example, one of these commenters stated that the disclosures called 
for by Item V.A relating to the average amount and average rate paid on 
interest-bearing deposits are duplicative of the disclosures called for 
by Item I.A.\242\ Many commenters stated that the disclosures called 
for by Item V.D relating to the amount of outstanding domestic time 
certificates of deposit and other time deposits equal to or in excess 
of $100,000 by maturity overlap with U.S. GAAP.\243\ However, these 
commenters generally noted the difference in disclosure 
thresholds.\244\ A few of these commenters stated that the disclosures 
called for by Item V.E relating to the amount of outstanding foreign 
office time certificates of deposit and other time deposits equal to or 
in excess of $100,000 overlap with U.S. GAAP.\245\
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    \241\ See letters from ABA; AmEx; BDO; BerryDunn; CAQ; Crowe; 
Deloitte; EY; KPMG; ICBA; MFG; MUFG; PNC; PwC; and RSM.
    \242\ See letter from MFG.
    \243\ See letters from ABA; AmEx; BDO; BerryDunn; CAQ; Crowe; 
Deloitte; EY; KPMG; ICBA; MFG; MUFG; PNC; PwC; and RSM.
    \244\ ASC 942-405-50-1 requires disclosure of the amount of time 
deposits equal to or in excess of the FDIC insurance limit, which is 
currently $250,000, whereas Guide 3 has a $100,000 threshold.
    \245\ See letters from BerryDunn; MFG; and MUFG.
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    Several commenters stated that a portion of the disclosures called 
for by Item V of Guide 3 elicit information that may be of value to 
investors.\246\ A few of these commenters \247\ indicated that the 
disclosure of the average rate paid on deposits is only called for by 
Item V.A of Guide 3, and some of these commenters \248\ asserted that 
the disclosure of other categories of deposits is only called for by 
Item V.B of Guide 3. All of these commenters expressed the view that 
the disclosure of the aggregate amount of deposits by foreign 
depositors in domestic offices is only called for by Item V.C of Guide 
3 and is not required by other disclosure requirements.\249\ One 
commenter stated that the disclosures called for by Item V.D relating 
to the amount of domestic time deposits equal to or in excess of 
$100,000 by maturity elicit ``meaningful

[[Page 52955]]

additional information'' for investors.\250\ Several commenters stated 
that the disclosure of the amount of foreign office time deposits equal 
to or in excess of $100,000 is only called for by Item V.E of Guide 3 
and is not required by other rules.\251\ One commenter also recommended 
that Guide 3 should be updated to align with the U.S. GAAP requirement 
to disclose information regarding time deposits in excess of the FDIC 
insurance limit.\252\
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    \246\ See letters from ABA; AmEx; CAQ; CH/SIFMA; EY; KPMG; PNC; 
and PwC.
    \247\ See letters from ABA; AmEx; and CH/SIFMA.
    \248\ See letters from CAQ; EY; KPMG; PNC; and PwC.
    \249\ See letters from ABA; AmEx; CAQ; CH/SIFMA; EY; KPMG; PNC; 
and PwC.
    \250\ See letter from CH/SIFMA.
    \251\ See letters from ABA; AmEx; CAQ; CH/SIFMA; EY; KPMG; PNC; 
and PwC.
    \252\ See letter from CH/SIFMA.
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    Several commenters stated that the disclosures called for by Items 
V.A, V.B, V.C and V.E of Guide 3 are not specifically required by 
IFRS.\253\ However, these commenters also noted that IFRS requires 
disclosure of more information about financial instruments if period-
end information is not representative of a registrant's exposure to 
risk (e.g., credit, liquidity and market) during the period.\254\ 
Further, these commenters noted that IFRS requires disclosure of risks 
based on information provided internally to management.\255\ Several 
commenters noted that the disclosures called for by Item V.D are not 
required by IFRS.\256\ However, these commenters also indicated that 
the IFRS disclosures generally address the objective of the disclosures 
called for by Item V.D.\257\
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    \253\ See letters from CAQ; EY; KPMG; and PwC.
    \254\ See, e.g., IFRS 7.35; IFRS 7.BC48; IFRS 7.IG20
    \255\ IFRS 7.34(a).
    \256\ See letters from CAQ; EY; KPMG; and PwC.
    \257\ For example, one commenter referenced the maturity 
analysis of financial liabilities and concentration of risk from 
financial instruments disclosures in IFRS 7.39, IFRS 7.34(c), IFRS 
7.B8 and B11, and IFRS 7.IG18 as disclosures with the same objective 
as Guide 3. See letter from CAQ.
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iii. Proposed Rule--Deposits
    Proposed Item 1406 of Regulation S-K would codify the majority of 
the disclosures currently called for by Item V of Guide 3, with some 
revisions. Specifically, the proposed rules would replace the ``amount 
of outstanding domestic time certificates of deposit and other time 
deposits equal to or in excess of $100,000'' by maturity disclosure in 
Item V.D with a requirement to disclose the ``amount of time deposits 
in uninsured accounts'' by maturity. The proposed rules would require 
separate presentation of (1) U.S. time deposits in amounts in excess of 
the FDIC insurance limit, and (2) time deposits that are otherwise 
uninsured (including for example, U.S. time deposits in uninsured 
accounts, non-U.S. time deposits in uninsured accounts, or non-U.S. 
time deposits in excess of any country-specified insurance fund), by 
time remaining until maturity of (1) 3 months or less; (2) over 3 
through 6 months; (3) over 6 through 12 months; and (4) over 12 months. 
By not having a defined dollar threshold for the disclosure, the 
disclosure requirement would accommodate changes in the FDIC limit, 
making it easier for registrants to apply the rule when there is a 
change in the FDIC Insurance limit.
    Additionally, the proposed rules would require bank and savings and 
loan registrants to quantify the amount of uninsured deposits as of the 
end of each reported period. Because uninsured deposits may have a 
different funding and interest rate risk profile than other deposits, 
we believe separate disclosure of these deposits would provide 
decision-relevant information about the registrant's sources of funds. 
For example, disclosure of uninsured deposits would provide enhanced 
information about deposits that are more prone to withdrawals if a 
registrant experiences financial difficulty,\258\ which could help 
investors better evaluate potential risks related to the registrant's 
funding sources. The proposed rules define uninsured deposits for bank 
and savings and loan registrants that are U.S. federally insured 
deposit institutions and require foreign bank and savings and loan 
registrants to disclose how they have defined uninsured deposits for 
purposes of this disclosure.\259\ The proposed rules do not provide a 
definition of uninsured deposits for foreign bank and savings and loan 
registrants given that the definition varies from jurisdiction to 
jurisdiction.
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    \258\ Stavros Peristiani and Jo[atilde]o Santos., Liberty Street 
Economics, Depositor Discipline of Risk-Taking by U.S. Banks (April 
2014), available at: https://libertystreeteconomics.newyorkfed.org/2014/04/depositor-discipline-of-risk-taking-by-us-banks.html.
    \259\ See Item 1406(e).
---------------------------------------------------------------------------

    Given that U.S. GAAP and IFRS do not require disclosure at the same 
level of detail that is currently called for by Item V of Guide 3, we 
believe the disclosures currently called for by Item V, including the 
proposed revision to the disclosure called for by Item V.D, should be 
codified in Item 1406 of Regulation S-K. We believe codifying these 
disclosures would provide transparency with respect to a registrant's 
sources of funding, which could be information material to an 
investment decision.
    Request for Comment:
    57. Should we codify the disclosures currently called for by Item V 
of Guide 3 with the proposed revisions?
    58. Should we, as proposed, require disclosure related to uninsured 
deposits? Would the proposed disclosures provide investors with 
information about amounts that are at a higher risk of being withdrawn 
on short notice and not replaced? Are there additional disclosures an 
investor needs to understand potential risks related to uninsured 
deposits? If so, what are those disclosures? Are there other types of 
deposits that may be considered at higher risk of being withdrawn? If 
so, which ones, and what type of disclosure would be material for these 
deposits?
    59. Is the proposed definition of uninsured deposits for U.S. 
federally insured depositary institutions appropriate? If not, how 
should it be revised? Should we, as proposed, allow foreign bank and 
savings and loan registrants to apply their own definition of uninsured 
deposits for the purposes of this disclosure? If not, how should we 
define uninsured deposits for these registrants? Would the lack of a 
definition for uninsured deposits result in a lack of comparability 
among foreign bank and savings and loan registrants?
    60. Are the deposit types specified in the proposed rules the 
appropriate categories? If not, which deposit types should be added or 
excluded? Should we, as proposed, codify the Guide 3 disclosure for 
deposit categories that are in excess of 10 percent of average total 
deposits? Should we specify a different threshold for disclosure of 
specific deposit categories? If so, what should the threshold be?
    61. Should we, as proposed, revise the time certificate of deposit 
disclosure to be based on all uninsured deposits rather than the 
current threshold of amounts of $100,000 or more? Would the proposed 
revision result in the disclosure of information that may be material 
to an investment decision? Would any information material to an 
investment decision be lost by the change in threshold?

III. Certain Existing Guide 3 Disclosures That Would Not Be Codified in 
Proposed Subpart 1400 of Regulation S-K

A. Return on Equity and Assets

i. Background
    Financial ratios aid investors in comparing registrants across 
different industries and time periods. Guide 3 (Item VI.) calls for 
disclosure of four specific ratios for each reported period, including 
return on asset (``ROA''), return on equity (``ROE''), a dividend 
payout ratio, and an equity to assets ratio. Guide 3 also includes an 
instruction that directs registrants to

[[Page 52956]]

supply any other ratios that they deem necessary to explain their 
operations.
    In the Request for Comment, the Commission asked whether Commission 
rules, U.S. GAAP, or IFRS require the same or similar information as 
called for by Guide 3, whether the disclosures provide investors with 
information material to an investment decision, and how the disclosures 
could be improved.
ii. Comments on Return on Equity and Assets
    Many commenters stated that the existing return on equity and 
assets disclosures called for by Item VI. of Guide 3 ``may be of 
value'' to investors and others.\260\ Most of these commenters stated 
that these disclosures are unique disclosures called for by Guide 
3.\261\ Despite believing that this information may be valuable to 
investors, a few of these commenters \262\ also indicated that these 
ratios or their components are easily derived from information 
otherwise disclosed in financial statements and are largely duplicative 
of data filed within Federal Reserve Form FY Y-9C.\263\
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    \260\ See letters from ABA; AmEx; CAQ; CH/SIFMA; Crowe; 
Deloitte; EY; KPMG; PNC; and PwC.
    \261\ See letters from CAQ; CH/SIFMA; Crowe; Deloitte; EY; KPMG; 
PNC; and PwC.
    \262\ See letters from ABA and AmEx.
    \263\ The Federal Reserve Board collects basic financial data on 
a consolidated basis from domestic bank holding companies, savings 
and loan holding companies and securities holding companies on Form 
FR Y-9C.
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iii. Proposed Rule--Return on Equity and Assets
    The proposed rules would not codify the ratios called for by Item 
VI. While these ratios may provide useful information to investors for 
comparing registrants and making investment decisions, these ratios are 
not unique to bank and savings and loan registrants. Instead these 
ratios may be key performance measures for any and all registrant types 
and our proposed rules focus on disclosures related to traditional 
``banking'' activities. In this regard, we note that the Commission's 
guidance on MD&A \264\ states companies should identify and discuss key 
performance indicators when they are used to manage the business and 
would be material to investors. We therefore believe investors would 
continue to receive return on equity and asset ratio disclosures when 
necessary to an understanding of the bank and savings and loan 
registrant's financial condition and results of operations.
---------------------------------------------------------------------------

    \264\ Commission Guidance Regarding Management's Discussion and 
Analysis of Financial Condition and Results of Operation, Release 
No. 33-8350 (Dec. 19, 2003) [68 FR 75056] (``2003 MD&A Interpretive 
Release'').
---------------------------------------------------------------------------

    To the extent registrants stop disclosing these ratios and 
investors still want the return on equity and asset ratios, the 
information to calculate these ratios can be derived from amounts 
reported on the income statement and the average balance sheet called 
for by Item I.A of Guide 3, which we propose to codify.\265\ Similarly, 
the dividend payout ratio can be calculated based on the disclosures 
required by Article 3 of Regulation S-X.\266\ We do not believe the 
burden to calculate the ratios justifies the cost to provide them when 
the disclosure threshold in the Commission MD&A guidance is not met.
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    \265\ In the case of average amounts, current and prior year 
amounts presented on the balance sheet can also be used to calculate 
the average.
    \266\ 17 CFR 210.3-01 through 3-20. Rule 3-04 of Regulation S-X 
requires disclosure of dividends per common share in the changes in 
stockholders' equity and noncontrolling interests' statement or 
footnote.
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    Request for Comment:
    62. The proposed rules would not codify the ratios currently called 
for by Item VI of Guide 3 (ROA, ROE, a dividend payout ratio, and an 
equity to assets ratio). Would this result in the loss of information 
material to an investment decision not readily available from other 
disclosures or publicly available information? If so, which ratios 
should be codified? How would investors use these ratios?
    63. Are investors able to calculate the ratios using existing 
financial information? If so, does the benefit of having the ratios 
readily available to an investor without calculation outweigh the cost 
of providing the ratio disclosures in circumstances when a bank and 
savings and loan registrant would otherwise not provide these ratios in 
MD&A? \267\
---------------------------------------------------------------------------

    \267\ Id.
---------------------------------------------------------------------------

    64. Would registrants no longer disclose these ratios in their 
filings if not codified in the proposed rules? Are there registrants 
currently disclosing these ratios under Guide 3 but who do not consider 
these ratios material to an investment decision? If so, would these 
registrants not disclose such ratios in MD&A?
    65. Should we require other specific ratios for bank and savings 
and loan registrants? If so, what types of ratios should we require? 
Are these ratios able to be calculated based on existing information 
available in the filings? How would investors use these ratios?
    66. If we were to expand the scope of the proposed rules to include 
all financial services registrants with material operations in any of 
the activities covered by the proposed rules, are there specific ratios 
we should require? If so, which ones, and how would investors use these 
ratios? Are financial services registrants currently providing these 
ratios? Would they be material to all financial services registrants or 
just certain types?

B. Short-Term Borrowings

i. Background
    Bank and savings and loan registrants often use short-term 
borrowings to supplement their deposits and diversify their funding 
sources. Short-term borrowings may include federal funds transactions, 
repurchase agreements, commercial paper, inter-bank loans, and any 
other short-term borrowings reflected on the registrant's balance 
sheet.\268\ Federal funds transactions can be an important tool for 
managing liquidity, while repurchase agreements can provide a cost-
effective source of funds and may allow a registrant to leverage its 
securities portfolio for liquidity and funding needs.
---------------------------------------------------------------------------

    \268\ 17 CFR 210.9-03.13(3).
---------------------------------------------------------------------------

    A registrant's use of short-term borrowings can fluctuate 
significantly during a reporting period. As a result, the presentation 
of period-end amounts alone may not accurately reflect a registrant's 
funding needs or use of short-term borrowings during the period.
    Item VII of Guide 3 currently calls for the following short-term 
borrowings disclosures by category:
     The period-end amount outstanding;
     The average amount outstanding during the period; and
     The maximum month-end amount outstanding.\269\
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    \269\ Item VII. refers to Rule 9-04.11 for categories of short-
term borrowings. The correct reference, however, is Rule 9-03.13. 
Registrants often provide the average short-term borrowings 
disclosures as part of their average balance sheet disclosures.

Item VII also calls for disclosure, by category of borrowing, of the 
weighted average interest rates at period-end and during the period, 
and the general terms of the borrowing. The disclosures called for by 
Item VII need not be provided for categories of short-term borrowings 
for which the average balance outstanding during the period was less 
than 30% of stockholders' equity at the end of the period.
    Since Guide 3 was last amended, a number of disclosures have been 
added to U.S. GAAP and IFRS, and the Commission has issued guidance 
related to borrowings and liquidity disclosures, as discussed below. 
For example, U.S. GAAP requires certain financial services

[[Page 52957]]

registrants to disclose significant categories of borrowings,\270\ as 
well as disclosures for repurchase agreements, securities lending 
transactions and repurchase-to-maturity transactions for all 
registrants for which the disclosures are material.\271\ Article 9 of 
Regulation S-X requires disclosure of certain specified short-term 
borrowing categories, including (1) federal funds purchased and 
securities sold under agreements to repurchase, (2) commercial paper, 
and (3) other short-term borrowings.\272\
---------------------------------------------------------------------------

    \270\ ASC 942-470-45-1 requires that significant categories of 
borrowings be presented as separate line items in the liability 
section of the balance sheet, or as a single line item with 
appropriate note disclosures of the components. Financial 
institutions may alternatively present debt based on the debt's 
priority (that is, senior or subordinated) if they also provide 
separate disclosure of significant categories of borrowings. See 
supra note 45.
    \271\ ASC 860-30-50-7 requires a registrant to provide an 
understanding of the nature and risks of short-term collateralized 
financing obtained through repurchase agreements, securities lending 
transactions, and repurchase-to-maturity transactions that are 
accounted for as secured borrowings, including a disaggregation of 
the gross obligation by class of collateral, the remaining 
contractual maturity, and a discussion of the potential risks 
associated with the agreements and related collateral pledged, 
including obligations arising from a decline in the fair value of 
the collateral pledged and how those risks are managed.
    \272\ Rule 9-03 of Regulation S-X.
---------------------------------------------------------------------------

    IFRS requires disclosure of the carrying amount and fair value of 
each class of financial liabilities.\273\ Additionally, IFRS requires a 
discussion of risk arising from financial instruments, and if the 
quantitative data disclosed for the risk is unrepresentative of the 
registrant's exposure to risk during the period, IFRS requires further 
disclosure, such as exposure at various times during the period, or the 
highest, lowest and average exposures.\274\
---------------------------------------------------------------------------

    \273\ IFRS 7.25.
    \274\ IFRS 7.34-35 and IFRS 7.IG20.
---------------------------------------------------------------------------

    In addition to the specific U.S. GAAP and IFRS requirements noted 
above, the Commission issued guidance in 2010 regarding appropriate 
disclosure when the registrant's financial statements do not adequately 
convey the registrant's financing arrangements, such as if borrowing 
arrangements during the period are materially different than the 
period-end amounts.\275\ Registrants typically discuss their sources of 
funding and outstanding borrowings in their liquidity section of MD&A. 
The 2010 MD&A Interpretive Release highlights important trends and 
uncertainties related to liquidity for registrants to consider in their 
MD&A disclosures. The guidance notes as examples of trends and 
uncertainties the reliance on commercial paper or other short-term 
financing arrangements for liquidity, and intra-period variations in 
borrowings in circumstances where borrowings during the period are 
materially different than the period-end amounts. Therefore, when 
material, Item 303 of Regulation S-K elicits similar disclosure to that 
called for by Item VII.
---------------------------------------------------------------------------

    \275\ Commission Guidance on Presentation of Liquidity and 
Capital Resources Disclosures in Management's Discussion and 
Analysis, Release No. 33-9144 (Sept. 17, 2010) (``2010 MD&A 
Interpretive Release'') [75 FR 59894].
---------------------------------------------------------------------------

    In the Request for Comment, the Commission asked whether Commission 
rules, U.S. GAAP, or IFRS require the same or similar information as 
called for by Guide 3, whether the disclosures provide investors with 
information material to an investment decision, and requested 
recommendations for how the disclosures could be improved.
ii. Comments on Short-Term Borrowings
    Many commenters said that a portion of the short-term borrowings 
disclosures called for by Item VII of Guide 3 overlaps with Commission 
rules, U.S. GAAP, or other disclosures called for by Guide 3.\276\ One 
commenter suggested that Item VII should be eliminated in its entirety 
due to overlap with existing Item I of Guide 3 disclosures relating to 
weighted average amounts outstanding and otherwise sufficient 
disclosures in the financial statements of period end amounts.\277\
---------------------------------------------------------------------------

    \276\ See letters from ABA; AmEx; BerryDunn; CAQ; Crowe; 
Deloitte; EY; KPMG; MFG; MUFG; PNC; and PwC.
    \277\ See letter from MFG. Items I.B.1 and I.B.3 of Guide 3 call 
for disclosure of the average balance and related average rate paid 
for each major category of interest-bearing liabilities.
---------------------------------------------------------------------------

    A few commenters stated that all or a portion of the disclosures 
called for by Item VII are not required by Commission rules or U.S. 
GAAP.\278\ Two of these commenters expressed the view that the 
disclosures called for by Item VII relating to average and maximum 
month-end amounts of short-term borrowings outstanding, as well as 
weighted average interest rate (i.e., Items VII.2 and VII.3 and the 
portion of Item VII.1 related to weighted-average interest rates), 
``may be useful'' to some investors because they provide further 
context to the period-end amounts.\279\ One commenter stated that they 
believe all of the information regarding short-term borrowings required 
by Item VII of Guide 3 provides ``meaningful information'' but did not 
elaborate on how the information is used.\280\
---------------------------------------------------------------------------

    \278\ See letters from ABA; AmEx; CH/SIFMA; and Crowe.
    \279\ See letters from ABA and AmEx.
    \280\ See letter from CH/SIFMA.
---------------------------------------------------------------------------

    A few commenters stated that the disclosures called for by Item 
VII.1 are not required by IFRS, while the disclosures called for by 
Items VII.2 and VII.3 are not specifically required by IFRS.\281\ 
However, these commenters also noted that IFRS requires disclosure of 
more information about financial instruments if period-end information 
is unrepresentative of a registrant's exposure to risk (e.g., credit, 
liquidity, or market risk) during the period.\282\
---------------------------------------------------------------------------

    \281\ See letters from CAQ; EY; KPMG; and PwC.
    \282\ See, e.g., letter from CAQ (referring to disclosures in 
IFRS 7.35, IFRS 7.BC48, and IFRS 7.IG20).
---------------------------------------------------------------------------

iii. Proposed Rule--Short-Term Borrowings
    The proposed rules would not codify the Item VII short-term 
borrowing disclosures currently called for by Guide 3 in their current 
form. Instead, we propose to codify the average balance and related 
average rate paid for each major category of interest-bearing liability 
disclosures currently called for by Item I.B.1 and I.B.3 of Guide 3 and 
to further disaggregate the major categories of interest-bearing 
liabilities to include those referenced in Item VII and Article 9 of 
Regulation S-X. We believe the disclosures currently called for by 
VII.1 and VII.3 would be substantially covered by these proposed 
requirements and the financial statements.\283\ These proposed 
requirements do not codify the bright-line disclosure threshold of 30% 
of stockholders' equity at the end of the period because Regulation S-X 
already includes thresholds for disclosure of short-term borrowing 
categories. Furthermore, in light of the guidance set forth in the 2010 
Interpretive Release, we believe Item 303 of Regulation S-K will elicit 
disclosure of any trends or uncertainties that may arise related to the 
maximum month-end amounts of short-term borrowings called for by Item 
VII.2. Given this overlap, we do not believe it is necessary to codify 
the current Item VII disclosures in proposed subpart 1400.
---------------------------------------------------------------------------

    \283\ See Section II.E discussing the proposed codification of 
the average amount outstanding during the period and the interest 
paid on such amount, and the average rate paid, for each major 
category of interest-bearing liability. Article 9 of Regulation S-X 
requires disclosure of the period-end amount outstanding by the 
short-term borrowing categories.
---------------------------------------------------------------------------

    Request for Comment:
    67. The proposed rules would effectively codify the disclosures 
currently called for by Items VII.1 and VII.3 that are not already 
addressed in Regulation S-X as part of the codification and further 
disaggregation of the Item I average balance sheet and

[[Page 52958]]

the interest and yield/rate analysis disclosures. Would the proposal to 
codify only these disclosures as part of that section of the proposed 
rules result in a loss of information material to an investment 
decision? If so, what other disclosures should be retained? The 
proposed rules would not codify the disclosure currently called for by 
Item VII.2. Would the proposal not to codify this disclosure result in 
a loss of information material to an investment decision? If so, what 
disclosure should be retained?
    68. Are there other types of short-term borrowing disclosures that 
are material to an investment decision and that are not already 
available from publicly available information? If so, what types of 
disclosures should be required?
    69. If we were to expand the scope of the proposed rules to include 
all financial services registrants that have material operations in any 
of the activities covered by the proposed rules, are there short-term 
borrowing disclosures that would be material to investors and that are 
not already available from publicly available information? If so, what 
types of disclosures should be required? Are any financial services 
registrants currently providing these disclosures? Would they be 
material to all financial services registrants or just certain types?

IV. Proposed Changes to Article 9 of Regulation S-X

    As noted in Section II.G of this Release, in the Request for 
Comment the Commission asked whether Commission rules require the same 
or similar loan information as called for by Guide 3. Many commenters 
indicated that the Item III.A loan disclosures overlap with U.S. 
GAAP.\284\ Most of these commenters also indicated that the Item III.A 
loan disclosures overlap with Article 9 of Regulation S-K.\285\ 
Additionally, several commenters indicated that IFRS calls for 
disclosure of financial instruments by class, although they 
acknowledged that determination of the classes will require judgement 
by management.\286\
---------------------------------------------------------------------------

    \284\ See letters from BerryDunn; CAQ; CH/SIFMA; Deloitte; EY; 
KPMG; MFG; MUFG; PNC; and PwC.
    \285\ See letters from CAQ; CH/SIFMA; Deloitte; EY; KPMG; MFG; 
MUFG; PNC; and PwC.
    \286\ See letters from CAQ; EY; KPMG; PNC; and PwC.
---------------------------------------------------------------------------

    Rule 9-01 of Regulation S-X states that Article 9 is applicable to 
the consolidated financial statements filed for BHCs and to any 
financial statements of banks that are included in filings with the 
Commission, although other registrants with material lending and 
deposit activities also apply the rules in Article 9 of Regulation S-
X.\287\ In light of our proposal to revise the scope of the proposed 
rules to include savings and loan associations and savings and loan 
holding companies, we propose to amend Rule 9-01 of Regulation S-X to 
include these registrants within the scope of Article 9 of Regulation 
S-X. However, if registrants outside one of the defined types of 
applicable registrants believe the Article 9 presentation is material 
to an understanding of its business, our rules would not preclude that 
presentation for those registrants. Additionally, Rule 9-03 of 
Regulation S-X provides guidance on the various items, which if 
applicable, should appear on the face of the balance sheets or in the 
notes thereto. Rule 9-03(7)(a)-(c) of Regulation S-X and U.S. GAAP 
\288\ both require disclosure of loans by category. Similarly, IFRS 
\289\ requires disclosure of financial instruments by class, which is 
consistent with the requirement in Rule 9-03(7)(a)-(c) of Regulation S-
X. Based on the foregoing, we propose to delete Rule 9-03(7)(a)-(c).
---------------------------------------------------------------------------

    \287\ See supra note 32.
    \288\ See supra note 145.
    \289\ See supra note 108.
---------------------------------------------------------------------------

    Request for Comment:
    70. Should we, as proposed, revise the scope of Rule 9-01 of 
Regulation S-X to include savings and loan associations and savings and 
loan holding companies? Should we include other types of companies in 
the scope of Rule 9-01 of Regulation S-X? If so, which types?
    71. Would the proposal to delete Rule 9-03(7)(a)-(c) result in a 
loss of information material to an investment decision? If so, should 
all or part of Rule 9-03(7)(a)-(c) be retained?
    72. Are there other parts of Article 9 of Regulation S-X that are 
duplicative of, or substantially overlap with, U.S. GAAP and IFRS? If 
so, which ones? Would the deletion of them result in the loss of 
information material to an investment decision?
    73. Are there other types of registrants that should be included in 
the scope of Rule 9-01 of Regulation S-X? For example, should we expand 
the scope to include all financial services registrants? Do 
registrants, other than those within the proposed scope, currently 
apply the requirements in Article 9 of Regulation S-X? If so, what 
types of registrants? Are there particular burdens that registrants, 
other than those within the proposed scope, would face in providing 
this information? If so, what are the burdens and would these burdens 
outweigh the benefits of this disclosure?

V. General Request for Comments

    The proposed rules address three financial activities: (1) Holding 
debt securities, (2) holding loans and the related allowance for credit 
losses, and (3) deposit-taking, as well as the related interest income 
and interest expense generated from these activities. Guide 3 also 
calls for disclosure of short-term borrowings and return on equity and 
assets. We did not codify these disclosures except for the categories 
of short-term borrowings in the average balance sheet. We seek feedback 
on whether the financial activities for which we are proposing 
disclosure requirements are the material activities for bank and 
savings and loan registrants and whether we should propose any other 
disclosures.
    Consistent with existing Guide 3, we are not proposing to require 
the disclosures in new Subpart 1400 of Regulation S-K to be presented 
in the notes to the financial statements. Therefore, the proposed 
disclosures would not be required to be audited,\290\ nor would they be 
subject to the Commission's requirements to file financial statements 
in a machine-readable format using eXtensible Business Reporting 
Language (``XBRL'').\291\ In the Request for Comment, the Commission 
asked whether it should require the Guide 3 tabular disclosures to be 
submitted in XBRL. We received limited feedback on this point \292\ and 
thus believe that additional feedback based on the

[[Page 52959]]

proposed disclosure requirements set forth in this release would be 
useful.
---------------------------------------------------------------------------

    \290\ Article 3 of Regulation S-X generally requires two years 
of audited balance sheets and three years of audited income 
statements, except that SRCs may present only two years of audited 
income statements under Article 8 of Regulation S-X. EGCs may also 
present only two years of financial statements in initial public 
offerings of common equity securities. Additionally, Part F/S(c)(ii) 
of Form 1-A requires audited financial statements for Tier 2 
offerings, and issuers in Tier 2 offerings are required to file an 
annual report on Form 1-K containing two years of audited financial 
statements.
    \291\ For domestic disclosure forms, the XBRL data-tagging 
requirements are imposed through Item 601(b)(101) of Regulation S-K 
and Rule 405(b) of Regulation S-T. See Item 601(b)(101) of 
Regulation S-K [17 CFR 229.601(b)(101)] and Rule 405(b) of 
Regulation S-T [17 CFR 232.405(b)]. For foreign disclosure forms, 
analogous XBRL tagging requirements are included in the instructions 
to the relevant forms. See, e.g., paragraphs 100 and 101 of the 
Instructions to Exhibits to Form 20-F. The Commission recently 
adopted rules requiring the use of Inline XBRL format, where XBRL 
data is embedded into the HTML document, instead of the traditional 
XBRL format. See Inline XBRL Filing of Tagged Data, Release No. 33-
10514 (June 28, 2018) [83 FR 40846 (July 10, 2018)].
    \292\ See letters from ABA, AmEx, CAP, CH/SIFMA, Deloitte, and 
XBRL US.
---------------------------------------------------------------------------

    74. Are the activities listed in the proposed rules the appropriate 
ones for disclosure? If not, how should we revise the proposed rules?
    75. Are there additional areas of disclosure, such as information 
related to non-interest income revenue streams or capital that also 
should be included in the proposed rules? If so, what are those other 
areas and what additional disclosures are appropriate and why?
    76. Are there disclosures about derivatives not already addressed 
by Commission rules, U.S. GAAP, or IFRS that also should be included in 
the proposed rules? If so, what disclosures would be material for 
investors and in what manner should they be provided? Would providing 
this information result in a significant undue cost or burden?
    77. Should we require the proposed disclosures to be included in 
the notes to the financial statements? What would be the benefits and 
costs of requiring the proposed disclosure in the financial statements? 
For example, how would such a requirement affect search costs for 
investors or compliance burdens for registrants?
    78. Should we require the proposed disclosures to be provided in a 
structured format, such as XBRL or Inline XBRL to facilitate investor 
discovery, access reuse, analysis, and comparison across registrants? 
Should all or a subset of the proposed disclosures be structured? If a 
subset, which disclosure elements and why? Is XBRL or Inline XBRL 
preferable and why? What would be the costs, burdens, and benefits 
associated with structuring this information? Would the costs and 
burdens be disproportionately high for any group of issuers?
    We request and encourage any interested person to submit comments 
on any aspect of the proposals, other matters that might have an impact 
on the amendments and any suggestions for additional changes. Comments 
are of greatest assistance to our rulemaking initiative if accompanied 
by supporting data and analysis, particularly quantitative information 
as to the costs and benefits, and by alternatives to the proposals 
where appropriate. Where alternatives to the proposals are suggested, 
please include information as to the costs and benefits of those 
alternatives.

VI. Economic Analysis

A. Introduction

    The Commission is proposing to rescind Guide 3 and to update and 
codify into a new Subpart 1400 of Regulation S-K certain Guide 3 
disclosures that do not overlap with disclosures required by Commission 
rules, U.S. GAAP, or IFRS, while adding to that Subpart certain credit 
ratio disclosure requirements. New Subpart 1400 would apply to banks, 
bank holding companies, savings and loan associations, and savings and 
loan holding companies. Disclosure within the banking industry may be 
valuable for investors; \293\ however, it could be costly for 
registrants. The proposed rules aim to streamline bank and savings and 
loan registrants' compliance efforts and may decrease their costs. At 
the same time, the proposed rules may enhance comparability across 
issuers--both foreign and domestic--which may benefit investors.
---------------------------------------------------------------------------

    \293\ For a discussion of the benefits of bank disclosure to 
investors, see, e.g., Ursel Baumann & Erland Nier, Disclosure, 
Volatility, and Transparency: An Empirical Investigation into the 
Value of Bank Disclosure, Econ. Pol'y Rev., Sept. 2004, at 31; Anne 
Beatty & Scott Liao, Financial Accounting in the Banking Industry: A 
Review of the Empirical Literature, 58 J. Acct. & Econ. 339 (2014).
---------------------------------------------------------------------------

    We are mindful of the costs imposed by, and the benefits obtained 
from, our rules. In this section, we analyze potential economic effects 
stemming from the proposed rules relative to the economic baseline, as 
well as reasonable alternatives to the proposed rules. The baseline 
consists of the current regulatory framework and current market 
practices. In this economic analysis, we consider the potential 
economic impact on affected registrants, investors, and other users of 
Commission filings, as well as potential effects on efficiency, 
competition, and capital formation.\294\ We also analyze the potential 
costs and benefits of reasonable alternatives to the proposed rules.
---------------------------------------------------------------------------

    \294\ Securities Act Section 2(a) and Exchange Act Section 3(f) 
require us, when engaging in rulemaking that requires us to consider 
or determine whether an action is necessary or appropriate in the 
public interest, to consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition, 
and capital formation. Further, Exchange Act Section 23(a)(2) 
requires us, when proposing rules under the Exchange Act, to 
consider the impact that any new rule would have on competition and 
to not adopt any rule that would impose a burden on competition that 
is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act.
---------------------------------------------------------------------------

    Where possible, we have attempted to quantify the economic effects 
expected to result from the proposed rules. In many cases, however, we 
are unable to quantify these economic effects. Some of the primary 
economic effects, such as the effect on investors' search costs, are 
inherently difficult to quantify. In many instances, we lack the 
information or data necessary to provide reasonable estimates for the 
economic effects of the proposed rules. Where we cannot quantify the 
relevant economic effects, we discuss them in qualitative terms. In 
addition, the broader economic effects of the proposed rules, such as 
those related to efficiency, competition, and capital formation, are 
difficult to quantify with any degree of certainty. The proposed rules 
simultaneously codify certain disclosures, add new credit ratio 
disclosures, and rescind disclosures that overlap with Commission 
rules, U.S. GAAP, or IFRS. As such, it is difficult to quantitatively 
attribute the overall effects on efficiency, competition, and capital 
formation to specific aspects of the proposed rules.

B. Baseline

    Our baseline consists of the disclosures currently called for by 
Guide 3, as well as those provided under current market practices.
i. Regulation
    Guide 3 applies to registration statements and annual reports filed 
by BHC registrants.\295\ In addition, other registrants that have 
material amounts of lending and deposit-taking activities provide Guide 
3 disclosures to the extent applicable.\296\ In general, Guide 3 calls 
for disclosures related to interest-earning assets and interest-bearing 
liabilities. More specifically, Item I calls for disclosure of average 
balance sheets and analyses of net interest earnings. Item II calls for 
disclosures related to a registrant's investment portfolio. Items III 
and IV call for disclosures related to the registrant's loan portfolio 
and loan loss experience, respectively. Item V calls for disclosures 
related to deposits. Item VI calls for registrants to report measures 
of return on equity and assets. Finally, Item VII calls for disclosures 
related to short-term borrowings.
---------------------------------------------------------------------------

    \295\ See supra note 4.
    \296\ See supra note 32.
---------------------------------------------------------------------------

    Since the last substantive revision of Guide 3 in 1986, certain 
U.S. GAAP and IFRS disclosure requirements have changed for registrants 
engaged in the activities addressed in Guide 3, which has resulted in 
some overlap between the Guide 3 disclosures and other disclosures. For 
example, Item II.A calls for disaggregated disclosure of book value of 
investments as of the end of each reported period. U.S. GAAP and IFRS 
require similar disclosure about both the amortized cost basis and fair 
value of investments as of the balance sheet date. Such overlapping 
disclosures may impose compliance costs on registrants without 
providing

[[Page 52960]]

additional material information to investors.
    Guide 3 applies to both domestic and foreign registrants, including 
most foreign private issuers,\297\ but does not apply to Form 40-F 
filers.\298\ As discussed above in Section II.B, the staff has observed 
that foreign bank and savings and loan registrants typically provide 
Guide 3 disclosures.
---------------------------------------------------------------------------

    \297\ Instructions to Item 4 of Form 20-F indicate that the 
information specified in any industry guide that applies to the 
registrant should be furnished.
    \298\ The staff has observed that Form 40-F filers that are 
banking institutions typically provide the disclosures called for by 
Guide 3.
---------------------------------------------------------------------------

    Guide 3 currently calls for five years of loan portfolio and loan 
loss experience data and for three years of all other data. This 
timeframe goes beyond the financial statement periods specified in 
Commission rules,\299\ which generally require two years of balance 
sheets and three years of income statements for registrants other than 
EGCs and SRCs. Guide 3 currently provides that registrants with less 
than $200 million of assets or less than $10 million of net worth may 
present only two years of information. However, the scaled disclosure 
regimes in Commission rules for SRCs and EGCs are based on other 
thresholds, such as public float, total annual revenues, or a 
combination of both. As such, SRCs and EGCs may not qualify for scaled 
disclosure under Guide 3.
---------------------------------------------------------------------------

    \299\ See Articles 3 and 8 of Regulation S-X.
---------------------------------------------------------------------------

ii. Affected Registrants
    We define the scope of Guide 3 as the population of registrants 
that may be currently following Guide 3. To estimate this population, 
we first identify registrants that meet the definition of a BHC in Rule 
1-02(e) of Regulation S-X \300\ or that are BHCs under the Bank Holding 
Company Act.\301\ We also identify certain other financial services 
registrants \302\ that have both lending and deposit-taking activities 
and are not BHCs, as these registrants may be following Guide 3 as a 
result of their activities.\303\ Table 1 below shows the estimated 
number of registrants within the Guide 3 scope, along with their 
cumulative assets by type and domestic/foreign status.\304\
---------------------------------------------------------------------------

    \300\ To estimate the number of BHC registrants, staff reviewed 
Commission filings by registrants in the following Standard 
Industrial Classification (``SIC'') codes to determine if the 
registrant met the definition of a BHC under Rule 1-02(e) of 
Regulation S-X: 6021, 6022, 6029, 6035, and 6036.
    \301\ Data on holding companies subject to the Bank Holding 
Company Act was obtained from Reporting Form FR Y-9C for holding 
companies as of Q4 2018. For purposes of this economic analysis, we 
only considered holding companies that are within the following SIC 
codes: 6021, 6022, 6029, 6035, 6036, 6099, 6111, 6141, 6153, 6159, 
6162, 6163, 6172, 6199, 6200, 6211, 6221, 6282, 6311, 6321, 6324, 
6331, 6351, 6361, 6399, 6411, 6500, 6510, 6519, 6798, and 7389. We 
note that registrants with SIC codes other than those specified may 
be holding companies subject to the Bank Holding Company Act. As 
such, the population of BHCs may be underestimated.
    \302\ For purposes of this economic analysis, we assume that a 
registrant is a financial services registrant if its type of 
business is identified as one of the following SIC codes: 6021, 
6022, 6029, 6035, 6036, 6099, 6111, 6141, 6153, 6159, 6162, 6163, 
6172, 6199, 6200, 6211, 6221, 6282, 6311, 6321, 6324, 6331, 6351, 
6361, 6399, 6411, 6500, 6510, 6519, 6798, and 7389. We note that 
registrants with SIC codes other than those specified may be 
providing financial services and some registrants with these SIC 
codes may not be providing financial services. As such, the 
population of financial services registrants may be under- or 
overestimated.
    \303\ For purposes of this economic analysis, we define this 
subset of registrants as those financial services registrants that 
have any amounts of loans and deposits reported in Commission 
filings. We note that amount of loans and deposits may not be 
material for some registrants in the subset. Therefore, the number 
of registrants that may be currently following Guide 3 due to their 
activities may be overestimated.
     To estimate the number of registrants with lending and deposit-
taking activities, the staff analyzed the most recent Form 10-K and 
Form 20-F filed as of May 1, 2019. This analysis is based on data 
from XBRL filings and staff review of filings for financial services 
registrants that did not submit XBRL filings. To identify financial 
services registrants that have both lending and deposit-taking 
activities, we used XBRL tags commonly used for loans and deposits. 
Staff reviewed the financial statements of identified registrants to 
determine whether the tags were related to the type of activities 
described in Guide 3 and excluded those with unrelated activities. 
We note that some registrants may use non-standard or custom XBRL 
tags to identify their lending or deposit-taking activities. As 
such, the number of financial services registrants with lending and 
deposit-taking activities may be underestimated.
    We also note that registrants with SIC codes other than those 
specified in supra note 302 may have lending and deposit-taking 
activities. For example, based on data from XBRL filings, staff 
identified 11 registrants that report both holdings of loans and 
deposit-taking activities and may be affected by Guide 3.
    \304\ For purposes of this economic analysis, we define domestic 
registrants as those that file Form 10-K and foreign registrants as 
those that file Form 20-F.
     The estimate for total assets of registrants is based on these 
registrants' most recent filings of Form 10-K or Form 20-F during 
the 12 month period ended May 1, 2019. The analysis was based on 
data from XBRL filings and staff review of filings for financial 
services registrants that did not submit XBRL filings. For foreign 
registrants that report total assets in local currency, we used 
exchange rates as of December 31, 2018 to convert their reported 
value to U.S. dollars.

                                                      Table 1--Registrants Within the Guide 3 Scope
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Domestic                         Foreign                          Total
                          Type                           -----------------------------------------------------------------------------------------------
                                                                 #         Assets, $bln          #         Assets, $bln          #         Assets, $bln
--------------------------------------------------------------------------------------------------------------------------------------------------------
BHCs....................................................             387          17,371              22          18,830             409          36,201
Financial services registrants with lending and deposit-              66           1,842              12           3,649              78           5,491
 taking activities:.....................................
    Savings and Loan Holding Companies \305\............              51             606               0               0              51             606
    Banks...............................................              13           1,199              10           3,177              23           4,377
    Other \306\.........................................               2              37               2             472               4             509
                                                         -----------------------------------------------------------------------------------------------
        Total...........................................             453          19,213              34          22,479             487          41,692
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We estimate that,  among registrants identified as being within the 
scope of Guide 3, 84% are BHCs that in aggregate hold 87% of total 
Guide 3 registrants' assets. We also estimate that, among the 
registrants within the scope of Guide 3, 93% are domestic registrants 
that in aggregate hold 46% of total assets. Although the number of 
foreign registrants is much smaller than the number of domestic 
registrants, foreign registrants in aggregate hold approximately 54% of 
total assets, as shown by the total assets in Table 1.
---------------------------------------------------------------------------

    \305\ We only identified savings and loan holding companies and 
did not identify any savings and loan associations within the 
population of financial services registrants with lending and 
deposit-taking activities.
    \306\ These are financial services registrants that do not fit 
under a definition of SLHC, bank, or SLA.
---------------------------------------------------------------------------

    Table 2 below shows the estimated number of registrants within the 
scope of Guide 3 that qualify for scaled Guide 3 disclosures, as well 
as the number of

[[Page 52961]]

registrants that qualify for SRC and/or EGC status.\307\
---------------------------------------------------------------------------

    \307\ To estimate the number of registrants that meet the Guide 
3 scaled disclosure threshold, the staff analyzed the most recent 
Form 10-K or Form 20-F filed as of May 1, 2019. The analysis was 
based on data from XBRL filings and staff review of filings for 
those registrants that did not submit their filings in XBRL format. 
The estimates for the number of affected registrants that are SRCs 
are based on information from their most recent annual filing, as of 
April 29, 2019. The estimates for the number of affected registrants 
that are EGCs are based on their most recent periodic filings as of 
April 29, 2019.

Table 2--Scaled Disclosure Thresholds for Registrants Within the Guide 3
                                  Scope
------------------------------------------------------------------------
                                              Qualifying registrants
                                         -------------------------------
       Scaled disclosure threshold                         Total assets,
                                                 #             $bln
------------------------------------------------------------------------
Guide 3 scaled threshold registrants....              12               1
SRC registrants.........................             165             176
EGC registrants.........................              61             120
------------------------------------------------------------------------

    Among the 487 registrants that may be following Guide 3, 36% are 
either SRCs or EGCs.\308\ However, only 2% currently qualify for the 
scaled disclosure in Guide 3. All of the registrants that qualify for 
scaled Guide 3 disclosures are either an SRC or an EGC, or both.
---------------------------------------------------------------------------

    \308\ We note that 37 affected registrants are both SRCs and 
EGCs.
---------------------------------------------------------------------------

C. Economic Effects

    The economic effects of the proposed rules primarily stem from 
changes to the substance and reporting periods of the Guide 3 
disclosures, including, among other things, the addition of certain new 
credit ratio disclosures. As a result, the affected bank and savings 
and loan registrants would experience changes in their compliance 
costs. In particular, affected registrants would experience a decrease 
in compliance costs stemming from a removal of overlapping disclosures 
and reduced reporting periods. However, this reduction may be partially 
offset by an increase in costs stemming from the proposed new credit 
ratio disclosures and more disaggregated disclosures. We first discuss 
the economic effects stemming from the proposed changes to the 
substance and reporting periods of the disclosures, followed by a 
discussion of the proposed scope, applicability, location, and format 
of the disclosures.
i. Not Codified Disclosures
    The proposed rule would not codify Guide 3 disclosures that overlap 
with Commission rules, U.S. GAAP, or IFRS. As such, the following 
disclosures in Items II, III, IV, and VII would not be codified:
     Short-term borrowing disclosures called for by Item VII.1 
and 2;
     Book value information, the maturity analysis of book 
value information, and the disclosures related to investments exceeding 
10% of stockholders' equity called for by Item II;
     Loan category disclosure, the loan portfolio risk elements 
disclosure, and the other interest-bearing assets disclosure called for 
by Item III;
     The analysis of loss experience disclosure called for by 
Item IV.A;
     The breakdown of the allowance disclosures called for by 
Item IV.B for IFRS registrants; and
     General Instruction 6 to Guide 3.
    The proposed rule also would not codify the disclosure called for 
by Item VI related to ROA, ROE, dividend payout, and equity to assets 
ratios, as these ratios are not specific to bank and savings and loan 
registrants. Because we are proposing to rescind Guide 3, we do not 
anticipate affected registrants would provide any Guide 3 disclosures 
not codified in new subpart 1400, unless required by other Commission 
rules,\309\ U.S. GAAP, or IFRS. Additionally, registrants may continue 
to voluntarily provide these disclosures.
---------------------------------------------------------------------------

    \309\ For example, a registrant may be required to provide 
certain of these disclosures pursuant to Exchange Act Rule 12b-20 in 
order to make any required statements, in light of the circumstances 
under which they were made, not misleading. See supra note 81.
---------------------------------------------------------------------------

a. Costs and Benefits
    To the extent that the disclosures we propose not to codify are 
reasonably similar to disclosures required under Commission rules, U.S. 
GAAP, or IFRS, not codifying these disclosures would facilitate bank 
and savings and loan registrants' compliance efforts by reducing the 
need to replicate disclosures or reconcile overlapping disclosures, and 
decrease the reporting burdens for the 487 registrants that may be 
currently following Guide 3. To the extent that these costs are 
currently passed along to customers and shareholders, the cost 
reductions associated with the proposed rule may flow through to 
customers in the form of more advantageous interest rates, and to 
shareholders in the form of higher earnings.
    Investors should not be adversely affected by the proposal not to 
codify the aforementioned disclosures, given that the overlapping 
disclosures required by Commission rules, U.S. GAAP, or IFRS elicit 
reasonably similar information. For example, U.S. GAAP and Article 9 of 
Regulation S-X require certain registrants to disclose certain 
categories of borrowings. As such, we believe the proposal not to 
codify the short-term borrowing disclosures called for by Item VII of 
Guide 3 would not result in a loss of information material to an 
investment decision.
    To the extent that the Guide 3 disclosures provide incremental 
information to investors, not codifying these disclosures could 
marginally increase information asymmetries and investor search costs. 
For example, unlike U.S. GAAP, which requires maturity analysis of 
investment securities, IFRS requires the maturity analysis of financial 
instruments like debt securities only if the information is necessary 
for evaluating the nature and extent of liquidity risk. However, a 
maturity analysis of debt securities could be useful for other things, 
such as measurement of interest rate risk. Therefore, not codifying the 
maturity analysis disclosure may result in a loss of information with 
respect to affected IFRS registrants if they were to determine that a 
maturity analysis of a portfolio of debt securities was not necessary 
for an investor to evaluate the nature and extent of liquidity risk. To 
the extent that some affected IFRS registrants come to this 
determination and the maturity analysis is considered material to an 
investment decision with respect to these registrants, investors may 
perceive them as more opaque or

[[Page 52962]]

risky compared to other registrants, resulting in a higher cost of 
capital for these registrants. In addition, potential loss of material 
information to investors could hypothetically arise if the disclosures 
that overlap with U.S. GAAP or IFRS are not codified and at some point 
in the future are no longer required by U.S. GAAP or IFRS.
    Item VI ratios are not specific to the financial activities 
specified in the proposed rules and would not provide additional 
information about those activities or the risks associated with them. 
In addition, codification of these ratios could be viewed as 
duplicative because key performance measures, when used to manage the 
business and are material to investors, are required to be disclosed 
under Item 303 of Regulation S-K.\310\ Finally, the ratios can be 
calculated using financial information already disclosed in Commission 
filings. Therefore, not codifying these ratios should not result in the 
loss of information material to an investment decision.
---------------------------------------------------------------------------

    \310\ See supra note 264.
---------------------------------------------------------------------------

    The Commission believes that the proposal not to codify General 
Instruction 6 to Guide 3--the undue burden accommodation for foreign 
registrants--would not result in an increase in compliance costs, as 
the purpose of the instruction overlaps with the general accommodation 
in Securities Act Rule 409 and Exchange Act Rule 12b-21. In addition, 
the proposed rules would link the specific categories of debt 
securities and loans that should be disclosed with those required by 
U.S. GAAP and IFRS and would explicitly exclude certain disclosures 
that are inapplicable to IFRS. This linkage to the categories used in 
the financial statements rather than U.S. banking categories should 
further reduce the need for foreign registrants to seek regulatory 
accommodations with respect to the proposed disclosure 
requirements.\311\
---------------------------------------------------------------------------

    \311\ See supra note 52.
---------------------------------------------------------------------------

b. Alternatives
    As an alternative, we could codify all of the Guide 3 disclosures. 
Codifying these disclosures would help ensure that relevant information 
about material financial activities is provided in a consistent and 
comparable format for investors, even though that format may be 
different from the presentation in the financial statements. Given the 
overlapping nature of certain Guide 3 disclosures and other disclosures 
required by Commission rules, U.S. GAAP, or IFRS, we believe that 
codifying all of the Guide 3 disclosures would result in inefficiencies 
for affected registrants and would not provide additional information 
material to an investment decision.
ii. Codified Disclosures
    We propose to codify certain Guide 3 disclosures that do not 
significantly overlap with disclosures required by Commission rules, 
U.S. GAAP, and IFRS. In addition, we propose to modify some of these 
disclosures to better align them with other existing reporting 
practices or to provide additional information that may be material to 
an investment decision.
a. Costs and Benefits
    We propose to codify all of the disclosures called for by Item I 
and the majority of disclosures called for by Item V, with some 
revisions. We also propose to codify the weighted average yield 
disclosure called for by Item II.B, the loan maturity and sensitivity 
to interest rate disclosures called for by Item III.B, and the 
allocation of the allowance for loan loss disclosure called for by Item 
IV.B for U.S. GAAP registrants. In addition, the proposed rules would 
codify the ratio of net charge-offs disclosure called for by Item IV.A, 
although on a disaggregated basis for each of the U.S. GAAP or IFRS 
loan categories presented in the registrant's financial statements.
    Codifying these items under new Subpart 1400 of Regulation S-K 
would provide a single source of disclosure requirements about the 
specified financial activities, which may facilitate compliance and 
lead to better comparability among bank and savings and loan 
registrants to the extent that centralization makes it easier for 
registrants to understand their disclosure obligations. In addition, 
this proposal would eliminate the uncertainty resulting from the 
existing disclosure structure for BHCs and registrants with material 
lending and deposit-taking activities under Guide 3.\312\ It also may 
decrease uncertainty on the part of registrants as to whether specific 
disclosures are required given Guide 3's status as staff guidance. 
However, codifying these disclosures in Regulation S-K may cause 
affected registrants to expend additional resources to produce the 
disclosures, as the status of the disclosures would be elevated from 
guidance to a rule, and could result in additional costs. To the extent 
that such effect is present, the resulting cost increase may be passed 
on to shareholders and customers.
---------------------------------------------------------------------------

    \312\ See letters from CAQ; Crowe; Deloitte; EY; KPMG; and PWC.
---------------------------------------------------------------------------

    We also propose to align the investment categories in Item II.B and 
loan categories in Items III.B, IV.A, and IV.B of Guide 3 with the 
respective debt security and loan categories required to be disclosed 
in the registrant's U.S. GAAP or IFRS financial statements. Currently 
Guide 3 indicates that registrants may present loan categories other 
than the ones outlined in Item III.B and IV.A if they consider them to 
be a more appropriate presentation. Therefore, we expect the proposed 
alignment of the loan categories to have minimal impact on those 
registrants that already use U.S. GAAP or IFRS loan categories. 
However, the registrants that currently apply Guide 3 loan categories 
may incur switching costs. Revising the debt security categories to 
conform to the financial statement categories would promote 
comparability and consistency of disclosures for investors and reduce 
the preparation burden and related costs imposed on affected 
registrants. However, to the extent that Guide 3 loan and investment 
categories provide information incremental to financial statement 
categories and bank and savings and loan registrants currently provide 
these disclosures based on the Guide 3 categories, investors may lose 
this information, which could impact their investment decisions.
    In addition, the proposed rules would disaggregate the categories 
of interest-earning assets and interest-bearing liabilities in the Item 
I disclosures that we propose to codify. For example, it would codify 
the short-term borrowing categories specified in Item VI. More 
disaggregated categories of assets and liabilities may provide 
investors with insight into the drivers of changes in the affected 
registrant's net interest income. As another example, the majority of 
the Item V deposits disclosures would be codified and additional 
categories of deposits would be required to be disclosed. The proposed 
disclosure, by avoiding specific reference to existing dollar limits, 
would better accommodate future changes in the FDIC insurance limit and 
provide more information on uninsured deposits. As such, these revised 
categories of deposits could provide greater transparency with respect 
to the affected registrant's sources of funding and risks related to 
these particular types of funding.
    The proposed rules also would require disclosure of the net charge-
off ratio on a disaggregated basis, based on the U.S. GAAP or IFRS loan 
categories. More disaggregated net charge-off ratio data may be 
information material to an investment decision as it could help

[[Page 52963]]

investors better understand drivers of the changes in a bank and 
savings and loan registrant's charge-offs and the related provision for 
loan losses. It also would supplement the financial statement 
disclosures with credit information, which could help investors 
interpret the various credit disclosures. As a result of increased 
transparency from these proposed disclosures, investors may be able to 
make more informed investment decisions and bank and savings and loan 
registrants' cost of capital may decrease.\313\ However, the need to 
provide disaggregated information would increase costs for affected 
registrants to the extent that some bank and savings and loan 
registrants may not be currently compiling such disaggregated data, 
which could ultimately affect shareholders and customers if the cost 
increases are passed on to them in the form of reduced earnings or 
increased prices.
---------------------------------------------------------------------------

    \313\ For a discussion of the benefits of loan loss disclosure 
for public banks, see, e.g., D. Craig Nichols, James M. Wahlen, & 
Matthew M. Wieland, Publicly Traded versus Privately Held: 
Implications for Conditional Conservatism in Bank Accounting, 14 
Rev. Acct. Stud. 88 (2009).
---------------------------------------------------------------------------

iii. New Credit Ratios Disclosures
    The proposed rules would require disclosure of three additional 
credit ratios for bank and savings and loan registrants, along with 
each of the components used in the ratios' calculation and a discussion 
of the factors that led to material changes in the ratios or related 
components. The ratios would be required for the last five years in 
initial registration statements and initial Regulation A offering 
statements, after which the reporting period for the ratios would be 
aligned with the reporting periods for financial statements. The 
proposed rules would also include an instruction stating that affected 
IFRS registrants do not have to provide either of the nonaccrual ratios 
as there is no concept of nonaccrual in IFRS.
a. Costs and Benefits
    Generally, the components of each proposed ratio are already 
required disclosures in bank and savings and loan registrants' 
financial statements. As such, the benefit to investors of requiring 
these additional credit ratios may be modest, mostly in the form of 
decreased search costs stemming from reduced time and effort to 
calculate the relevant credit ratios from other information. At the 
same time, since many registrants with holdings of loans already 
provide some of these ratios in their filings, we believe that the 
additional compliance burden for the proposed credit ratio disclosures 
would not be significant for such bank and savings and loan 
registrants.
    New bank and savings and loan registrants may experience higher 
costs due to the proposed requirement to provide five years instead of 
two years of credit ratios in initial registration statements and 
initial Regulation A offering statements. However, this effect would be 
somewhat mitigated by Securities Act Rule 409 and Exchange Act Rule 
12b-21, which, if certain conditions are met, allow a registrant to 
omit required information if it is unknown and not reasonably available 
to the registrant. In addition, the added transparency of an extended 
history of credit ratios may provide beneficial information to 
investors, increasing information efficiency and lowering the cost of 
capital for new bank and savings and loan registrants.\314\
---------------------------------------------------------------------------

    \314\ See infra Section VII for a discussion of our estimates--
for PRA purposes--of the burdens and costs associated with providing 
the proposed credit ratio disclosures.
---------------------------------------------------------------------------

iv. Reporting Periods
    Guide 3 currently calls for five years of loan portfolio and 
summary of loan loss experience data and three years for all other 
information. However, under Guide 3, registrants with less than $200 
million of assets or $10 million of net worth may present only two 
years of the information. The proposed rule would align the reporting 
periods for the proposed disclosures with the periods required by 
Commission rules for financial statements rather than the longer 
periods called for by Guide 3, except for the proposed credit ratios 
disclosure.\315\
---------------------------------------------------------------------------

    \315\ The reporting period for the proposed credit ratios 
disclosure would be the last five years for initial registration 
statements and initial Regulation A offering statements.
---------------------------------------------------------------------------

a. Costs and Benefits
    The proposal would reduce compliance costs for registrants 
currently following Guide 3, other than the small number of registrants 
eligible for scaled disclosure under Guide 3, as shown in Table 2 
above. In addition, alignment of the proposed rules' reporting periods 
with those required for financial statements would make it easier for 
both investors and bank and savings and loan registrants to determine 
which periods should be disclosed and why they are disclosed. Since 
prior period information for existing registrants is publicly available 
on EDGAR, scaling the number of reporting periods presented in a 
particular filing should not have a significant adverse impact on 
investors. However, outside of the proposed credit ratio disclosures, 
historical information for new bank and savings and loan registrants 
may not be available beyond the required disclosure period. As such, to 
the extent that investors and other users of Commission filings rely on 
Guide 3 information that covers a longer period of time than the 
proposed reporting periods, the loss of this information may result in 
higher search costs and more uncertainty about certain activities of 
new bank and savings and loan registrants. We do not have data to 
quantify the magnitude of the expected cost reductions for affected 
registrants or search cost increases for investors and other users of 
Commission filings as a result of the proposed reporting periods.
b. Alternatives
    As an alternative, we considered codifying the current Guide 3 
reporting periods. Under this alternative, all bank and savings and 
loan registrants with total assets over $200 million or net worth over 
$10 million, including SRCs and EGCs, would provide the proposed loan 
and allowance for credit losses disclosures for five years and the rest 
of the disclosures for three years. As such, the data would be required 
for a longer period of time than Commission rules require for financial 
statements. The additional historical periods would benefit investors 
in new bank and savings and loan registrants, as historical information 
is not publicly available for them. However, under this alternative, 
the majority of SRCs and EGCs would not realize the benefits of scaled 
disclosure, which would impose higher compliance costs for these 
registrants.
v. Proposed Scope
a. Costs and Benefits
    The proposed rules would apply to bank and savings and loan 
registrants. We estimate that this approach would not subject any 
additional registrants to the proposed rules, as our analysis 
preliminarily indicates that the population identified in Table 1 
includes all bank and savings and loan registrants within the financial 
services industry. At the same time, the proposed scope would provide 
more certainty to registrants with lending and deposit-taking 
activities because they would no longer need to assess the 
applicability of Guide 3 based on materiality of their activities and, 
instead, would be explicitly required to provide disclosure based on 
the type of their business.

[[Page 52964]]

    However, as shown in Table 1, this approach may result in four 
registrants not being included in the population of registrants that 
would have to provide the proposed disclosures because these 
registrants do not fall under a definition of a BHC, bank, savings and 
loan holding company, or savings and loan association, even though 
these registrants conduct deposit-taking and lending activities. To the 
extent that the lending and deposit-taking activities of these 
registrants are material, investors may lose information about these 
activities and comparability among registrants with lending and 
deposit-taking activities may decrease. However, if the primary 
business of registrants that do not fall under the definition of a BHC, 
bank, savings and loan holding company, or savings and loan association 
is considerably different from that of bank and savings and loan 
registrants, the information provided in response to Guide 3 may not be 
as relevant for investors. In addition, we note that, even if a 
registrant would not be subject to the proposed rules, other Commission 
disclosure requirements, such as MD&A, may elicit certain disclosure 
about financial activities of these registrants to the extent they are 
material, or registrants may voluntarily provide disclosures not being 
codified.
b. Alternatives
    As an alternative to the proposed scope, the Commission considered 
a scope that would not be limited to bank and savings and loan 
registrants, but would encompass all financial services registrants 
that conduct the activities addressed in the proposed rules. Given that 
the financial services industry has evolved significantly since the 
last substantive revision of Guide 3 in 1986, a wider range of 
registrants now engage in the activities addressed in Guide 3. Under 
the proposal, other registrants that provide similar financial 
services, such as lending, would not be required to provide the same 
disclosure because they do not fit the definition of a BHC, bank, 
savings and loan holding company, or savings and loan association, 
thereby making it more difficult to compare those registrants' 
disclosures to those provided by bank and savings and loan registrants. 
In addition, to the extent that registrants that conduct one of the 
activities addressed by the proposed rules would not be within the 
proposed scope, and to the extent that these registrants currently have 
a competitive advantage over registrants providing the Guide 3 
disclosures due to lower costs, the alternative may decrease this 
disparity.
    Table 3 below shows the estimated number of financial services 
registrants \316\ that conduct the activities addressed in the proposed 
rules: (1) Holding debt securities, (2) holding loans, and (3) deposit-
taking. It also provides a breakdown of those registrants that are 
within the scope of Guide 3 and those that are not.
---------------------------------------------------------------------------

    \316\ See supra note 303.
    \317\ For purposes of this economic analysis, we define 
financial services registrants holding debt securities as those that 
have any investment securities reported in their financial 
statements. To estimate the number of these registrants, the staff 
analyzed the most recent Form 10-K or Form 20-F filed as of May 1, 
2019 for financial services registrants. The analysis was based on 
data from XBRL filings and staff review of filings for financial 
services registrants that did not submit XBRL filings. To the extent 
that the estimate includes financial services registrants that hold 
equity and not debt securities or that the holdings in debt 
securities are not material, the number of financial services 
registrants with holdings of debt securities may be overestimated. 
To the extent that some financial services registrants may use non-
standard or custom XBRL tags to identify their investment activities 
or that there are financial services registrants outside of the SIC 
codes specified in note 301, supra, the number of financial services 
registrants with holdings of debt securities may be underestimated.

                                                  Table 3--Activities of Financial Services Registrants
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Holding debt securities \317\           Holding loans                  Deposit-taking
             Financial services registrants              -----------------------------------------------------------------------------------------------
                                                                 #         Assets, $bln          #         Assets, $bln          #         Assets, $bln
--------------------------------------------------------------------------------------------------------------------------------------------------------
Within Guide 3 scope....................................             485          41,691             487          41,692             486          41,692
Not within Guide 3 scope................................             468          18,278             264          15,860               0               0
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................             953          59,969             751          57,552             486          41,692
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We estimate that, out of 953 financial services registrants that 
hold debt securities, 485 registrants that in aggregate hold 
approximately 69.5% of assets among financial services registrants with 
debt securities may be currently following Guide 3. Similarly, out of 
751 financial services registrants that hold loans, 487 registrants 
that in aggregate hold approximately 72.4% of assets among all 
financial services registrants with holdings of loans may be currently 
following Guide 3. In contrast, all financial services registrants with 
deposit-taking activities may be currently applying Guide 3. We 
estimate that there are 566 additional financial services registrants 
that in aggregate hold approximately 31.1% of assets, conduct at least 
one of the three activities, and are not within the Guide 3 population 
identified in Table 1. Among these registrants, 166 have holdings of 
both debt securities and loans, 98 have holdings of loans only, and 302 
have holdings of debt securities only.
    To the extent that certain types of registrants outside the Guide 3 
population identified in Table 1 provide financial services and conduct 
activities similar to bank and savings and loan registrants, such as 
lending, this alternative approach could help investors to better 
compare registrants that conduct similar activities, which in turn 
could help investors make more efficient investment decisions. Further, 
this approach could facilitate investors' analysis of securities, 
potentially resulting in improved earnings estimates. Table 4 below 
lists financial services registrants that engage in at least one of the 
activities addressed by the proposed disclosures (holding loans, 
deposit-taking, or holding debt securities) by type of business.\318\
---------------------------------------------------------------------------

    \318\ We use SIC codes 6021, 6022, 6029, 6035, and 6036 to 
identify banks and saving institutions; SIC codes 6111, 6141, 6153, 
6159, 6162, 6172, and 6199 to identify credit and finance services 
registrants; SIC codes 6163, 6200, 6211, and 6221 to identify 
brokers, dealers, and exchanges; SIC code 6282 to identify 
investment advisers; SIC codes 6311, 6321, 6324, 6331, 6351, 6361, 
6399, and 6411 to identify insurance services companies; SIC codes 
6500, 6510, 6519, and 6798 to identify real estate registrants; and 
SIC codes 6099 and 7389 to identify registrants that provide other 
financial services. We note that there are 27 registrants outside of 
the SIC codes 6021, 6022, 6029, 6035, and 6036 (and thus not 
included in the 456 banking and savings registrants) that are either 
identified as BHCs under the BHC Act or under Rule 1-02(e) of 
Regulation S-X, or identified as banks or savings and loan holding 
companies.

[[Page 52965]]

                                                     Table 4--Financial Services Registrants by Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Within guide 3 scope          Not within guide 3 scope                  Total
               Type of financial services                -----------------------------------------------------------------------------------------------
                                                                 #         Assets, $bln          #         Assets, $bln          #         Assets, $bln
--------------------------------------------------------------------------------------------------------------------------------------------------------
Banking and saving......................................             456          36,569               1               0             457          36,569
Credit and finance......................................              19           1,643              60           6,357              79           8,000
Brokers, dealers, and exchanges.........................               7           3,293              89             763              96           4,056
Investment advice.......................................               1             137              37             214              38             352
Insurance...............................................               1              11             138           9,716             139           9,727
Real estate.............................................               0               0             192           1,386             192           1,386
Other financial services................................               3              39              49             426              52             465
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................             487          41,692             566          18,862            1053          60,554
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under the alternative to the proposed scope, these registrants 
would be newly subject to the proposed rules and would experience an 
increase in compliance costs as a result of new disclosure obligations. 
Given that many of these registrants may not currently provide the 
disclosures we propose to codify, these increased costs may be 
significant. Moreover, even if a registrant would not be subject to 
disclosure under the proposed rules, other Commission disclosure 
requirements, such as MD&A, or investors' demand may elicit certain 
disclosure about financial activities of these registrants to the 
extent they are material.
vi. Applicability of Disclosures
a. Costs and Benefits
    Guide 3 calls for disclosure about each of its specified 
activities, regardless of the materiality of these activities, except 
for the few disclosures that include bright-line disclosure thresholds. 
The proposed rules would codify the bright-line disclosure threshold 
for deposit disclosures and would not specify disclosure thresholds, 
similar to current Guide 3, for any of the other proposed disclosures. 
As such, we do not expect this aspect of the proposal to result in 
meaningful economic effects for registrants and investors as compared 
to the baseline.
b. Alternatives
    As an alternative, the Commission considered requiring disclosures 
based on the materiality of the relevant financial activities to the 
registrant's business or financial statements. On the one hand, a 
materiality-based approach may result in a more tailored compliance 
regime and allow these registrants to use firm-specific information to 
determine whether certain activities are material. However, if 
registrants and investors have different perceptions about what 
activities are material, investors may have less information than they 
desire in making investment decisions. In addition, under this 
alternative approach, a banking registrant could make an incorrect 
judgment about the materiality of a certain activity, potentially 
subjecting the registrant to increased litigation risk. As such, bank 
and savings and loan registrants may respond by expending more 
resources on materiality determinations. In addition, under this 
alternative, comparability across registrants may decrease.
    As another alternative, the Commission could have proposed using a 
bright-line threshold for all proposed disclosures. Such an approach 
may be easier to apply as it would not require judgment and would 
reduce bank and savings and loan registrants' uncertainty about whether 
they need to provide disclosures. However, a bright-line threshold may 
be under- or over-inclusive, especially for bank and savings and loan 
registrants with a level of activities just below or over the specified 
threshold. As a result, registrants that fall just below the threshold 
would not be comparable to registrants above the threshold, despite 
conducting similar activities. In addition, under this alternative, 
some bank and savings and loan registrants may be incentivized to 
actively manage their activity to the level just below the threshold 
such that they would not have to provide the disclosures for specified 
activities, even though those activities could be material to their 
business. In this instance, the bright-line approach would be under-
inclusive.
vii. Location and Format of Disclosures
    The proposed rules would continue to provide bank and savings and 
loan registrants with flexibility to determine where in the filing the 
required information should be presented.\319\ As such, we do not 
expect this aspect of the proposal to result in meaningful economic 
effects for registrants and investors as compared to the baseline.
---------------------------------------------------------------------------

    \319\ Based on the staff's review of financial services 
registrants' annual reports that contain Guide 3 disclosures, there 
currently is diversity in location of the disclosures, with some 
registrants providing the disclosures in the Business section and 
others providing it in MD&A.
---------------------------------------------------------------------------

a. Alternatives
    Investors and other users of Commission filings may process 
information located in different places within a registrant's filing 
differently. As an alternative, we could have proposed to require the 
disclosure to be located in the footnotes to the financial statements. 
The annual financial statements are required to be audited and tagged 
in a structured data format (i.e., Inline XBRL),\320\ which could 
enable investors and other users of Commission filings to locate 
specific proposed disclosures more easily and make comparisons across 
registrants faster, thereby decreasing investors' search costs. In 
addition, to the extent that investors may rely more on audited 
information, requiring the disclosure to be located in the footnotes to 
financial statements could decrease information asymmetries between 
investors and bank and savings and loan registrants, consequently 
decreasing cost of capital for these registrants. On the other hand, a 
requirement to include the proposed disclosures in the financial 
statements would increase bank and savings and loan registrants' 
compliance costs. Moreover, prescribing a specific

[[Page 52966]]

location for the disclosures could diminish bank and savings and loan 
registrants' ability to present the information in the context in which 
it is most relevant and understandable for investors.
---------------------------------------------------------------------------

    \320\ For academic research on the benefits and costs of XBRL, 
see, e.g., Yi Dong, Oliver Zhen Li, Yupeng Lin, & Chenkai Ni, Does 
Information-Processing Cost Affect Firm-Specific Information 
Acquisition? Evidence from XBRL Adoption, 51 J. Fin. & Quantitative 
Analysis 435 (2016); Elizabeth Blankespoor, The Impact of Investor 
Information Processing Costs on Firm Disclosure Choice: Evidence 
from the XBRL Mandate, 57 J. Acct. Res. 919 (2019); Chunhui Liu, 
Tawei Wang, & Lee J. Yao, XBRL's Impact on Analyst Forecast 
Behavior: an Empirical Study, 33 J. Acct. & Pub. Pol'y 69 (2014); Yu 
Cong, Jia Hao, & Lin Zou, The Impact of XBRL Reporting on Market 
Efficiency, J. Info. Sys., Fall 2014, at 181; Elizabeth Blankespoor, 
Brian P. Miller, & Hal D. White, Initial Evidence on the Market 
Impact of the XBRL Mandate, 19 Rev. Acct. Stud. 1468 (2014).
---------------------------------------------------------------------------

D. Effects on Efficiency, Competition, and Capital Formation

    The proposed codification of certain Guide 3 disclosures and new 
credit ratio disclosures may increase the quality and availability of 
information about bank and savings and loan registrants' activities, 
which could promote efficiency, competition, and capital formation. In 
addition, the new credit ratio disclosures may reduce information 
asymmetries between bank and savings and loan registrants and their 
investors and promote transparency, which may reduce the cost of 
capital for these registrants. Codification may also promote 
comparability and avoid uncertainty about when the proposed disclosures 
are required, further reducing information asymmetries and allowing 
investors to achieve better allocation efficiency. This, in turn, may 
increase the demand for securities offerings, reduce costs of capital, 
and enhance capital formation.
    The effect of proposing not to codify the disclosures that overlap 
with Commission rules, U.S. GAAP, and IFRS on informational efficiency 
depends on the balance of two effects. On the one hand, the clarity of 
information presented in Commission filings may increase, which would 
reduce search costs for investors who do not use computerized search 
tools for locating data and lead to more efficient information 
processing. Given that investors may have limited attention and limited 
information processing capabilities,\321\ elimination of such 
information should facilitate more efficient investment decision-
making. Not codifying the Guide 3 disclosures that overlap with U.S. 
GAAP and IFRS would reduce the number of disclosures that bank and 
savings and loan registrants need to consider and prepare, and 
consequently simplify their compliance regime. To the extent that the 
overlapping disclosures are substantially the same as those provided in 
response to Guide 3, not codifying certain Guide 3 disclosures would 
not adversely affect investors and other users of Commission filings. 
Some academic research suggests that individuals may invest more in 
firms with more concise disclosures.\322\ Thus, to the extent that the 
proposed rescission of Guide 3 does not affect the completeness of 
disclosures, it could enhance the informational and allocative 
efficiency of the market and facilitate capital formation. The 
potential adverse effects of the proposed rules are likely to be 
limited as investors would continue to receive substantially similar 
information from bank and savings and loan registrants under U.S. GAAP 
and IFRS disclosure requirements.
---------------------------------------------------------------------------

    \321\ See, e.g., David Hirshleifer & Siew Hong Teoh, Limited 
Attention, Information Disclosure, and Financial Reporting, 36 J. 
Acct. & Econ. 337 (2003).
    \322\ See, e.g., Alastair Lawrence, Individual Investors and 
Financial Disclosure, 56 J. Acct. & Econ. 130 (2013); Michael S. 
Drake, Jeffrey Hales, & Lynn Rees, Disclosure Overload? A 
Professional User Perspective on the Usefulness of General Purpose 
Financial Statement, Contemp. Acct. Res. (forthcoming 2019).
---------------------------------------------------------------------------

    On the other hand, not codifying certain Guide 3 disclosures could 
lead to increased information asymmetries between investors and bank 
and savings and loan registrants. To the extent that some of the Guide 
3 disclosures (e.g., those that overlap with, but are not entirely 
duplicative of, U.S. GAAP or IFRS disclosures) would no longer be 
called for by an industry guide, bank and savings and loan registrants 
may be less likely to voluntarily disclose such information, when 
applicable. For example, the Guide 3 disclosure of maturity analysis of 
investment categories that we propose not to codify applies only in 
certain instances under IFRS. Moreover, even if some IFRS bank and 
savings and loan registrants disclose this information, it may be 
difficult for investors to assess the relative quality of those 
registrants without the same disclosure for every IFRS bank and savings 
and loan registrant. This impact may be heightened for smaller 
registrants and first time entrants, as these types of registrants may 
exhibit more information asymmetries due to less historical information 
being available for investors. However, elimination of overlapping 
disclosures may reduce bank and savings and loan registrants' 
compliance costs, particularly for smaller registrants for which fixed 
costs are a higher portion of revenue.
    The proposed rules may have effects on competition. First, to the 
extent that compliance costs may increase for bank and savings and loan 
registrants under the proposed rules, these costs may be passed on to 
their customers, in contrast to private banking companies not subject 
to the proposed disclosures or current Guide 3. Therefore, private 
banking companies may gain additional competitive advantage from not 
incurring such increased costs. Further, to the extent that certain 
costs related to disclosures are fixed, these burdens may have a larger 
impact on smaller bank and savings and loan registrants, potentially 
reducing their ability to offer banking products and terms that would 
enable them to better compete with their larger peers.
    Second, the cost savings from proposing not to codify all of the 
Guide 3 disclosures may be larger for IFRS bank and savings and loan 
registrants as they often face particular challenges in presenting the 
Guide 3 disclosures that presume a U.S. GAAP presentation.\323\ For 
example, the TDR and nonaccrual concepts do not exist under IFRS. To 
the extent that IFRS bank and savings and loan registrants experience 
greater cost savings compared to U.S. GAAP bank and savings and loan 
registrants and the costs are currently passed through to their 
customers and shareholders, shareholders and customers may experience 
larger increases in earnings or larger decreases in service costs, 
respectively, which may allow IFRS registrants to better compete for 
investors as compared to U.S. GAAP registrants.\324\ Although we 
request comment on the extent of any such competitive advantage, we 
preliminarily do not anticipate this effect to be substantial.
---------------------------------------------------------------------------

    \323\ See letters from CAQ; EY; Deloitte; and PWC.
    \324\ Based on the staff's review of IFRS registrants' annual 
reports that include Guide 3 disclosures, most do not provide the 
TDR and nonaccrual loan disclosures called for by Guide 3.
---------------------------------------------------------------------------

E. Request for Comment

    We request comment on the economic analysis set forth in this 
release. To the extent possible, we request that market participants 
and other commenters provide supporting data and analysis with respect 
to the benefits, costs, and effects on competition, efficiency, and 
capital formation of adopting the proposed rules or any reasonable 
alternatives. We also are interested in comments on the alternatives 
presented in this release as well as any additional alternatives to the 
proposed amendments that should be considered. In addition, we are 
interested in views regarding the costs and benefits for particular 
types of covered registrants, such as SRCs and EGCs.
    In addition, we ask commenters to consider the following questions:
    79. What additional qualitative or quantitative information should 
we consider as part of the baseline for the economic analysis of the 
proposed rules?
    80. What additional data or methodologies can we use to estimate

[[Page 52967]]

the costs and benefits of implementing the proposed rules?
    81. Have we considered all relevant costs of the proposed rules? 
Are the estimated costs of the proposed rules reasonable? If not, 
please explain in detail why the cost estimates should be higher or 
lower than those provided. Please identify any costs associated with 
the proposed rules that we have not identified.
    82. Have we considered all relevant benefits of the proposed rules? 
Have we accurately described the benefits of the proposed rules? Why or 
why not? Please identify any other benefits associated with the 
proposed rules in detail.
    83. What are the current compliance costs related to Guide 3 
disclosure for U.S. GAAP and IFRS registrants, including SRCs and EGCs? 
Are the costs different for U.S. GAAP and IFRS registrants? Are these 
costs significantly higher/lower than the compliance costs of 
registrants that are not currently within the Guide 3 scope identified 
in Table 1? How will the proposed rules change the compliance costs for 
U.S. GAAP and IFRS registrants? Would there be any differences in costs 
for U.S. GAAP and IFRS registrants?
    84. Would the proposed new credit ratio disclosures impose 
significant costs for bank and savings and loan registrants? Do 
registrants currently provide these disclosures? If so, can the costs 
of providing these disclosures be quantified?
    85. We invite comment on the nature of any resulting compliance 
costs. In particular, to what extent are the compliance costs fixed 
versus variable? Are there scale advantages or disadvantages in the 
compliance costs, both in terms of activity size or registrant size? To 
what extent are the compliance costs one-time set-up costs versus 
recurring variable costs?
    86. We are interested in comments and data related to any potential 
competitive effects from the proposed rules. In particular, we are 
interested in evidence and views on the current competitive situation 
of U.S. bank and savings and loan registrants as well as the 
attractiveness of U.S. securities markets for foreign banking 
companies. To what extent does the current Guide 3 disclosure regime 
affect this competitive situation, if at all? To what extent would the 
proposed rules change competition between U.S. and foreign bank and 
savings and loan registrants? To what extent would the proposed rules 
change competition between U.S. GAAP and IFRS registrants?
    87. Would expanding the scope of the proposed rules to all 
financial services registrants impose significant costs on registrants 
that do not currently provide Guide 3 disclosures? If so, can these 
costs be quantified? How would expanding the proposed scope to all 
financial services registrants affect the competitive situation among 
registrants that conduct activities addressed in this proposal?
    88. Would expanding the scope to all financial services registrants 
provide significant benefits to investors and other users of Commission 
filings? How would expanding the scope to all financial services 
registrants affect the efficiency of capital markets?

VII. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rules contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\325\ The Commission is submitting the 
proposed rules to the Office of Management and Budget (``OMB'') for 
review in accordance with the PRA.\326\ The hours and costs associated 
with preparing and filing forms and reports that include the disclosure 
called for by the proposed rules constitute reporting and cost burdens 
imposed by each collection of information. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information requirement unless it displays a currently valid OMB 
control number. Compliance with the information collections is 
mandatory. Responses to the information collections are not kept 
confidential and there is no mandatory retention period for the 
information disclosed. The titles for the affected collections of 
information are:
---------------------------------------------------------------------------

    \325\ 44 U.S.C. 3501 et seq.
    \326\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

     Regulation S-K (OMB Control No. 3235-007); \327\
---------------------------------------------------------------------------

    \327\ The paperwork burden from Regulation S-K is imposed 
through the forms that are subject to the requirements in that 
regulation and is reflected in the analysis of those forms. To avoid 
a PRA inventory reflecting duplicative burdens and for 
administrative convenience, we assign a one-hour burden to 
Regulation S-K.
---------------------------------------------------------------------------

     Form S-1 \328\ (OMB Control No. 3235-0065);
---------------------------------------------------------------------------

    \328\ 17 CFR 239.11.
---------------------------------------------------------------------------

     Form S-3 \329\ (OMB Control No. 3235-0073); \330\
---------------------------------------------------------------------------

    ;\329\ 17 CFR 239.13.
    \330\ The paperwork burdens for Form S-3 and Form F-3 that would 
result from the proposed rules are imposed through the forms from 
which they are incorporated by reference and reflected in the 
analysis of those forms.
---------------------------------------------------------------------------

     Form S-4 \331\ (OMB Control No. 3235-0324);
---------------------------------------------------------------------------

    \331\ 17 CFR 239.25.
---------------------------------------------------------------------------

     Form F-1 \332\ (OMB Control No. 3235-0258);
---------------------------------------------------------------------------

    \332\ 17 CFR 239.31.
---------------------------------------------------------------------------

     Form F-3 \333\ (OMB Control No. 3235-0256);
---------------------------------------------------------------------------

    \333\ 17 CFR 239.33.
---------------------------------------------------------------------------

     Form F-4 \334\ (OMB Control No. 3235-0325);
---------------------------------------------------------------------------

    \334\ 17 CFR 239.34.
---------------------------------------------------------------------------

     Form 10 \335\ (OMB Control No. 3235-0064);
---------------------------------------------------------------------------

    \335\ 17 CFR 249.210.
---------------------------------------------------------------------------

     Form 10-K (OMB Control No. 3235-0064);
     Form 10-Q \336\ (OMB Control No. 3235-0070);
---------------------------------------------------------------------------

    \336\ 17 CFR 249.308a.
---------------------------------------------------------------------------

     Form 20-F (OMB Control No. 3235-0063); and
     Regulation A \337\ (Form 1-A) \338\ (OMB Control No. 3235-
0286).
---------------------------------------------------------------------------

    \337\ 17 CFR 230.251 through 17 CFR 230.263.
    \338\ 17 CFR 239.90.
---------------------------------------------------------------------------

    The regulations and forms listed above were adopted under the 
Securities Act or the Exchange Act. The regulations and forms set forth 
the disclosure requirements for registration statements, offering 
statements, and periodic reports filed by registrants and issuers to 
help investors make informed investment decisions. A description of the 
proposed rules, including the need for the information and its proposed 
use, as well as a description of the likely respondents, can be found 
in Sections II through V above, and a discussion of the economic 
effects of the proposed rules can be found in Section VI above.

B. Burden and Cost Estimates Related to the Proposed Rules

i. Affected Registrants and Forms
    We estimate that, currently, approximately 487 bank and savings and 
loan registrants provide the disclosures set forth in Guide 3. These 
registrants would have to provide the disclosures required by the 
proposed rules in Securities Act registration statements filed on Forms 
S-1, S-3, S-4, F-1, F-3, and F-4, Exchange Act registration statements 
on Forms 10 and 20-F, Exchange Act annual reports on Forms 10-K and 20-
F, Exchange Act quarterly reports on Form 10-Q, and Regulation A 
offering statements on Form 1-A. We refer to these registrants in this 
PRA analysis as ``affected registrants.''

[[Page 52968]]

    The proposed rules would codify certain disclosures called for by 
Guide 3 and eliminate other Guide 3 disclosures that overlap with 
Commission rules, U.S. GAAP, or IFRS. Although the disclosure Items in 
Guide 3 are not Commission rules, under existing practice, affected 
registrants currently provide many of these disclosures in response to 
the Guide 3 items. Therefore, the burdens associated with these 
disclosures are already included in the current burden hours and costs 
for the affected forms. As such, for PRA purposes, we are only revising 
the burdens and costs of the affected forms to reflect changes to the 
existing Guide 3 disclosures in the proposed rules.
    For example, as discussed in greater detail below,\339\ we do not 
propose to codify in proposed Item 1403 the disclosures under existing 
Item II of Guide 3 that substantially overlap with U.S. GAAP and IFRS 
disclosure requirements, and those we propose to codify in proposed 
Item 1403 are consistent with the current disclosures in Item II. 
Therefore, we estimate that there would be no change to the burdens and 
costs of an affected registrant as a result of proposed Item 1403 
because the Item would include disclosures that are already included in 
Guide 3. In contrast, as discussed below,\340\ proposed Item 1404 
would, in addition to codifying the loan disclosures in Item III of 
Guide 3 that do not overlap with Commission rules, U.S. GAAP, or IFRS, 
also require certain interest rate disclosure that is not currently a 
Guide 3 disclosure. Therefore, we estimate that the proposed Item 1404 
would increase the burden to an affected registrant.
---------------------------------------------------------------------------

    \339\ See Section VII.B.iii.b below.
    \340\ See Section VII.B.iii.c below.
---------------------------------------------------------------------------

    Additionally, for PRA purposes, the burden and costs estimates 
related to the proposed rules should primarily affect annual reports on 
Forms 10-K and 20-F. We do not believe the proposed rules should affect 
the burdens and costs of a registrant filing its quarterly reports on 
Form 10-Q, as the registrant would be required to collect and disclose 
almost the same information related to the proposed rules cumulatively 
in its annual report as in each of its prior quarterly reports. 
Therefore, including the burden and cost estimates in both annual and 
quarterly reports would result in a PRA inventory reflecting 
duplicative burdens.
---------------------------------------------------------------------------

    \341\ See Section VII.B.iii.h.
    \342\ We recognize that the costs of retaining outside 
professionals may vary depending on the nature of the professional 
services, but for purposes of this PRA analysis, we estimate that 
such costs will be an average of $400 per hour.This estimate is 
based on consultations with several registrants, law firms and other 
persons who regularly assist registrants in preparing and filing 
reports with the Commission.
---------------------------------------------------------------------------

    Further, as with quarterly reports on Form 10-Q, a registrant would 
be required to collect and disclose almost the same information related 
to the proposed rules in a registration or offering statement as it 
would in an annual report. However, we recognize that there could be 
some additional burdens and costs associated with a registration or 
offering statement that may not apply to an annual report. Therefore, 
we are assigning a small incremental increase in burdens and costs to 
all affected registration and offering statements, including Forms 20-
F, S-1, S-4, F-1, F-4, 10, and 1-A.
    Also, as discussed below,\341\ a new affected registrant would be 
required to provide more years of credit ratio and related disclosures 
in its initial registration or offering statement than it would be 
required to provide in any subsequent registration or offering 
statement. Therefore, we are assigning additional burdens and costs to 
a registration or offering statement that can be filed as an initial 
registration or offering statement, including Forms 20-F, S-1, F-1, 10, 
and 1-A.
---------------------------------------------------------------------------

    \342\ We recognize that the costs of retaining outside 
professionals may vary depending on the nature of the professional 
services, but for purposes of this PRA analysis, we estimate that 
such costs will be an average of $400 per hour. This estimate is 
based on consultations with several registrants, law firms and other 
persons who regularly assist registrants in preparing and filing 
reports with the Commission.
---------------------------------------------------------------------------

ii. Standard Estimated Burden Allocation for Specified Forms
    For purposes of the PRA, total burden is to be allocated between 
internal burden hours and outside professional costs. A registrant's 
internal burden is estimated in internal burden hours and its outside 
professional costs are estimated at $400 per hour.\342\ Table 5 below 
sets forth the percentage estimates we typically use for the burden 
allocation for each form.

    Table 5--Standard Estimated Burden Allocation for Specified Forms
------------------------------------------------------------------------
                                                              Outside
                Form type                    Internal      professionals
                                             (percent)       (percent)
------------------------------------------------------------------------
Form 10-K...............................              75              25
Form 20-F...............................              25              75
Form S-1................................              25              75
Form S-4................................              25              75
Form F-1................................              25              75
Form F-4................................              25              75
Form 10.................................              25              75
Form 1-A................................              75              25
------------------------------------------------------------------------

iii. Burden Change for Specific Portions of the Proposed Rules
a. Proposed Disclosure Related to Distribution of Assets, Liabilities, 
and Stockholders' Equity; and Interest Rate and Interest Differential 
(Item I of Guide 3/Proposed Item 1402)
    Proposed Item 1402 would require additional disaggregation to 
include the categories under Item VII of Guide 3 and certain other 
categories in Article 9 of Regulation S-X. Therefore, we estimate that 
the burdens and costs of an affected annual report would increase by 
two hours per year and the burdens and costs of an affected 
registration or offering statement would increase by one hour per year. 
Table 6 below shows the resulting estimated change in an affected 
registrant's internal burden hours and costs for outside professionals 
due to the proposed disclosure related to the distribution of assets, 
liabilities, and stockholders' equity and interest rate and interest 
differential.

[[Page 52969]]

  Table 6--Estimated Increase in Internal Burden Hours and Costs for Professionals From the Proposed Disclosure
    Related to Distribution of Assets, Liabilities, and Stockholders' Equity; and Interest Rate and Interest
                                                  Differential
                                     [Item I of guide 3/proposed item 1402]
----------------------------------------------------------------------------------------------------------------
                                                                                    Increase in   Total proposed
                                     Number of      Increase in   Total proposed      outside       increase in
              Form                   affected        internal       increase in    professional       outside
                                      filings      burden hours      internal        cost per      professional
                                                  per registrant   burden hours     registrant         cost
(A)                                          (B)             (C)             (D)             (E)             (F)
                                                                     [(B) * (C)]                     [(B) * (E)]
----------------------------------------------------------------------------------------------------------------
                                            Annual Reports = +2 hours
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................             453       \343\ 1.5           679.5      \344\ $200         $90,600
Form 20-F.......................              34       \345\ 0.5              17       \346\ 600          20,400
----------------------------------------------------------------------------------------------------------------
                                 Registration and Offering Statements = +1 hour
----------------------------------------------------------------------------------------------------------------
Form 20-F.......................               1      \347\ 0.25            0.25       \348\ 300             300
Form S-1........................              24      \349\ 0.25               6       \350\ 300           7,200
Form S-4........................              93      \351\ 0.25           23.25       \352\ 300          27,900
Form F-1........................               1      \353\ 0.25            0.25       \354\ 300             300
Form F-4........................               2      \355\ 0.25             0.5       \356\ 300             600
Form 10.........................               2      \357\ 0.25             0.5       \358\ 300             600
Form 1-A........................               5      \359\ 0.75            3.75       \360\ 100             500
----------------------------------------------------------------------------------------------------------------

b. Proposed Disclosure Related to Investment Portfolios (Item II of 
Guide 3/Proposed Item 1403)
    The disclosures under existing Item II of Guide 3 that we do not 
propose to codify in proposed Item 1403 substantially overlap with U.S. 
GAAP and IFRS disclosure requirements, and those we propose to codify 
in proposed Item 1403 are consistent with the current disclosures in 
Item II of Guide 3. Therefore, we estimate that there would be no 
change to the burdens and costs of an affected annual report or 
registration or offering statement as a result of this aspect of the 
proposed rules.
c. Proposed Disclosure Related to Loan Portfolios (Item III of Guide 3/
Proposed Item 1404)
    Proposed Item 1404 would codify the loan disclosures in Item III of 
Guide 3 that do not overlap with Commission rules, U.S. GAAP, or IFRS. 
However, because proposed Item 1404 would require additional disclosure 
regarding interest rates for all loan categories, we estimate that the 
burdens and costs of an affected annual report would increase by three 
hours per year and the burdens and costs of an affected registration or 
offering statement  would increase by one hour per year. Table 7 below 
shows the resulting estimated change in an affected registrant's 
internal burden hours and costs for outside professionals due to the 
proposed disclosure related to loan portfolios.
---------------------------------------------------------------------------

    \343\ Two hours x 0.75 = 1.5 hours.
    \344\ (Two hours x 0.25) x $400 = $200.
    \345\ Two hours x 0.25 = 0.5 hours.
    \346\ (Two hours x 0.75) x $400 = $600.
    \347\ One hour x 0.25 = 0.25 hours.
    \348\ (One hour x 0.75) x $400 = $300.
    \349\ One hour x 0.25 = 0.25 hours.
    \350\ (One hour x 0.75) x $400 = $300.
    \351\ One hour x 0.25 = 0.25 hours.
    \352\ (One hour x 0.75) x $400 = $300.
    \353\ One hour x 0.25 = 0.25 hours.
    \354\ (One hour x 0.75) x $400 = $300.
    \355\ One hour x 0.25 = 0.25 hours.
    \356\ (One hour x 0.75) x $400 = $300.
    \357\ One hour x 0.25 = 0.25 hours.
    \358\ (One hour x 0.75) x $400 = $300.
    \359\ One hour x 0.75 = 0.75 hours.
    \360\ (One hour x 0.25) x $400 = $100.
    \361\ Three hours x 0.75 = 2.25 hours.
    \362\ (Three hours x 0.25) x $400 = $300.
    \363\ Three hours x 0.25 = .75 hours.
    \364\ (Three hours x 0.75) x $400 = $900.

    Table 7--Estimated Change in Internal Burden Hours and Costs for Outside Professionals From the Proposed
                                      Disclosure Related to Loan Portfolios
                                    [Item III of guide 3/proposed item 1404]
----------------------------------------------------------------------------------------------------------------
                                                                                    Increase in   Total proposed
                                     Number of      Increase in   Total proposed      outside       increase in
              Form                   affected        internal       increase in    professional       outside
                                      filings      burden hours      internal        cost per      professional
                                                  per registrant   burden hours     registrant         cost
(A)                                          (B)             (C)             (D)             (E)             (F)
                                                                     [(B) * (C)]                     [(B) * (E)]
----------------------------------------------------------------------------------------------------------------
                                            Annual Reports = +3 hours
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................             453      \361\ 2.25        1,019.25      \362\ $300        $135,900
Form 20-F.......................              34      \363\ 0.75            25.5       \364\ 900          30,600
----------------------------------------------------------------------------------------------------------------

[[Page 52970]]

 
                                    Registration and Offering Statements = +1
----------------------------------------------------------------------------------------------------------------
Form 20-F.......................               1      \365\ 0.25            0.25       \366\ 300             300
Form S-1........................              24      \367\ 0.25               6       \368\ 300           7,200
Form S-4........................              93      \369\ 0.25           23.25       \370\ 300          27,900
Form F-1........................               1      \371\ 0.25            0.25       \372\ 300             300
Form F-4........................               2      \373\ 0.25             0.5       \374\ 300             600
Form 10.........................               2      \375\ 0.25             0.5       \376\ 300             600
Form 1-A........................               5      \377\ 0.75            3.75       \378\ 100             500
----------------------------------------------------------------------------------------------------------------

d. Proposed Disclosure Related to Allowance for Credit Losses (Item IV 
of Guide 3/Proposed Item 1405(c))
---------------------------------------------------------------------------

    \365\ One hour x 0.25 = 0.25 hours.
    \366\ (One hour x 0.75) x $400 = $300.
    \367\ One hour x 0.25 = 0.25 hours.
    \368\ (One hour x 0.75) x $400 = $300.
    \369\ One hour x 0.25 = 0.25 hours.
    \370\ (One hour x 0.75) x $400 = $300.
    \371\ One hour x 0.25 = 0.25 hours.
    \372\ (One hour x 0.75) x $400 = $300.
    \373\ One hour x 0.25 = 0.25 hours.
    \374\ (One hour x 0.75) x $400 = $300.
    \375\ One hour x 0.25 = 0.25 hours.
    \376\ (One hour x 0.75) x $400 = $300.
    \377\ One hour x 0.75 = 0.75 hours.
    \378\ (One hour x 0.25) x $400 = $100.
---------------------------------------------------------------------------

    The disclosures under existing Item IV of Guide 3 that we do not 
propose to codify in proposed Item 1405(c) substantially overlap with 
U.S. GAAP and IFRS disclosure requirements, and those we propose to 
codify in proposed Item 1405(c) are consistent with the current 
disclosures in Item IV of Guide 3. Therefore, we estimate that there 
would be no change to the burdens and costs of an affected annual 
report or registration or offering statement as a result of this aspect 
of the proposed rules.
e. Proposed Disclosure Related to Deposits (Item V of Guide 3/Proposed 
Item 1406)
    Proposed Item 1406 would codify the majority of the disclosures 
currently called for by Item V of Guide 3, with some revisions. Based 
on differences from the current Item V disclosures and the proposed 
requirements, we estimate that burdens and costs of an affected annual 
report would increase by three burden hours per year and the burdens 
and costs of an affected registration or offering statement would 
increase by one hour per year. Table 8 below shows the resulting 
estimated change in an affected registrant's internal burden hours and 
costs for outside professionals due to the proposed disclosure related 
to deposits.

[[Page 52971]]

    Table 8--Estimated Change in Internal Burden Hours and Costs for Outside Professionals From the Proposed
                                         Disclosure Related to Deposits
                                     [Item V of guide 3/proposed item 1406]
----------------------------------------------------------------------------------------------------------------
                                                                                    Increase in   Total proposed
                                     Number of      Increase in   Total proposed      outside       increase in
              Form                   affected        internal       increase in    professional       outside
                                      filings      burden hours      internal        cost per      professional
                                                  per registrant   burden hours     registrant         cost
(A)                                          (B)             (C)             (D)         (E) (F)
                                                                     [(B) * (C)]     [(B) * (E)]
----------------------------------------------------------------------------------------------------------------
                                            Annual Reports = +3 hours
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................             453      \379\ 2.25        1,019.25      \380\ $300        $135,900
Form 20-F.......................              34      \381\ 0.75            25.5       \382\ 900          30,600
----------------------------------------------------------------------------------------------------------------
                                    Registration and Offering Statements = +1
----------------------------------------------------------------------------------------------------------------
Form 20-F.......................               1      \383\ 0.25            0.25       \384\ 300             300
Form S-1........................              24      \385\ 0.25               6       \386\ 300           7,200
Form S-4........................              93      \387\ 0.25           23.25       \388\ 300          27,900
Form F-1........................               1      \389\ 0.25            0.25       \390\ 300            $300
Form F-4........................               2      \391\ 0.25             0.5       \392\ 300             600
Form 10.........................               2      \393\ 0.25             0.5       \394\ 300             600
Form 1-A........................               5      \395\ 0.75            3.75       \396\ 100             500
----------------------------------------------------------------------------------------------------------------

f. Proposed Disclosure Related to Return on Equity and Assets (Item VI 
of Guide 3)
    The proposed rules would not codify the disclosures in Item VI of 
Guide 3. Therefore, we estimate that the burdens and costs of an 
affected annual report would decrease by two burden hours per year and 
the burdens and costs of an affected registration or offering statement 
would decrease by one hour per year. Table 9 below shows the resulting 
estimated change in an affected registrant's internal burden hours and 
costs for outside professionals due to this aspect of the proposed 
rules.
---------------------------------------------------------------------------

    \379\ Three hours x 0.75 = 2.25 hours.
    \380\ (Three hours x 0.25) x $400 = $300.
    \381\ Three hours x 0.25 = 0.75 hours.
    \382\ (Three hours x 0.75) x $400 = $900.
    \383\ One hour x 0.25 = 0.25 hours.
    \384\ (One hour x 0.75) x $400 = $300.
    \385\ One hour x 0.25 = 0.25 hours.
    \386\ (One hour x 0.75) x $400 = $300.
    \387\ One hour x 0.25 = 0.25 hours.
    \388\ (One hour x 0.75) x $400 = $300.
    \389\ One hour x 0.25 = 0.25 hours.
    \390\ (One hour x 0.75) x $400 = $300.
    \391\ One hour x 0.25 = 0.25 hours.
    \392\ (One hour x 0.75) x $400 = $300.
    \393\ One hour x 0.25 = 0.25 hours.
    \394\ (One hour x 0.75) x $400 = $300.
    \395\ One hour x 0.75 = 0.75 hours.
    \396\ (One hour x 0.25) x $400 = $100.
    \397\ Two hours x 0.75 = 1.5 hours.
    \398\ (Two hours x 0.25) x $400 = $200.
    \399\ Two hours x 0.25 = 0.5 hours.
    \400\ (Two hours x 0.75) x $400 = $600.
    \401\ One hour x 0.25 = 0.25 hours.
    \402\ (One hour x 0.75) x $400 = $300.
    \403\ One hour x 0.25 = 0.25 hours.
    \404\ (One hour x 0.75) x $400 = $300.
    \405\ One hour x 0.25 = 0.25 hours.
    \406\ (One hour x 0.75) x $400 = $300.
    \407\ One hour x 0.25 = 0.25 hours.
    \408\ (One hour x 0.75) x $400 = $300.
    \409\ One hour x 0.25 = 0.25 hours.
    \410\ (One hour x 0.75) x $400 = $300.
    \411\ One hour x 0.25 = 0.25 hours.
    \412\ (One hour x 0.75) x $400 = $300.

   Table 9--Estimated Decrease in Internal Burden Hours and Costs for Outside Professionals From the Proposed
                                Disclosure Related to Return on Equity and Assets
                                              [Item VI of guide 3]
----------------------------------------------------------------------------------------------------------------
                                                                                    Increase in   Total proposed
                                     Number of      Increase in   Total proposed      outside       increase in
              Form                   affected        internal       increase in    professional       outside
                                      filings      burden hours      internal        cost per      professional
                                                  per registrant   burden hours     registrant         cost
(A)                                          (B)             (C)             (D)             (E)             (F)
                                                                      [(B * (C)]                     [(B) * (E)]
----------------------------------------------------------------------------------------------------------------
                                            Annual Reports = -2 hours
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................             453     \397\ (1.5)         (679.5)    \398\ ($200)       ($90,600)
Form 20-F.......................              34     \399\ (0.5)            (17)     \400\ (600)        (20,400)
----------------------------------------------------------------------------------------------------------------
                                 Registration and Offering Statements = -1 hour
----------------------------------------------------------------------------------------------------------------
Form 20-F.......................               1    \401\ (0.25)          (0.25)     \402\ (300)          ($300)
Form S-1........................              24     \403\(0.25)             (6)     \404\ (300)         (7,200)
Form S-4........................              93    \405\ (0.25)         (23.25)      \406\(300)        (27,900)
Form F-1........................               1    \407\ (0.25)          (0.25)     \408\ (300)           (300)
Form F-4........................               2    \409\ (0.25)           (0.5)     \410\ (300)           (600)
Form 10.........................               2    \411\ (0.25)           (0.5)      \412\(300)           (600)

[[Page 52972]]

 
Form 1-A........................               5    \413\ (0.75)          (3.75)      \414\(100)           (500)
----------------------------------------------------------------------------------------------------------------

g. Proposed Disclosure Related to Short-Term Borrowings (Item VII of 
Guide 3/Proposed Item 1402)
    The proposed rules would codify the average amount outstanding and 
interest paid disclosures in Item VII of Guide 3 as part of Proposed 
Rule 1402, and the remaining disclosures in Item VII would not be 
proposed for codification. Therefore, we estimate that the burdens and 
costs of an affected annual report would decrease by four burden hours 
per year and the burdens and costs of an affected registration or 
offering statement would decrease by one hour per year. Table 10 below 
shows the resulting estimated change in an affected registrant's 
internal burden hours and costs for outside professionals due to the 
proposed disclosure related to short-term borrowings.

    Table 10--Estimated Decrease in Internal Burden Hours and Costs for Outside Professionals From the Proposed Rule Related to Short-Term Borrowings
                                                        [Item VII of guide 3/proposed item 1402]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Increase in
                                                                       Number of       internal     Total proposed   Increase in out     Total proposed
                               Form                                    affected      burden  hours    increase in   side professional     increase in
                                                                        filings           per          internal          cost per           outside
                                                                                      registrant     burden  hours      registrant     professional cost
(A)                                                                            (B)             (C)      (D) [(B) *                (E)    (F) [(B) * (E)]
                                                                                                              (C)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Annual Reports = -4 hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K.........................................................             453       \415\ (3)         (1,359)       \416\ ($400)         ($181,200)
Form 20-F.........................................................              34       \417\ (1)            (34)      \418\ (1,200)           (40,800)
                                                        Registration and Offering Statements = -1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 20-F.........................................................               1    \419\ (0.25)          (0.25)        \420\ (300)              (300)
Form S-1..........................................................              24    \421\ (0.25)             (6)        \422\ (300)            (7,200)
Form S-4..........................................................              93    \423\ (0.25)         (23.25)         \424\(300)           (27,900)
Form F-1..........................................................               1    \425\ (0.25)          (0.25)        \426\ (300)              (300)
Form F-4..........................................................               2    \427\ (0.25)           (0.5)        \428\ (300)              (600)
Form 10...........................................................               2     \429\(0.25)           (0.5)        \430\ (300)              (600)
Form 1-A..........................................................               5    \431\ (0.75)          (3.75)        \432\ (100)              (500)
--------------------------------------------------------------------------------------------------------------------------------------------------------

h. Proposed Disclosure Related to Credit Ratios (Proposed Items 1405(a) 
and (b))
---------------------------------------------------------------------------

    \413\ One hour x 0.75 = 0.75 hours.
    \414\ (One hour x 0.25) x $400 = $100.
    \415\ Four hours x 0.75 = 3 hours.
    \416\ (Four hours x 0.25) x $400 = $400.
    \417\ Four hours x 0.25 = 1 hours.
    \418\ (Four hours x 0.75) x $400 = $1,200.
    \419\ One hour x 0.25 = 0.25 hours.
    \420\ (One hour x 0.75) x $400 = $300.
    \421\ One hour x 0.25 = 0.25 hours.
    \422\ (One hour x 0.75) x $400 = $300.
    \423\ One hour x 0.25 = 0.25 hours.
    \424\ (One hour x 0.75) x $400 = $300.
    \425\ One hour x 0.25 = 0.25 hours.
    \426\ (One hour x 0.75) x $400 = $300.
    \427\ One hour x 0.25 = 0.25 hours.
    \428\ (One hour x 0.75) x $400 = $300.
    \429\ One hour x 0.25 = 0.25 hours.
    \430\ (One hour x 0.75) x $400 = $300.
    \431\ One hour x 0.75 = 0.75 hours.
    \432\ (One hour x 0.25) x $400 = $100.
---------------------------------------------------------------------------

    For all filings other than initial registration and offering 
statements, including annual reports and registration or offering 
statements that are not initial registration or offering statements, 
the proposed credit ratios and related disclosures would be required 
for the same periods that financial statements for those filings are 
required by our rules, which would be less than five years. For an 
affected registrant that would be required under the proposed rules to 
provide its credit ratios and related disclosures for less than five 
years, we estimate that the burdens and costs of an annual report would 
increase by six burden hours per year and the burdens and costs of a 
registration or offering statement that is not an initial registration 
or offering statement would increase by one hour per year.
    An affected registrant filing its initial registration or offering 
statement would be required under the proposed rules to provide its 
credit ratios and related disclosures for each of the last five years. 
We estimate that providing the additional years of credit ratios and 
related disclosures that go beyond what would be required in an annual 
report or a registration or offering statement that is not an initial 
registration or offering statement would increase the burdens and costs 
for an initial

[[Page 52973]]

registration or offering statement by six burden hours per year.
    Table 11 below shows the resulting estimated change in an affected 
registrant's internal burden hours and costs for outside professionals 
due to the proposed disclosure related to credit ratios.

     Table 11--Estimated Increase in Internal Burden Hours and Costs for Outside Professionals From the Proposed Disclosure Related to Credit Ratios
                                                            [Proposed items 1405(a) and (b)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Increase in
                                                                       Number of       internal     Total proposed   Increase in out     Total proposed
                               Form                                    affected      burden  hours    increase in   side professional     increase in
                                                                        filings           per          internal          cost per           outside
                                                                                      registrant     burden hours       registrant     professional cost
(A)                                                                            (B)             (C)      (D) [(B) *                (E)    (F) [(B) * (E)]
                                                                                                              (C)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Annual Reports = +6 hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K.........................................................             453       \433\ 4.5         2,038.5         \434\ $600           $271,800
Form 20-F.........................................................              34       \435\ 1.5              51        \436\ 1,800             61,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Not Initial Registration and Offering Statements = +1 hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 20-F.........................................................               1      \437\ 0.25            0.25         \438\ $300               $300
Form S-1..........................................................              24      \439\ 0.25               6          \440\ 300              7,200
Form S-4..........................................................              93      \441\ 0.25           23.25          \442\ 300             27,900
Form F-1..........................................................               1      \443\ 0.25            0.25          \444\ 300                300
Form F-4..........................................................               2      \445\ 0.25             0.5          \446\ 300                600
Form 10...........................................................               2      \447\ 0.25             0.5          \448\ 300                600
Form 1-A..........................................................               5      \449\ 0.75            3.75           \450\100                500
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Initial Registration and Offering Statements = +6 hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 20-F.........................................................               1       \451\ 1.5             1.5        \452\ 1,800              1,800
Form S-1..........................................................              20       \453\ 1.5              30        \454\ 1,800             36,000
Form F-1..........................................................               1       \455\ 1.5             1.5        \456\ 1,800              1,800
Form 10...........................................................               1       \457\ 1.5             1.5         \458\1,800              1,800
Form 1-A..........................................................               4       \459\ 4.5              18          \460\ 600              2,400
--------------------------------------------------------------------------------------------------------------------------------------------------------

iv. Aggregated Change in Burden for Specific Portions of the Proposed 
Rules
---------------------------------------------------------------------------

    \433\ Six hours x 0.75 = 4.5 hours.
    \434\ (Six hours x 0.25) x $400 = $600.
    \435\ Six hours x 0.25 = 1.5 hours.
    \436\ (Six hours x 0.75) x $400 = $1,800.
    \437\ One hour x 0.25 = 0.25 hours.
    \438\ (One hour x 0.75) x $400 = $300.
    \439\ One hour x 0.25 = 0.25 hours.
    \440\ (One hour x 0.75) x $400 = $300.
    \441\ One hour x 0.25 = 0.25 hours.
    \442\ (One hour x 0.75) x $400 = $300.
    \443\ One hour x 0.25 = 0.25 hours.
    \444\ (One hour x 0.75) x $400 = $300.
    \445\ One hour x 0.25 = 0.25 hours.
    \446\ (One hour x 0.75) x $400 = $300.
    \447\ One hour x 0.25 = 0.25 hours.
    \448\ (One hour x 0.75) x $400 = $300.
    \449\ One hour x 0.75 = 0.75 hours.
    \450\ (One hour x 0.25) x $400 = $100.
    \451\ Six hours x 0.25 = 1.5 hours.
    \452\ (Six hours x 0.75) x $400 = $1,800.
    \453\ Six hours x 0.25 = 1.5 hours.
    \454\ (Six hours x 0.75) x $400 = $1,800.
    \455\ Six hours x 0.25 = 1.5 hours.
    \456\ (Six hours x 0.75) x $400 = $1,800.
    \457\ Six hours x 0.25 = 1.5 hours.
    \458\ (Six hours x 0.75) x $400 = $1,800.
    \459\ Six hours x 0.75 = 4.5 hours.
    \460\ (Six hours x 0.25) x $400 = $600.
---------------------------------------------------------------------------

    Table 12 below shows the resulting estimated change in an affected 
registrant's internal burden hours and costs for outside professionals 
aggregated for each portion of the proposed rules.

[[Page 52974]]

       Table 12--Estimated Change in Internal Burden Hours and Costs for Outside Professionals From the Aggregated Portions of the Proposed Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                          Total proposed
                                                                           Total burden      Internal     Total proposed      Outside        change in
               Form                    Number of      Existing Guide 3      hour change     burden hour      change in     professional       outside
                                    affected forms          item             per form       change per       internal      costs change    professional
                                                                                               form        burden hours      per form          cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Annual Reports
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10-K.........................             453  Item I..............               2             1.5           679.5            $200         $90,600
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               3            2.25        1,019.25             300         135,900
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               3            2.25        1,019.25             300         135,900
                                                    Item VI.............             (2)           (1.5)         (679.5)           (200)        (90,600)
                                                    Item VII............             (4)             (3)         (1,359)           (400)       (181,200)
                                                    Credit Ratios.......               6             4.5         2,038.5             600         271,800
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               8               6           2,718             800         362,400
Form 20-F.........................              34  Item I..............               2             0.5              17             600          20,400
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               3            0.75            25.5             900          30,600
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               3            0.75            25.5             900          30,600
                                                    Item VI.............             (2)           (0.5)            (17)           (600)        (20,400)
                                                    Item VII............             (4)             (1)            (34)         (1,200)        (40,800)
                                                    Credit Ratios.......               6             1.5              51           1,800          61,200
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               8               2              68           2,400          81,600
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Not Initial Registration and Offering Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 20-F.........................               1  Item I..............               1            0.25            0.25             300             300
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25            0.25             300             300
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25            0.25             300             300
                                                    Item VI.............             (1)          (0.25)          (0.25)           (300)           (300)
                                                    Item VII............             (1)          (0.25)          (0.25)           (300)           (300)
                                                    Credit Ratios.......               1            0.25            0.25             300             300
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5             0.5             600             600
Form S-1..........................              24  Item I..............               1            0.25               6             300           7,200
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25               6             300           7,200
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25               6             300           7,200
                                                    Item VI.............             (1)          (0.25)             (6)           (300)         (7,200)
                                                    Item VII............             (1)          (0.25)             (6)           (300)         (7,200)
                                                    Credit Ratios.......               1            0.25               6             300           7,200
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5              12             600          14,400
Form S-4..........................              93  Item I..............               1            0.25           23.25             300          27,900
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25           23.25             300          27,900
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25           23.25             300          27,900
                                                    Item VI.............             (1)          (0.25)         (23.25)           (300)        (27,900)
                                                    Item VII............             (1)          (0.25)         (23.25)           (300)        (27,900)
                                                    Credit Ratios.......               1            0.25           23.25             300          27,900
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5            46.5             600          55,800
Form F-1..........................               1  Item I..............               1            0.25            0.25             300             300
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25            0.25             300             300
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25            0.25             300             300
                                                    Item VI.............             (1)          (0.25)          (0.25)           (300)           (300)
                                                    Item VII............             (1)          (0.25)          (0.25)           (300)           (300)
                                                    Credit Ratios.......               1            0.25            0.25             300             300
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5             0.5             600             600
Form F-4..........................               2  Item I..............               1            0.25             0.5             300             600
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25             0.5             300             600

[[Page 52975]]

 
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25             0.5             300             600
                                                    Item VI.............             (1)          (0.25)           (0.5)           (300)           (600)
                                                    Item VII............             (1)          (0.25)           (0.5)           (300)           (600)
                                                    Credit Ratios.......               1            0.25             0.5             300             600
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5               1             600           1,200
Form 10...........................               2  Item I..............               1            0.25             0.5             300             600
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.25             0.5             300             600
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.25             0.5             300             600
                                                    Item VI.............             (1)          (0.25)           (0.5)           (300)           (600)
                                                    Item VII............             (1)          (0.25)           (0.5)           (300)           (600)
                                                    Credit Ratios.......               1            0.25             0.5             300             600
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             0.5               1             600           1,200
Form 1-A..........................               5  Item I..............               1            0.75            3.75             100             500
                                                    Item II.............               0               0               0               0               0
                                                    Item III............               1            0.75            3.75             100             500
                                                    Item IV.............               0               0               0               0               0
                                                    Item V..............               1            0.75            3.75             100             500
                                                    Item VI.............             (1)          (0.75)          (3.75)           (100)           (500)
                                                    Item VII............             (1)          (0.75)          (3.75)           (100)           (500)
                                                    Credit Ratios.......               1            0.75            3.75             100             500
                                                                         -------------------------------------------------------------------------------
    Subtotals.....................  ..............  ....................               2             1.5             7.5             200           1,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Initial Registration or Offering Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 20-F.........................               1  Credit Ratios.......               6             1.5             1.5           1,800           1,800
Form S-1..........................              20  Credit Ratios.......               6             1.5              30           1,800          36,000
Form F-1..........................               1  Credit Ratios.......               6             1.5             1.5           1,800           1,800
Form 10...........................               1  Credit Ratios.......               6             1.5             1.5           1,800           1,800
Form 1-A..........................               4  Credit Ratios.......               6             4.5              18             600           2,400
--------------------------------------------------------------------------------------------------------------------------------------------------------

v. Total Change in Burden Per Form as a Result of the Proposed Rules
    Table 13 below shows the resulting estimated change in an affected 
registrant's internal burden hours and costs for outside professionals 
per form as a result of the proposed rules regardless of the purpose 
for which the form is used.

  Table 13--Estimated Total Increase in Internal Burden Hours and Costs for Outside Professional as a Result of
                                               the Proposed Rules
----------------------------------------------------------------------------------------------------------------
                                                                                                  Total proposed
                                   Total number      Internal     Total proposed      Outside        change in
              Form                  of affected     burden hour      change in     professional       outside
                                       forms        change per       internal      costs change    professional
                                                       form        burden hours      per form          cost
----------------------------------------------------------------------------------------------------------------
Form 10-K.......................             453               6           2,718            $800        $362,400
Form 20-F
    Form 20-F...................              34               2              68           2,400          81,600
    Form 20-F...................               1             0.5             0.5             600             600
    Form 20-F...................               1             1.5             1.5           1,800           1,800
                                              36               4              70           4,800          84,000
Form S-1
    Form S-1....................              24             0.5              12             600          14,400
    Form S-1....................              20             1.5              30           1,800          36,000
                                              44               2              42           2,400          50,400
Form S-4........................              93             0.5            46.5             600          55,800
Form F-1
    Form F-1....................               1             0.5             0.5             600             600
    Form F-1....................               1             1.5             1.5           1,800           1,800
                                               2               2               2           2,400           2,400

[[Page 52976]]

 
Form F-4........................               2             0.5               1             600           1,200
Form 10
    Form 10.....................               2             0.5               1             600           1,200
    Form 10.....................               1             1.5             1.5           1,800           1,800
                                               3               2             2.5           2,400           3,000
Form 1-A
    Form 1-A....................               5             1.5             7.5             200           1,000
    Form 1-A....................               4             4.5              18             600           2,400
                                               9               6            25.5             800           3,400
                                 -------------------------------------------------------------------------------
    Total.......................             642              23           2,908          14,800         562,600
----------------------------------------------------------------------------------------------------------------

vi. Total Paperwork Burden Under the Proposed Rules
    Table 14 below shows the total estimated internal burden hours and 
costs for outside professional under the proposed rules.

                                                Table 14--Total Paperwork Burden Under the Proposed Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Proposed        Proposed
                                                                                         change in       change in       Proposed
                                  Current annual  Current burden     Current cost        internal         outside      burden hours   Proposed costs for
                                     responses         hours            burden          registrant     professional    for affected   affected responses
                                                                                       burden hours        costs         responses
                                             (A)             (B)                 (C)             (D)             (E)             (F)                 (G)
                                                                                                                         [(B) + (D)]         [(C) + (E)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
10-K............................           8,137      14,220,652      $1,898,891,869           2,718        $362,400      14,223,370      $1,899,254,269
20-F............................             725         479,784         577,479,600              70          84,000         479,854         577,563,600
S-1.............................             901         148,556         182,048,700              42          50,400         148,598         182,099,100
S-4.............................             551         563,216         678,291,204        \461\ 47          55,800         563,263         678,347,004
F-1.............................              63          26,815          32,445,300               2           2,400          26,817          32,447,700
F-4.............................              39          14,076          17,106,000               1           1,200          14,077          17,107,200
10..............................             216          12,072          14,356,888         \462\ 3           3,000          12,075          14,359,888
1-A.............................             179          98,396          13,111,912        \463\ 26           3,400          98,422          13,115,312
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Request for Comment
---------------------------------------------------------------------------

    \461\ Rounded to 47.
    \462\ Rounded to three.
    \463\ Rounded to 26.
---------------------------------------------------------------------------

    Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order 
to:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Commission, including whether the information will have practical 
utility;
     Evaluate the accuracy of our assumptions and estimates of 
the burden of the proposed collection of information;
     Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected;
     Evaluate whether there are ways to minimize the burden of 
the collection of information on those who respond, including through 
the use of automated collection techniques or other forms of 
information technology; and
     Evaluate whether the proposed rules would have any effects 
on any other collection of information not previously identified in 
this section.
    Any member of the public may direct to us any comments concerning 
the accuracy of these burden estimates and any suggestions for reducing 
these burdens. Persons submitting comments on the collection of 
information requirements should direct their comments to the Office of 
Management and Budget, Attention: Desk Officer for the U.S. Securities 
and Exchange Commission, Office of Information and Regulatory Affairs, 
Washington, DC 20503, and send a copy to, Vanessa A. Countryman, 
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549, with reference to File No. S7-02-17. Requests for 
materials submitted to OMB by the Commission with regard to the 
collection of information requirements should be in writing, refer to 
File No. S7-02-17 and be submitted to the U.S. Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549. OMB is required to make a decision concerning the collection of 
information requirements between 30 and 60 days after publication of 
the proposed rule. Consequently, a comment to OMB is best assured of 
having its full effect if the OMB receives it within 30 days of 
publication.

VIII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of

[[Page 52977]]

1996 (``SBREFA''),\464\ the Commission must advise OMB as to whether 
the proposed rules constitute a ``major'' rule. Under SBREFA, a rule is 
considered ``major'' where, if adopted, it results or is likely to 
result in:
---------------------------------------------------------------------------

    \464\ Public Law 104-121, tit. II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more 
(either in the form of an increase or a decrease);
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    We request comment on whether our proposed rule would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment, or 
innovation.
    Commenters are requested to provide empirical data and other 
factual support for their views to the extent possible.

IX. Regulatory Flexibility Act Certification

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (``RFA'') \465\ requires the Commission to prepare and 
make available for public comment an Initial Regulatory Flexibility 
Analysis (``IRFA'') that will describe the impact of the proposed rule 
on small entities.\466\ Section 605 of the RFA allows an agency to 
certify a rule, in lieu of preparing an IRFA, if the proposed 
rulemaking is not expected to have a significant economic impact on a 
substantial number of small entities.\467\
---------------------------------------------------------------------------

    \465\ 5 U.S.C. 601 et seq.
    \466\ 5 U.S.C. 603(a).
    \467\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The proposed amendments would update and streamline our disclosure 
requirements for banks, bank holding companies, savings and loan 
associations, and savings and loan holding companies. These registrants 
currently provide many disclosures in response to the items set forth 
in Guide 3, which are not Commission rules. The proposed rules would 
rescind Guide 3; update and codify certain Guide 3 disclosures into new 
Subpart 1400 of Regulation S-K; eliminate other Guide 3 disclosures 
that overlap with Commission rules, U.S. GAAP, or IFRS; and add certain 
credit ratio disclosure requirements. The reasons for, and objectives 
of, the proposed rules are discussed in more detail in Sections II 
through IV above.
    The RFA defines ``small entity'' to mean ``small business,'' 
``small organization,'' or ``small governmental jurisdiction.'' \468\ 
For purposes of the RFA, under our rules, a registrant, other than an 
investment company, is a ``small business'' or ``small organization'' 
if it had total assets of $5 million or less on the last day of its 
most recent fiscal year and is engaged or proposing to engage in an 
offering of securities that does not exceed $5 million.\469\ We 
estimate the proposed amendments would affect one issuer that files 
with the Commission, other than investment companies, which may be 
considered a small entity and is potentially subject to the proposed 
rule.\470\ Accordingly, the Commission hereby certifies, pursuant to 5 
U.S.C. 605(b), that the proposed amendments, if adopted, would not have 
a significant economic impact on a substantial number of small entities 
for purposes of the RFA.
---------------------------------------------------------------------------

    \468\ 5 U.S.C. 601(6).
    \469\ See 17 CFR 230.157 under the Securities Act and 17 CFR 
240.0-10(a) under the Exchange Act.
    \470\ This estimate is based on staff analysis. See supra notes 
300 to 303 above.
---------------------------------------------------------------------------

    Request for Comment:
    We request comment on this certification. In particular, we solicit 
comment on the following: Do commenters agree with the certification? 
If not, please describe the nature of any impact of the proposed 
amendments on small entities and provide empirical data to illustrate 
the extent of the impact. Such comments will be considered in the 
preparation of the final rules (and in a Final Regulatory Flexibility 
Analysis if one is needed) and, if the proposed amendments are adopted, 
will be placed in the same public file as comments on the proposed 
rules themselves.

X. Statutory Authority and Text of Proposed Rules

    We are proposing the rules contained in this document pursuant to 
Sections 3(b), 7, 10, 19(a), and 28 of the Securities Act and Sections 
3(b), 12, 13, 15(d), 23(a), and 36(a) of the Exchange Act.

List of Subjects

17 CFR Part 210

    Accountants, Accounting, Banks, Banking, Employee benefit plans, 
Holding companies, Insurance companies, Investment companies, Oil and 
gas exploration, Reporting and recordkeeping requirements, Securities, 
Utilities.

17 CFR Parts 229

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 249

    Brokers, Reporting and recordkeeping requirements, Securities.
    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:
    For the reasons stated in the preamble, the Commission is proposing 
to amend Title 17, Chapter II of the Code of Federal Regulations as 
follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 
1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

0
1. The authority citation for part 210 continues to read as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n, 
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 
80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c), 
Pub. L. 112-106, 126 Stat. 310 (2012), unless otherwise noted.

0
2. Revise Sec.  210.9-01 to read as follows:

Sec.  210.9-01  Application of Sec. Sec.  210.9-01 to 210.9-07

    The consolidated financial statements filed for bank holding 
companies, savings and loan holding companies, and the financial 
statements of banks and savings and loan associations, must apply the 
guidance in this article in filings with the Commission.
0
3. Amend Sec.  210.9-03 by:
0
a. removing and reserving paragraphs 7(a) through (c); and
0
 b. revising paragraph 7(e)(2).
0
 The revisions to read as follows:

Sec.  210.9-03  Balance sheets.

* * * * *
    7. * * *
    (e) * * *
    (2) If a significant portion of the aggregate amount of loans 
outstanding at the end of the fiscal year disclosed pursuant to 
(e)(1)(i) of this section relates to loans that are disclosed as past 
due, nonaccrual or troubled debt restructurings in the consolidated 
financial statements, so state and disclose the aggregate amounts of 
such loans along with such other information necessary to an 
understanding of the

[[Page 52978]]

effects of the transactions on the financial statements.
* * * * *

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

0
4. The authority citation for part 229 continues to read as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 
80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.; 18 U.S.C. 1350; 
sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec. 
102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

0
5. Amend Sec.  229.404 by revising Instruction 4.c under ``Instructions 
to Item 404(a)'' to read as follows:

Sec.  229.404  (Item 404) Transactions with Related Persons, Promoters 
and Certain Control Persons

* * * * *

Instructions to Item 404(a)

* * * * *
    4. * * *
    c. If the lender is a bank, savings and loan association, or 
broker-dealer extending credit under Federal Reserve Regulation T (12 
CFR part 220) and the loans are not disclosed as past due, nonaccrual 
or troubled debt restructurings in the consolidated financial 
statements, disclosure under paragraph (a) of this Item may consist of 
a statement, if such is the case, that the loans to such persons:
    i. Were made in the ordinary course of business;
    ii. Were made on substantially the same terms, including interest 
rates and collateral, as those prevailing at the time for comparable 
loans with persons not related to the lender; and
    iii. Did not involve more than the normal risk of collectibility or 
present other unfavorable features.
* * * * *

Sec.  229.801  [Amended]

0
6. Amend Sec.  229.801 by reserving paragraph (c).

Sec.  229.802  [Amended]

0
7. Amend Sec.  229.802 by reserving paragraph (c).
0
8. Add Subpart 229.1400, consisting of Sec. Sec.  229.1401 through 
229.1406, to read as follows:

Subpart 229.1400--Disclosure by Bank and Savings and Loan 
Registrants

Sec.
229.1401 (Item 1401) General instructions.
229.1402 (Item 1402) Distribution of assets, liabilities and 
stockholders' equity; interest rates and interest differential.
229.1403 (Item 1403) Investments in debt securities.
229.1404 (Item 1404) Loan portfolio.
229.1405 (Item 1405) Allowance for Credit Losses.
229.1406 (Item 1406) Deposits.

Sec.  229.1401  (Item 1401) General instructions.

    (a) A bank, bank holding company, savings and loan association, or 
savings and loan holding company (``bank and savings and loan 
registrants'') must provide the disclosure required by this subpart.
    (b) When the term ``reported period'' is used in this subpart, it 
refers to each of the periods described below:
    (1) Each annual period required by 17 CFR part 210 (``Regulation S-
X'') or 17 CFR 239.90 (``Form 1-A'') for bank and savings and loan 
registrants, except as is provided in paragraph (2) below;
    (2) With respect to the disclosures required by Sec.  229.1405(a), 
each of the last five fiscal years for initial public offering 
registration statements under the Securities Act, registration 
statements for an initial registration of a class of securities under 
Section 12(b) or 12(g) of the Exchange Act, and initial offering 
statements under Regulation A, and
    (3) Any additional interim period subsequent to the most recent 
fiscal year end if a material change in the information or the trend 
evidenced thereby has occurred.
    (c) In this subpart, registrants are required to use daily averages 
unless otherwise indicated. Registrants may use weekly or month-end 
averages where the collection of data on a daily average basis would 
involve unwarranted or undue burden or expense; provided that such 
averages are representative of the registrant's operations. Registrants 
must disclose the basis used for presenting averages.
    (d) In various provisions throughout this subpart, registrants are 
required to disclose information relating to certain foreign financial 
activities. For purposes of this subpart, registrants are only required 
to present this information if the registrant meets the threshold to 
make separate disclosures concerning its foreign activities in its 
consolidated financial statements pursuant to the test set forth in 
Sec.  210.9-05 of Regulation S-X.

Sec.  229.1402  (Item 1402) Distribution of assets, liabilities and 
stockholders' equity; interest rates and interest differential.

    (a) For each reported period, present average balance sheets 
containing the information specified below. The format of the average 
balance sheets may be condensed from consolidated financial statements, 
provided that the condensed average balance sheets indicate the 
significant categories of assets and liabilities, including all major 
categories of interest-earning assets and interest-bearing liabilities. 
Major categories of interest-earning assets must include, at a minimum, 
loans, taxable investment securities, non-taxable investment 
securities, interest bearing deposits in other banks, federal funds 
sold, securities purchased with agreements to resell, and other short-
term investments. Major categories of interest-bearing liabilities must 
include, at a minimum, savings deposits, other time deposits, federal 
funds purchased, securities sold under agreements to repurchase, 
commercial paper, other short-term debt, and long-term debt.
    (b) For each reported period, present an analysis of net interest 
earnings as follows:
    (1) For each major category of interest-earning asset and each 
major category of interest-bearing liability, the average amount 
outstanding during the period and the interest earned or paid on such 
amount.
    (2) The average yield for each major category of interest-earning 
asset.
    (3) The average rate paid for each major category of interest-
bearing liability.
    (4) The average yield on all interest-earning assets and the 
average effective rate paid on all interest-bearing liabilities.
    (5) The net yield on interest-earning assets (net interest earnings 
divided by total interest-earning assets, with net interest earnings 
equaling the difference between total interest earned and total 
interest paid).
    (6) The registrant may, at its option, present its analysis in 
connection with the average balance sheet required by paragraph (a) of 
this section.
    (c) For the interest rates and interest differential analysis:
    (1) Present for each comparative reporting period:
    (i) The dollar amount of change in interest income; and
    (ii) The dollar amount of change in interest expense.
    (2) For each major category of interest-earning asset and interest-
bearing liability, segregate the changes presented pursuant to 
paragraph (c)(1)

[[Page 52979]]

of this section into amounts attributable to:
    (i) Changes in volume (change in volume times old rate);
    (ii) Changes in rates (change in rate times old volume); and
    (iii) Changes in rates and volume (change in rate times the change 
in volume).
    (3) The rates and volume variances presented pursuant to paragraph 
(c)(2) of this section must be allocated on a consistent basis between 
rates and volume variances, and the basis of allocation disclosed in a 
note to the table.
    Instruction 1 to Sec.  229.1402. If material, disclose how non-
accruing loans have been treated for purposes of the analyses required 
by paragraph (b) of this section.
    Instruction 2 to Sec.  229.1402. In the calculation of the changes 
in the interest income and interest expense required by paragraph (c) 
of this section, exclude any out-of-period items and adjustments and 
disclose the types and amounts of items excluded in a note to the 
table.
    Instruction 3 to Sec.  229.1402. If material loan fees are included 
in the interest income computation, disclose the amount of such fees.
    Instruction 4 to Sec.  229.1402. If tax-exempt income is calculated 
on a tax equivalent basis, describe the extent of recognition of 
exemption from Federal, state, and local taxation and the combined 
marginal or incremental rate used in a brief note to the table.
    Instruction 5 to Sec.  229.1402. If disclosure regarding foreign 
activities is required pursuant to Sec.  229.1401(d), the information 
required by paragraphs (a), (b) and (c) of this section must be further 
segregated between domestic and foreign activities for each significant 
category of assets and liabilities disclosed pursuant to paragraph (a) 
of this section. In addition, for each reported period, present 
separately, on the basis of averages, the percentage of total assets 
and total liabilities attributable to foreign activities.

Sec.  229.1403  (Item 1403) Investments in debt securities.

    (a) As of the end of the latest reported period, state the weighted 
average yield of each category of debt securities not carried at fair 
value through earnings for which disclosure is required in the 
financial statements and is due:
    (1) In one year or less;
    (2) After one year through five years;
    (3) After five years through ten years; and
    (4) After ten years.
    (b) Disclose how the weighted average yield has been calculated. 
Additionally, state whether yields on tax-exempt obligations have been 
computed on a tax-equivalent basis (see Instruction 4 to Sec.  
229.1402). Discuss any major changes in the tax-exempt portfolio.

Sec.  229.1404  (Item 1404) Loan portfolio.

    (a) As of the end of the latest reported period, present separately 
the amount of loans in each category for which disclosure is required 
in the financial statements that are due:
    (1) In one year or less;
    (2) After one year through five years; and
    (3) After five years.
    (b) For each loan category for which disclosure is provided in 
response to paragraph (a), present separately the total amount of all 
loans in such loan category that are due after one year that:
    (1) Have predetermined interest rates; and
    (2) Have floating or adjustable interest rates.
    Instruction 1 to Sec.  229.1404. Report scheduled repayments in the 
maturity category in which the payment is due.
    Instruction 2 to Sec.  229.1404. Report demand loans, loans having 
no stated schedule of repayments and no stated maturity, and overdrafts 
as due in one year or less.
    Instruction 3 to Sec.  229.1404. Determinations of maturities shall 
be based upon contractual terms. However, to the extent that non-
contractual rollovers or extensions are included for purposes of 
measuring the allowance for credit losses under U.S. GAAP or IFRS, 
consider such non-contractual rollovers or extensions for purposes of 
the maturities classification and briefly discuss this methodology.

Sec.  229.1405  (Item 1405) Allowance for Credit Losses.

    (a) For each reported period, disclose the following credit ratios, 
along with each component of the ratio's calculation. For initial 
public offering registration statements under the Securities Act, 
registration statements for an initial registration of a class of 
securities under Section 12(b) or 12(g) of the Exchange Act, and 
initial offering statements under Regulation A, provide the following 
ratios for the last five fiscal years:
    (1) Allowance for credit losses to total loans outstanding at each 
period end.
    (2) Nonaccrual loans to total loans outstanding at each period end.
    (3) Allowance for credit losses to nonaccrual loans at each period 
end.
    (4) Net charge-offs during the period to average loans outstanding 
during the period. Provide this ratio for each loan category for which 
disclosure is required in the financial statements.
    (b) Provide a discussion of the factors that drove material changes 
in the ratios in (a) above, or the related components, during the 
periods presented.
    (c) At the end of each reported period, provide a breakdown of the 
allowance for credit losses by each loan category for which disclosure 
is required by U.S. GAAP as set forth in the following template:

              Allocation of the Allowance for Credit Losses
------------------------------------------------------------------------
                                                  Reported period
                                         -------------------------------
                                                            Percent of
 Balance at end of period applicable to:                   loans in each
                                              Amount        category to
                                                            total loans
------------------------------------------------------------------------
Each loan category required by U.S. GAAP              $X               X
                                         -------------------------------
                                          ..............             100
------------------------------------------------------------------------

    Instruction 1 to Sec.  229.1405. A foreign private issuer that 
prepares its financial statements in accordance with IFRS as issued by 
the IASB does not need to provide disclosure responsive to Sec.  
229.1405(a)(2), (a)(3) and paragraph (c) of this section.
    Instruction 2 to Sec.  229.1405. Net charge-offs must be based on 
current period net charge-offs for each loan category.

[[Page 52980]]

Sec.  229.1406  (Item 1406) Deposits.

    (a) For each reported period, present separately the average amount 
of and the average rate paid on each of the following deposit in bank 
office categories that are in excess of 10 percent of average total 
deposits:
    (1) Noninterest bearing demand deposits.
    (2) Interest-bearing demand deposits.
    (3) Savings deposits.
    (4) Time deposits.
    (5) Other.
    (b) If the registrant believes other categories more appropriately 
describe the nature of the deposits, those categories may be used.
    (c) If material, separately present domestic deposits and foreign 
deposits for all amounts reported under paragraph (a) of this section. 
Foreign deposits as used here means deposits from depositors who are 
not in the registrant's country of domicile.
    (d) If material, the registrant must disclose separately the 
aggregate amount of deposits by foreign depositors in domestic offices. 
Registrants are not required to identify the nationality of the 
depositors.
    (e) As of the end of each reported period, present separately the 
amount of uninsured deposits. For registrants that are U.S. federally 
insured depositary institutions, uninsured deposits are individual 
deposits in U.S. offices of amounts exceeding the Federal Deposit 
Insurance Corporation insurance limit, and investment products such as 
mutual funds, annuities, or life insurance policies. Foreign banking or 
savings and loan institutions must disclose the definition of uninsured 
deposits appropriate for their country of domicile.
    (f) As of the end of the latest reported period, state the amount 
outstanding of:
    (1) U.S. time deposits in excess of the Federal Deposit Insurance 
Corporation insurance limit; and
    (2) Time deposits that are otherwise uninsured (including for 
example, U.S time deposits in uninsured accounts, non-U.S. time 
deposits in uninsured accounts, or non-U.S. time deposits in excess of 
any country-specific insurance fund), by time remaining until maturity 
of:
    (i) 3 months or less;
    (ii) Over 3 through 6 months;
    (iii) Over 6 through 12 months; and
    (iv) Over 12 months.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
9. The authority citation for part 249 continues to read in part as 
follows:

    Authority:  15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111-203, 124 Stat. 
1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012); Sec. 
107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001, Pub. L. 
114-94, 129 Stat. 1312 (2015), unless otherwise noted.

0
10. Amend Form 20-F (referenced in Sec.  249.220f) by:
0
a. adding Instruction 4 to Item 4; and
0
b. revising Instruction 2 to Item 7.B.
    The addition and revisions to read as follows:

    Note:  The text of Form 20-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

United States, Securities and Exchange Commission, Washington, DC 20549

Form 20-F

* * * * *

Part I

* * * * *
    Instructions to Item 4: * * *
    4. If you are bank, bank holding company, savings and loan 
association or savings and loan holding company, provide the 
information specified in Subpart 1400 of Regulation S-K (Sec.  229.1400 
et seq. of this chapter).
* * * * *
    Instructions to Item 7.B: * * *
    2. In response to Item 7.B.2, if the lender is a bank, savings and 
loan association, or broker dealer extending credit under Federal 
Reserve Regulation T, and the loans are not disclosed as past due, 
nonaccrual or troubled debt restructurings in the consolidated 
financial statements, your response may consist of a statement, if 
true, that the loans in question (A) were made in the ordinary course 
of business, (B) were made on substantially the same terms, including 
interest rates and collateral, as those prevailing at the time for 
comparable transactions with other persons, and (C) did not involve 
more than the normal risk of collectibility or present other 
unfavorable features.
* * * * *

    By the Commission.

    Dated: September 17, 2019.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2019-20491 Filed 10-2-19; 8:45 am]
 BILLING CODE 8011-01-P