Source: https://www.federalregister.gov/documents/2006/06/21/E6-9756/data-reporting-requirements-for-the-federal-home-loan-banks
Timestamp: 2017-10-24 00:50:09
Document Index: 636121981

Matched Legal Cases: ['arts 915', 'art 914', 'art 917', 'art 955', 'art 914', 'art 914', 'art 917', 'art 914', 'art 914', 'arts 915', 'art 304', '§\u2009914', 'art 917', 'art 914', 'art 917', '§\u2009917', 'art 955', '§\u2009955', 'art 900', '§\u2009900', 'art 914', '§\u2009914', '§\u2009914', '§\u2009915', '§\u2009915', '§\u2009915', 'art 925', '§\u2009925', 'art 950', '§\u2009950', 'art 955', '§\u2009955', 'art 955']

Federal Register :: Data Reporting Requirements for the Federal Home Loan Banks
A Rule by the Federal Housing Finance Board on 06/21/2006
71 FR 35495
35495-35500 (6 pages)
No. 2006-10
E6-9756
C. Parts 915, 925, 950, and 955
Opportunity for Notice and Comment on Reporting Changes
Reporting Violation as Basis for Enforcement Action
Banking Agencies' Treatment of Reporting Violations
Potential for Confusion Between Reporting Requirements and Other Guidance
Proposed Part 914
Proposed Addition to Part 917
AMA Reporting Requirements
Appendices A and B to Part 955 [Removed]
https://www.federalregister.gov/d/E6-9756 https://www.federalregister.gov/d/E6-9756
The Federal Housing Finance Board (Finance Board) is reorganizing the way it imposes certain reporting requirements on the Federal Home Loan Banks (Banks) by removing the requirements from its regulations and issuing them in the Data Reporting Manual (DRM), which is an enforceable order issued pursuant to the Finance Board's investigatory powers. The Finance Board also is adding a new part 914, which addresses a Bank's obligation with respect to reporting requirements and making its books and records available to the Finance Board.
Effective Date: This final rule is effective on July 21, 2006.
Thomas Hearn, Senior Attorney Advisor, Office of General Counsel, by electronic mail at hearnt@fhfb.gov or by telephone at 202-408-2976; Scott L. Start Printed Page 35496Smith, Associate Director, Office of Supervision, by electronic mail at smiths@fhfb.gov or by telephone at 202-408-2991; or Gary Ternullo, Associate Director, Office of Supervision, by electronic mail at ternullog@fhfb.gov or by telephone at 202-408-2904. You can send regular mail to the Federal Housing Finance Board, 1625 Eye Street, NW., Washington, DC 20006.
[P]erhaps the most effective weapon of federal regulation of banking is the broad visitorial power of federal bank examiners. Whenever the agencies deem it necessary, they may order ‘a thorough examination of all the affairs of the bank’ * * * [citation omitted]. Such examinations are frequent and intensive. In addition, the banks are required to furnish detailed periodic reports of their operations to the supervisory agencies [citation omitted]. In this way the agencies maintain virtually a day-to-day surveillance of the American banking system. And should they discover unsound banking practices, they are equipped with a formidable array of sanctions * * *. As a result of this panoply of sanctions, recommendations by the agencies concerning banking practices tend to be followed by bankers without the necessity of formal compliance proceedings. 1 Davis, Administrative Law (1958), s. 4.04.
92 Cong. Rec. 5648 (1948), cited in Appeal of FTC Line of Business Report Litigation, 595 F.2d 685, 695-696 (DC Cir.) (per curiam), cert. denied sub nom. Milliken and Co. v. FTC, 439 U.S. 958 (1978).
Historically, the Finance Board has imposed reporting requirements in a variety of ways. Some requirements, such as those related to the call report, have been imposed by informal directives issued by staff. For other requirements, the Finance Board has used its rulemaking authority. 12 U.S.C. 1422b(a)(1).
On February 9, 2005, the Board of Directors approved for publication a proposed rule that would reorganize the way the Finance Board imposes reporting requirements by creating a Data Reporting Manual (DRM) that would contain certain reporting requirements currently in regulations or issued by Finance Board staff. See Resolution Number 2005-04 (Feb. 9, 2005), published at 770 FR 9551 (Feb. 28, 2005).[1] For each subject matter, the DRM includes instructions addressing data definitions as well as requirements concerning data elements, reporting format, reporting method, e.g., electronic or paper, record retention, timeliness, reporting frequency, and certification. Going forward, changes to the reporting requirements will be made by amendments to the DRM.
The proposed rule included substantive regulatory changes that would add a new part 914, which addresses a Bank's obligation with respect to reporting requirements and making its books and records available to the Finance Board. It also would add a new section to part 917, which imposes on each Bank's board of directors the obligation to establish policies and procedures with respect to regulatory reporting. In July 2005, the Board of Directors created the DRM and located in it reporting requirements for the Call Report System. See Resolution Number 2005-14 (July 13, 2005). In August 2005, the Finance Board added to the DRM reporting requirements related to Bank members. See Resolution Number 2005-15 (Aug. 10, 2005). The Finance Board is continuing this effort by relocating from regulations to the DRM data reporting requirements Start Printed Page 35497concerning: Purchases of Bank stock by member banks (12 CFR 925.20(e)); advances and commitments outstanding to each Bank member (12 CFR 950.4(e)); Acquired Member Assets (AMA) (12 CFR 955.4); and forms related to Bank director eligibility (12 CFR 915.7 and 915.12(a)).
In the proposed rule, the Finance Board considered placing in the DRM reporting requirements for a Bank's strategic business plan (12 CFR 917.5(c)); Advisory Councils (12 CFR 951.4(f)(3)); the Affordable Housing Reserve Fund (12 CFR 951.3(d) and 951.15(b)); and Community Investment Cash Advance (CICA) Programs (12 CFR 952.6(a)). Because these requirements do not involve the periodic reporting of empirical data, we have determined that these requirements are better left in Finance Board regulations.
The DRM represents an enforceable order issued pursuant to the Finance Board's investigatory powers. The reorganization of reporting requirements and the amendments to Finance Board regulations will allow the Finance Board to address problems it has experienced with the timeliness, accuracy, and completeness of data reporting by the Banks. The Bank Act gives the Finance Board enforcement authority to redress, among other things, violations of the Bank Act, or any law, order, rule, or regulation. 12 U.S.C. 1422b(a)(5). The Finance Board will deem data reporting problems as violations of an investigatory order and, where applicable, violations of the regulations being added today in 12 CFR part 914.
Reporting requirements imposed pursuant to the Finance Board's investigatory powers are not subject to the notice and comment provisions of the APA. See Appeal of FTC Line of Business Report Litigation, 595 F.2d at 695-696. Nevertheless, the Finance Board recognizes that changes to reporting requirements can impose regulatory burden. The Finance Board also recognizes the utility of input from the Banks and the public in determining what information is appropriate to collect. Thus, where practicable, Finance Board staff will consult with the Banks and the public with respect to significant changes in the DRM before changes are made. Moreover, information collections that are subject to the Paperwork Reduction Act (PRA), such as those related to the AMA rule, will continue to be published in the Federal Register for comment in accordance with the PRA.
The Finance Board is adding a new part 914 to its regulations that addresses a Bank's obligation with respect to reporting requirements and makes its books and records available to the Finance Board. Section 914.1 contains a number of provisions directed at how a Bank reports data to the Finance Board and makes its books and records available to Finance Board examiners. Section 914.1(a) defines the term Regulatory Report to mean any report of raw or summary data required to evaluate the safe and sound condition and operations of a Bank or to determine compliance with any: (1) Provision in the Bank Act, or any law, order, rule, or regulation; (2) condition imposed in writing by the Finance Board in connection with the granting of any application or other request by a Bank; or (3) written agreement entered into by the Finance Board and a Bank. Section 914.1(b) provides examples of a Regulatory Report, including the call report and reports of instrument-level data submitted for risk assessment purposes. The term Regulatory Report also includes reports related to a Bank's housing mission achievement, such as reports related to AMA, a Bank's Affordable Housing Program (AHP), Community Investment Program (CIP), and other CICA programs.
Section 914.2 requires each Bank to file Regulatory Reports with the Finance Board pursuant to the Finance Board's forms and instructions for the reports. These reports must be filed no later than the deadline established by the Finance Board. In some cases, this will involve reporting at regular intervals; in other cases, it will involve responding to Finance Board requests for information that are in addition to the information submitted at regular intervals.
Section 914.3 requires each Bank to make its books and records available upon request by the Finance Board within a reasonable period at a location acceptable to the Finance Board. Section 914.3 establishes presumptions about what the Finance Board considers a reasonable period of time to respond to requests that occur during and outside of an ongoing examination as well as those that occur at other times.
The Finance Board is revising various reporting requirements set forth in parts 915, 925, 950, and 955 to refer the reader to forms and instructions issued pursuant to the DRM.
In response to the February 2005 proposed rule, the Finance Board received four comments—three from Banks and one from a law firm representing a fourth Bank. These comments covered the following areas.
The four commenters expressed concern that reporting requirements could be imposed in the future without giving the Banks or the public an opportunity to comment. One commenter requested that the final rule provide procedures by which the Finance Board will determine if an amendment would impose regulatory burden or would constitute a significant change that merits input from the Banks and public through the comment process.
As discussed in the proposed rule, reporting requirements imposed pursuant to the Finance Board's investigatory powers are not subject to the notice and comment provisions of the APA.[2] In some cases, new reporting requirements or revisions to existing requirements trigger the notice and comment requirements of the PRA. Other reporting requirements, such as those related to call reports, are not covered by the PRA.
The Finance Board recognizes that changes to reporting requirements can impose regulatory burden. The Finance Board also recognizes the utility of input from the Banks and the public in determining what information is appropriate to collect and what is the most efficient way to collect needed information. Thus, as was indicated in the proposed rule, the Finance Board intends, where practicable, to consult with the Banks and the public with respect to substantial changes to reporting requirements, regardless of whether the APA or PRA apply.
Three of the four commenters expressed concern that a violation of a reporting requirement could be the basis for sanctions against a Bank without any additional due process. One commenter indicated that it believes that non-compliance with a reporting requirement alone would not suffice to cause an immediate violation resulting in sanctions. Rather, the commenter believes that non-compliance would Start Printed Page 35498have to go to a judicial forum to determine whether the agency was entitled to the information it was seeking.
The Bank Act authorizes the Finance Board to bring an enforcement action in the face of conduct that violates any order imposed in writing by the Finance Board. 12 U.S.C. 1422b(a)(5). The Finance Board also may bring an enforcement action if a Bank engages in an unsafe or unsound banking practice, and courts have held that frustrating a regulator's gathering of information constitutes an unsafe or unsound banking practice. See Seidman v. Office of Thrift Supervision, 37 F.3d 911, 936-937 (3rd Cir. 1994).
In any formal enforcement action by the Finance Board related to a data reporting violation, the process will guarantee all constitutional and statutory rights, including a review in a judicial forum before the enforcement action becomes final. Under Finance Board regulations, the Finance Board would initiate an enforcement action by issuing a notice of charges. 12 CFR 908.40. If the Bank, director, or executive officer disputed the charges, a presiding officer would hold a hearing and issue a recommendation to the Finance Board. 12 CFR 908.60 and 908.63. If, after receiving the presiding officer's recommendation, the Finance Board's board of directors found that the charges were sustained and issued a cease and desist order or imposed civil money penalties, the affected party would have the option of appealing the action to the United States Court of Appeals for the District of Columbia Circuit. 12 CFR 908.10.
Two Banks commented that establishing the DRM as an enforceable order is inconsistent with the approach taken by other federal bank regulators with respect to information gathering. One Bank cited the Office of the Comptroller of the Currency (OCC) Handbook on Bank Supervisory Processes to demonstrate that, in the event of disagreements between examiners and a bank, it is the OCC's policy to resolve the dispute fairly and expeditiously in an informal, amicable manner. The Bank also made reference to similar publication by the Office of Thrift Supervision.
The examples cited by the commenters appear to relate to disagreements that arise during an examination or inquiry of a specific institution. For reporting requirements directed at all institutions within a banking agencies' purview, such as those related to the call report, the banking agencies impose reporting requirements in a manner closely similar to the way the Finance Board has exercised such powers here. For example, call report requirements for insured depository institutions and changes to such requirements are imposed by amending the forms and instructions for the call report. See 12 CFR part 304. These forms and instructions, like the DRM discussed above, represent enforceable orders issued as a proper exercise of an agency's investigatory powers. When a depository institution fails to comply with a reporting requirement, its primary banking regulator routinely imposes penalties for reporting violations including violations that might seem de minimis.
Another Bank commented that other federal banking regulators do not view the various manuals they promulgate as definitive statements carrying the force of law. Instead, the commenter claimed, the manuals of other federal banking regulators are not intended to be strictly binding on either the regulator or the regulated institution. The commenter appears to be confusing a basic principal of administrative law that staff policy guidance, such as those put in manuals at some agencies, ordinarily does not carry the force of law. Here, the data reporting requirements are being issued by the Finance Board's Board of Directors pursuant to statutory authority to require reports. Compiling the reporting requirements in the DRM is solely a matter of convenience and in no way diminishes the legal authority with which they were adopted and the force of law.
One Bank commented that orders usually arise in adjudicatory or investigative proceeding that is specific to a particular entity. The Bank wrote that it is doubtful that the law allows the Finance Board, as part of its regulatory process, to grant itself the power to issue an enforceable order preemptively and with application to all of the Banks particularly in view of the fact that the Banks have the right to challenge a request for privileged or confidential legal advice. Another Bank and the law firm commenter also expressed concerns that the Finance Board might include privileged or confidential material among the information it sought from all Banks or from one particular Bank. As discussed in the proposed rule, case law has long recognized Congress' authority to give a regulatory agency investigatory powers that include the power to require informational reports. There is no dispute that section 20 gives the Finance Board investigatory power to obtain information reports about the Banks.
Where Congress, as here, has given an agency investigatory powers, an agency's exercise of that power will be upheld if the request for information is “reasonably relevant.” FTC v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C. Cir. 1992). Courts have said that an agency's own appraisal of relevancy must be accepted as long as it is not “obviously wrong.” Id. In exercising its authority to create reporting requirements, the Finance Board intends to observe all applicable privileges.
One commenter noted that the Finance Board already has established a process for clarifying regulatory reporting requirements through Advisory Bulletins and other supervisory guidance. The commenter claimed that nothing in the proposed rule stated that the Finance Board would stop issuing Advisory Bulletins or other supervisory letters apart from the DRM. This omission creates the potential, the commenter claimed, for discrepancies between the DRM and other supervisory guidance. The commenter recommended that the Finance Board revise the proposed rule to ensure that no such discrepancies or ambiguities are created in the reporting requirements. Another commenter made a similar comment.
A commenter noted that not all data reporting requirements will be contained in the DRM. The Bank suggested that the DRM include an appendix clearly describing which reporting requirements are not in the DRM and where such reporting requirements are located. Without guidance as to when the DRM applies and when to consult the regulations, the commenter argued, the data reporting requirements may, in practice, become more confusing for the Banks. Another commenter expressed a similar point. For reporting requirements that currently are in the Finance Board regulations, the Finance Board will leave a reference that directs a reader to the DRM. The Finance Board will adopt the recommendation of including an appendix to the DRM that lists reporting requirements by topic and indicates where they may be found.
Two commenters opposed adopting a presumption in § 914.3 of 1 business day and 3 business days for a reasonable Start Printed Page 35499period for complying with an examiner's request for documents. These commenters recommended that, when considering whether a Bank complied with an examiner's request in a reasonable period of time, the Finance Board should consider: (a) Whether the data are available and finalized; (b) whether there are any information technology issues affecting the ability to respond or analyze the response (on either the Finance Board's or a Bank's part); (c) whether the applicable business units are able to concentrate on these requests exclusively; (d) whether the applicable committees are available to review and approve the responses; and (e) whether any of the information is privileged.
The Finance Board believes that the time periods set out in the proposed rule are reasonable. Because they are only presumptions, a Bank may cite the factors listed by the commenters, or other factors, to demonstrate that in a particular instance, a reasonable period to comply with an examiner's request is longer than the time periods set out in the regulation.
One commenter wrote that it believes that the proposal to amend part 917 to require the board of directors of a Bank to establish policies and procedures with respect to regulatory reporting was redundant given other requirements that require a Bank's board of directors to ensure compliance generally with the regulatory requirements mandated by the Finance Board.
The Finance Board acknowledges that the commenter has raised a valid concern. A Bank's obligation to provide the Finance Board with information that is accurate, timely, and complete derives from the chapters that have been added to the DRM and in the new part 914 that is recommended for the final rule. Finance Board regulations already make clear that a Bank's board of directors retains ultimate responsibility for a Bank's management (12 CFR 917.2(a)). Upon further reflection, the Finance Board believes that adding the proposed part 917 amendment may cause a Bank's board to focus on a Bank's processes for regulatory reporting at the expense of focusing on outcomes of whether such reporting is timely, accurate, and complete. Thus, the final rule does not include the proposed § 917.11.
The final rule will have no substantive effect on any collection of information covered by the PRA. See 44 U.S.C. 3501 et seq. Therefore, the Finance Board did not submit the proposed regulation to the Office of Management and Budget (OMB) for review.
As part of the reorganization of reporting requirements, the Board of Directors added the AMA reporting requirements to the DRM. See Resolution Number 2006-11 (June 14, 2006). The AMA reporting requirements, which are being moved from 12 CFR part 955 (specifically, § 955.4 and Appendices A and B) to the DRM as a result of this final rule, are contained an information collection entitled “Federal Home Loan Bank Acquired Member Assets, Core Mission Activities, Investments and Advances.” The OMB control number for this information collection is 3069-0058, and it is due to expire on March 31, 2007. In November 2005, the Finance Board published a PRA notice soliciting comments on the changes to the AMA reporting requirements. See 70 FR 66413 (Nov. 2, 2005). Elsewhere in this issue of the Federal Register, the Finance Board is publishing the second PRA notice with respect to the AMA reporting requirements and also is submitting the entire information collection, with the AMA reporting changes, to OMB for review and approval of a 3 year extension of the control number.
The final rule applies only to the Banks, which do not come within the meaning of “small entities” as defined in the Regulatory Flexibility Act (RFA). See 5 U.S.C. 601(6). Thus, in accordance with section 605(b) of the RFA, 5 U.S.C. 605(b), the Finance Board hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities.
For the reasons stated in the preamble, the Finance Board revises 12 CFR, chapter IX to read as follows:
1. The authority for part 900 continues to read as follows:
2. Amend § 900.2 by adding in alphabetical order the definition for “Data Reporting Manual or DRM” to read as follows:
3. Add a new part 914 to title 12, chapter IX, Subchapter C, to read as follows:
Regulatory Report defined.
Filing Regulatory Reports.
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), and 1440.
§ 914.1
(3) Written agreement entered into between the Finance Board and a Bank. Start Printed Page 35500
(b) Examples. Regulatory Report includes:
(1) Call reports and reports of instrument-level risk modeling data;
§ 914.2
Each Bank shall file Regulatory Reports with the Finance Board in accordance with the forms, instructions, and schedules issued by the Finance Board from time to time. If no regularly scheduled reporting dates are established, Regulatory Reports shall be filed as requested by the Finance Board.
Each Bank shall make its books and records readily available for inspection and other supervisory purposes within a reasonable period upon request by the Finance Board, at a location acceptable to the Finance Board. For requests for documents made during the course of an onsite examination and pursuant to the examination's scope, a reasonable period is presumed to be no longer than 1 business day. For requests for documents made outside of an onsite examination, a reasonable period is presumed to be 3 business days.
5. Revise § 915.7(a) to read as follows:
(a) Eligibility verification. Based on the information provided on the director eligibility certification form prescribed in the Data Reporting Manual issued by the Finance Board, as amended from time to time, a Bank shall verify that each nominee meets all of the eligibility requirements for elective directors set forth in the Act and this part before placing that nominee on the ballot prepared by the Bank under § 915.8(a). A Bank shall not declare elected a nominee that it has reason to know is ineligible to serve, nor shall it seat a director-elect that it has reason to know is ineligible to serve.
6. Revise § 915.12(a) to read as follows:
(a) Annual reporting. Each director shall submit to his or her Bank the appropriate executed director eligibility certification, as prescribed in the Data Reporting Manual issued by the Finance Board, as amended from time to time. The Bank shall promptly forward to the Finance Board a copy of the certification filed by each appointive director.
7. The authority citation for part 925 continues to read as follows:
8. Revise § 925.20(e) to read as follows:
(e) Reports. The Bank shall make reports to the Finance Board setting forth purchases by institutions approved for membership of their minimum stock requirement pursuant to this section in accordance with the instructions provided in the Data Reporting Manual issued by the Finance Board, as amended from time to time.
9. The authority citation for part 950 continues to read as follows:
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1429, 1430, 1430b, and 1431.
10. Revise § 950.4(e) to read as follows:
Limitations on access to advances.
11. The authority citation for part 955 continues to read as follows:
Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, and 1431.
12. Revise § 955.4 to read as follows:
Reporting requirement for acquired member assets.
13. Remove Appendices A and B to part 955.
1. Resolutions are available electronically in the FOIA Reading Room of the Finance Board Web site at: http://www.fhfb.gov/​Default.aspx?​Page=​59&​Top=​4.
2. The banking agencies have taken the position that changes to reporting requirements for the call report are not covered by the APA. 69 FR 3995, 3998 (Jan. 27, 2004).
[FR Doc. E6-9756 Filed 6-20-06; 8:45 am]