Proposed Agency Information Collection Activities; Comment Request
| Published date | 22 July 2020 |
| Citation | 85 FR 44361 |
| Record Number | 2020-15788 |
| Section | Notices |
| Court | Federal Deposit Insurance Corporation,Federal Reserve System,The Comptroller Of The Currency Office,Treasury Department |
Federal Register, Volume 85 Issue 141 (Wednesday, July 22, 2020)
[Federal Register Volume 85, Number 141 (Wednesday, July 22, 2020)]
[Notices]
[Pages 44361-44376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15788]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
Proposed Agency Information Collection Activities; Comment
Request
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); and Federal
Deposit Insurance Corporation (FDIC).
ACTION: Joint notice and request for comment.
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SUMMARY: In accordance with the requirements of the Paperwork Reduction
Act of 1995 (PRA), the OCC, the Board, and the FDIC (the ``agencies'')
may not conduct or sponsor, and the respondent is not required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The Federal
Financial Institutions Examination Council (FFIEC), of which the
agencies are members, has approved the agencies' publication for public
comment of a proposal to revise and extend the Consolidated Reports of
Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, and FFIEC
051) and Regulatory Capital Reporting for Institutions Subject to the
Advanced Capital Adequacy Framework (FFIEC 101), which are currently
approved collections of information. The FFIEC has also approved the
Board's publication for public comment, on behalf of the agencies, of a
proposal to revise and extend the Report of Assets and Liabilities of
U.S. Branches and Agencies of Foreign Banks (FFIEC 002) and the Report
of Assets and Liabilities of a Non-U.S. Branch that is Managed or
Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank
(FFIEC 002S), which also are currently approved collections of
information. The agencies are requesting comment on revisions to the
Call Reports, FFIEC 101, and FFIEC 002 related to interim final rules
and a final rule issued in response to disruptions related to the
Coronavirus Disease 2019 (COVID-19) that revise the agencies' capital
rule, the Board's regulations on reserve requirements and insider
loans, and the FDIC's assessments regulations as well as certain
sections of the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) for which the agencies received emergency approvals from
OMB. In addition, the agencies are proposing changes to the Call Report
and the FFIEC 002 related to U.S. generally accepted accounting
principles (GAAP). Further, the agencies are proposing revisions to the
Call Report to reflect the expiration of the temporary exception for
estimated disclosures on international remittance transfers and certain
amendments to the Remittance Rule recently finalized by the Consumer
Financial Protection Bureau (Bureau), which is a member of the FFIEC.
DATES: Comments must be submitted on or before September 21, 2020.
ADDRESSES: Interested parties are invited to submit written comments to
any or all of the agencies. All comments, which should refer to the
``Call Report, FFIEC 101, and FFIEC 002 Revisions,'' will be shared
among the agencies.
OCC: You may submit comments, which should refer to ``Call Report,
FFIEC 101, and FFIEC 002 Revisions,'' by any of the following methods:
Email: [email protected].
Mail: Chief Counsel's Office, Office of the Comptroller of
the Currency, Attention: 1557-0081 and 1557-0239, 400 7th Street, SW,
suite 3E-218, Washington, DC 20219.
Hand Delivery/Courier: 400 7th Street, SW, suite 3E-218,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``1557-0081 and 1557-0239'' in your comment. In general, the OCC will
publish comments on www.reginfo.gov without change, including any
business or personal information provided, such as name and address
information, email addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not include any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this information collection beginning on the date of publication of the
second notice for this collection by the following method:
Viewing Comments Electronically: Go to www.reginfo.gov.
Click on the ``Information Collection Review'' tab. Underneath the
``Currently under Review'' section heading, from the drop-down menu
select ``Department of Treasury'' and then click ``submit.'' This
information collection can be located by searching by OMB control
number ``1557-0081'' or ``1557-0239.'' Upon finding the appropriate
information collection, click on the related ``ICR Reference Number.''
On the next screen, select ``View Supporting Statement and Other
Documents'' and then click on the link to any comment listed at the
bottom of the screen.
For assistance in navigating www.reginfo.gov, please
contact the Regulatory Information Service Center at (202) 482-7340.
Board: You may submit comments, which should refer to ``Call
Report, FFIEC 101, and FFIEC 002 Revisions,'' by any of the following
methods:
[[Page 44362]]
Agency website: http://www.federalreserve.gov. Follow the
instructions for submitting comments at: http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include ``Call
Report, FFIEC 101, and FFIEC 002 Revisions'' in the subject line of the
message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
All public comments are available on the Board's website at https://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information.
FDIC: You may submit comments, which should refer to ``Call Report,
FFIEC 101, and FFIEC 002 Revisions,'' by any of the following methods:
Agency website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the FDIC's
website.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include ``Call Report, FFIEC
101, and FFIEC 002 Revisions'' in the subject line of the message.
Mail: Manuel E. Cabeza, Counsel, Attn: Comments, Room MB-
3128, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments received will be posted
without change to https://www.fdic.gov/regulations/laws/federal/
including any personal information provided. Paper copies of public
comments may be requested from the FDIC Public Information Center by
telephone at (877) 275-3342 or (703) 562-2200.
Additionally, commenters may send a copy of their comments to the
OMB desk officers for the agencies by mail to the Office of Information
and Regulatory Affairs, U.S. Office of Management and Budget, New
Executive Office Building, Room 10235, 725 17th Street, NW, Washington,
DC 20503; by fax to (202) 395-6974; or by email to
[email protected].
FOR FURTHER INFORMATION CONTACT: For further information about the
proposed revisions to the information collections discussed in this
notice, please contact any of the agency staff whose names appear
below. In addition, copies of the report forms for the Call Reports,
FFIEC 101, FFIEC 002, and FFIEC 002S can be obtained at the FFIEC's
website (https://www.ffiec.gov/ffiec_report_forms.htm).
OCC: Kevin Korzeniewski, Counsel, Chief Counsel's Office, (202)
649-5490, or for persons who are deaf or hearing impaired, TTY, (202)
649-5597.
Board: Nuha Elmaghrabi, Federal Reserve Board Clearance Officer,
(202) 452-3884, Office of the Chief Data Officer, Board of Governors of
the Federal Reserve System, 20th and C Streets NW, Washington, DC
20551. Telecommunications Device for the Deaf (TDD) users may call
(202) 263-4869.
FDIC: Manuel E. Cabeza, Counsel, (202) 898-3767, Legal Division,
Federal Deposit Insurance Corporation, 550 17th Street NW, Washington,
DC 20429.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Affected Reports
II. Current Actions
A. Regulation-Related Items
1. Definition of Eligible Retained Income
2. Money Market Mutual Fund Liquidity Facility
3. 5-Year 2020 CECL Transition Provision
4. Community Bank Leverage Ratio
5. Paycheck Protection Program (PPP) Loans and Liquidity
Facility
6. Board Regulation D Amendments
7. Loans to Executive Officers, Directors, and Principal
Shareholders
8. Temporary Exclusions from the Supplementary Leverage Ratio
B. Revisions Related to Section 4013 of the CARES Act
C. Revisions Related to U.S. GAAP
1. Provisions for Credit Losses on Off-Balance-Sheet Credit
Exposures
2. Expected Recoveries of Amounts Previously Charged Off
Included within the Allowances for Credit Losses
3. Nonaccrual Treatment of Purchased Credit-Deteriorated Assets
4. Last-of-Layer Hedging
D. Revisions Related to International Remittance Transfers
III. Timing
IV. Request for Comment
I. Affected Reports
The proposed changes discussed below affect the Call Reports, FFIEC
101, and FFIEC 002.
A. Call Reports
The agencies propose to extend for three years, with revision, the
FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports.
Report Title: Consolidated Reports of Condition and Income (Call
Report).
Form Number: FFIEC 031 (Consolidated Reports of Condition and
Income for a Bank with Domestic and Foreign Offices), FFIEC 041
(Consolidated Reports of Condition and Income for a Bank with Domestic
Offices Only), and FFIEC 051 (Consolidated Reports of Condition and
Income for a Bank with Domestic Offices Only and Total Assets Less Than
$5 Billion).
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
Type of Review: Revision and extension of currently approved
collections.
OCC:
OMB Control No.: 1557-0081.
Estimated Number of Respondents: 1,136 national banks and federal
savings associations.
Estimated Average Burden per Response: 42.56 burden hours per
quarter to file.
Estimated Total Annual Burden: 193,393 burden hours to file.
Board:
OMB Control No.: 7100-0036.
Estimated Number of Respondents: 756 state member banks.
Estimated Average Burden per Response: 45.43 burden hours per
quarter to file.
Estimated Total Annual Burden: 137,380 burden hours to file.
FDIC:
OMB Control No.: 3064-0052.
Estimated Number of Respondents: 3,335 insured state nonmember
banks and state savings associations.
Estimated Average Burden per Response: 40.62 burden hours per
quarter to file.
Estimated Total Annual Burden: 541,871 burden hours to file.
The estimated average burden hours collectively reflect the
estimates for the FFIEC 051, the FFIEC 041, and the FFIEC 031 reports
for each agency. In the agencies' most recently published Federal
Register notice for the submission of Call Report revisions for OMB
review, the estimated burden hours per quarter for each agency for the
Call Report information collection (based on the data reported by the
institutions under each agency's supervision as of September 30, 2019)
were 41.24 hours for the OCC, 44.45 hours for the Board, and 39.43
hours for the FDIC.\1\ In connection with the agencies' emergency
clearance requests that were submitted to, and approved by, OMB in the
second quarter of 2020
[[Page 44363]]
for the COVID-19-related Call Report revisions outlined in Sections
II.A and II.B, below, these estimates were adjusted based on Call
Report data reported as of December 31, 2019, before estimating that
these revisions would produce an increase of approximately 0.92 burden
hours per quarter for each of the three versions of the Call Report.
The estimated burden hours per quarter by agency for the Call Report as
currently approved by OMB, i.e., in response to the agencies' emergency
clearance requests, are 42.20 hours for the OCC, 45.07 hours for the
Board, and 40.26 hours for the FDIC. The Call Report revisions proposed
in this notice related to U.S. GAAP and international remittance
transfers would represent a further increase in estimated average
burden hours per quarter by agency of 0.36 hours.
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\1\ 85 FR 4780 (January 27, 2020).
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When the estimates are calculated by type of report across the
agencies, the estimated average burden hours per quarter are 37.98
(FFIEC 051), 51.39 (FFIEC 041), and 96.68 (FFIEC 031). The estimated
burden hours for the currently approved reports are 37.62 (FFIEC 051),
51.02 (FFIEC 041), and 96.30 (FFIEC 031), so the revisions proposed in
this notice related to U.S. GAAP and international remittance transfers
would represent an increase in estimated average burden hours per
quarter by type of report of 0.36 (FFIEC 051), 0.37 (FFIEC 041), and
0.38 (FFIEC 031).
The estimated burden per response for the quarterly filings of the
Call Report is an average that varies by agency because of differences
in the composition of the institutions under each agency's supervision
(e.g., size distribution of institutions, types of activities in which
they are engaged, and existence of foreign offices).
Type of Review: Extension and revision of currently approved
collections.
Legal Basis and Need for Collections
The Call Report information collections are mandatory: 12 U.S.C.
161 (national banks), 12 U.S.C. 324 (state member banks), 12 U.S.C.
1817 (insured state nonmember commercial and savings banks), and 12
U.S.C. 1464 (federal and state savings associations). At present,
except for selected data items and text, these information collections
are not given confidential treatment.
Banks and savings associations submit Call Report data to the
agencies each quarter for the agencies' use in monitoring the
condition, performance, and risk profile of individual institutions and
the industry as a whole. Call Report data serve a regulatory or public
policy purpose by assisting the agencies in fulfilling their shared
missions of ensuring the safety and soundness of financial institutions
and the financial system and protecting consumer financial rights, as
well as agency-specific missions affecting national and state-chartered
institutions, such as conducting monetary policy, ensuring financial
stability, and administering federal deposit insurance. Call Reports
are the source of the most current statistical data available for
identifying areas of focus for on-site and off-site examinations. Among
other purposes, the agencies use Call Report data in evaluating
institutions' corporate applications, including interstate merger and
acquisition applications for which the agencies are required by law to
determine whether the resulting institution would control more than 10
percent of the total amount of deposits of insured depository
institutions in the United States. Call Report data also are used to
calculate institutions' deposit insurance assessments and national
banks' and federal savings associations' semiannual assessment fees.
B. FFIEC 101
The agencies propose to extend for three years, with revision, the
FFIEC 101 report.
Report Title: Risk-Based Capital Reporting for Institutions Subject
to the Advanced Capital Adequacy Framework.
Form Number: FFIEC 101.
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
OCC:
OMB Control No.: 1557-0239.
Estimated Number of Respondents: 5 national banks and federal
savings associations.
Estimated Time per Response: 674 burden hours per quarter to file
for banks and federal savings associations.
Estimated Total Annual Burden: 13,480 burden hours to file.
Board:
OMB Control No.: 7100-0319.
Estimated Number of Respondents: 4 state member banks; 5 bank
holding companies and savings and loan holding companies that complete
Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 9 other bank
holding companies and savings and loan holding companies; and 6
intermediate holding companies.
Estimated Time per Response: 674 burden hours per quarter to file
for state member banks; 3 burden hours per quarter to file for bank
holding companies and savings and loan holding companies that complete
Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 677 burden
hours per quarter to file for other bank holding companies and savings
and loan holding companies; and 3 burden hours per quarter to file for
intermediate holding companies.
Estimated Total Annual Burden: 10,784 burden hours for state member
banks to file; 60 burden hours for bank holding companies and savings
and loan holding companies that complete Supplementary Leverage Ratio
(SLR) Tables 1 and 2 only to file; 24,372 burden hours for other bank
holding companies and savings and loan holding companies to file; and
72 burden hours for intermediate holding companies to file.
FDIC:
OMB Control No.: 3064-0159.
Estimated Number of Respondents: 1 insured state nonmember bank and
state savings association.
Estimated Time per Response: 674 burden hours per quarter to file.
Estimated Total Annual Burden: 2,696 burden hours to file.
Type of Review: Extension and revision of currently approved
collections.
Legal Basis and Need for Collections
Each advanced approaches institution \2\ is required to report
quarterly regulatory capital data on the FFIEC 101. Each top-tier
advanced approaches institution and top-tier Category III institution
\3\ is required to report supplementary leverage ratio information on
the FFIEC 101. The FFIEC 101 information collections are mandatory for
advanced approaches and top-tier Category III institutions: 12 U.S.C.
161 (national banks), 12 U.S.C. 324 (state member banks), 12 U.S.C.
1844(c) (bank holding companies), 12 U.S.C. 1467a(b) (savings and loan
holding companies), 12 U.S.C. 1817 (insured state nonmember commercial
and savings banks), 12 U.S.C. 1464 (federal and state savings
associations), and 12 U.S.C. 1844(c), 3106, and 3108 (intermediate
holding companies). Certain data items in this information collection
are given confidential treatment under 5 U.S.C. 552(b)(4) and (8).
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\2\ 12 CFR 3.100(b) (OCC); 12 CFR 217.100(b) (Board); 12 CFR
324.100(b) (FDIC).
\3\ 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC).
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The agencies use data reported in the FFIEC 101 to assess and
monitor the levels and components of each reporting entity's applicable
capital requirements and the adequacy of the entity's capital under the
Advanced Capital Adequacy
[[Page 44364]]
Framework \4\ and the supplementary leverage ratio,\5\ as applicable;
to evaluate the impact of the Advanced Capital Adequacy Framework and
the supplementary leverage ratio, as applicable, on individual
reporting entities and on an industry-wide basis and its competitive
implications; and to supplement on-site examination processes. The
reporting schedules also assist advanced approaches institutions and
top-tier Category III institutions in understanding expectations
relating to the system development necessary for implementation and
validation of the Advanced Capital Adequacy Framework and the
supplementary leverage ratio, as applicable. Submitted data that are
released publicly will also provide other interested parties with
additional information about advanced approaches institutions' and top-
tier Category III institutions' regulatory capital.
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\4\ 12 CFR part 3, subpart E (OCC); 12 CFR part 217, subpart E
(Board); 12 CFR part 324, subpart E (FDIC).
\5\ 12 CFR 3.10(c)(4) (OCC); 12 CFR 217.10(c)(4) (Board); 12 CFR
324.10(c)(4) (FDIC).
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C. FFIEC 002 and 002S
The Board proposes to extend for three years, with revision, the
FFIEC 002 and FFIEC 002S reports.
Report Titles: Report of Assets and Liabilities of U.S. Branches
and Agencies of Foreign Banks; Report of Assets and Liabilities of a
Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or
Agency of a Foreign (Non-U.S.) Bank
Form Numbers: FFIEC 002; FFIEC 002S.
OMB control number: 7100-0032.
Frequency of Response: Quarterly.
Affected Public: Business or other for-profit.
Respondents: All state-chartered or federally-licensed U.S.
branches and agencies of foreign banking organizations, and all non-
U.S. branches managed or controlled by a U.S. branch or agency of a
foreign banking organization.
Estimated Number of Respondents: FFIEC 002--209; FFIEC 002S-38.
Estimated Average Burden per Response: FFIEC 002--24.87 hours;
FFIEC 002S--6.0 hours.
Estimated Total Annual Burden: FFEIC 002--20,791 hours; FFIEC
002S--912 hours.
Type of Review: Revision of currently approved collections.
Legal Basis and Need for Collection
On a quarterly basis, all U.S. branches and agencies of foreign
banks are required to file the FFIEC 002, which is a detailed report of
condition with a variety of supporting schedules. This information is
used to fulfill the supervisory and regulatory requirements of the
International Banking Act of 1978. The data are also used to augment
the bank credit, loan, and deposit information needed for monetary
policy and other public policy purposes. The FFIEC 002S is a supplement
to the FFIEC 002 that collects information on assets and liabilities of
any non-U.S. branch that is managed or controlled by a U.S. branch or
agency of the foreign bank. A non-U.S. branch is managed or controlled
by a U.S. branch or agency if a majority of the responsibility for
business decisions, including but not limited to decisions with regard
to lending or asset management or funding or liability management, or
the responsibility for recordkeeping in respect of assets or
liabilities for that foreign branch resides at the U.S. branch or
agency. A separate FFIEC 002S must be completed for each managed or
controlled non-U.S. branch. The FFIEC 002S must be filed quarterly
along with the U.S. branch or agency's FFIEC 002. These information
collections are mandatory (12 U.S.C. 3105(c)(2), 1817(a)(1) and (3),
and 3102(b)). Except for select sensitive items, the FFIEC 002 is not
given confidential treatment; the FFIEC 002S is given confidential
treatment (5 U.S.C. 552(b)(4) and (8)). The data from both reports are
used for (1) monitoring deposit and credit transactions of U.S.
residents; (2) monitoring the impact of policy changes; (3) analyzing
structural issues concerning foreign bank activity in U.S. markets; (4)
understanding flows of banking funds and indebtedness of developing
countries in connection with data collected by the International
Monetary Fund and the Bank for International Settlements that are used
in economic analysis; and (5) assisting in the supervision of U.S.
offices of foreign banks. The Federal Reserve System collects and
processes these reports on behalf of all three agencies.
II. Current Actions
A. Regulation-Related Revisions
From March through June 2020, in response to the impact on the
financial markets and the strains on the U.S. economy as a result of
COVID-19, the agencies published in the Federal Register numerous
interim final rules to make certain changes to their regulatory capital
and liquidity rules to support prudent lending by banking organizations
and facilitate banking organizations' use of the Board's emergency
facilities. These revisions primarily affect the instructions for the
calculation of certain amounts reported on Schedule RC-R, Regulatory
Capital, and apply to the three versions of the Call Report (FFIEC 031,
FFIEC 041, and FFIEC 051) and for the calculation of certain amounts
reported on Schedule A, Advanced Approaches Regulatory Capital, on the
FFIEC 101. Certain revisions also involve the addition of new data
items to Call Report Schedule RC-M, Memoranda. In addition, the Board
made revisions to its Regulation D (12 CFR 204) that affect the
reporting of deposit liabilities on Call Report Schedule RC-E, Deposit
Liabilities, and FFIEC 002, Schedule E, Deposit Liabilities and Credit
Balances, and issued an interim final rule that provides a certain
exception to the reporting of extensions of credit to insiders on Call
Report Schedule RC-M, required by section 22(h) of the Federal Reserve
Act and the corresponding provisions of the Board's Regulation O (12
CFR 215). The FDIC proposed and subsequently adopted revisions to its
deposit insurance assessment rules that require the collection of new
data items on Call Report Schedule RC-M and FFIEC 002 Schedule O, Other
Data for Deposit Insurance Assessments.
The agencies requested and received emergency approvals on April 3,
2020, from OMB to implement revisions to the Call Report and FFIEC 101
that took effect beginning with the March 31, 2020, report date.
Subsequently, the agencies requested and received emergency approvals
on May 27, 2020, from OMB to implement revisions to the Call Report,
FFIEC 101, and FFIEC 002 that take effect beginning with the June 30,
2020, report date. The Board requested and received emergency approvals
on June 8, 2020, and July 8, 2020, from OMB to implement further
revisions to the FFIEC 002 that take effect beginning with the June 30,
2020, and September 30, 2020, report dates, respectively. The agencies
are requesting comment on whether there should be any further changes
to the items or instructions developed by the agencies to implement the
revisions for which emergency approvals were received from OMB, and in
regard to the Board Regulation D amendments, on whether to adopt
proposed revisions to the Call Report and the FFIEC 002 to remove a
reporting option that was implemented by the emergency approvals and
could result in the collection of ambiguous data.
Further, the agencies have requested comment in connection with
each of the interim final rules described below. If modifications are
made to the associated final rules, the agencies would modify the
information collection revisions in
[[Page 44365]]
this proposal to incorporate such changes.
1. Definition of Eligible Retained Income
Under the capital rule, a banking organization must maintain a
minimum amount of regulatory capital. In addition, a banking
organization must maintain a buffer of regulatory capital above its
minimum capital requirements to avoid restrictions on capital
distributions and discretionary bonus payments. The agencies intend for
the buffer requirements to limit the ability of banking organizations
to distribute capital in the form of dividends and discretionary bonus
payments and therefore strengthen the ability of banking organizations
to continue lending and conducting other financial intermediation
activities during stress periods. The agencies are concerned, however,
that the existing calculation method could lead to sudden and severe
distribution limits if such banking organizations were to experience
even a modest reduction in their capital ratios.
Therefore, the agencies adopted an interim final rule \6\ on March
20, 2020, that revises the definition of eligible retained income
(ERI). By modifying the definition of ERI and thereby allowing banking
organizations to more freely use their capital buffers, this interim
final rule should help to promote lending activity and other financial
intermediation activities by banking organizations and avoid
compounding disruptions due to COVID-19.
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\6\ 85 FR 15909 (March 20, 2020).
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Call Report Revisions
The instructions for Schedule RC-R, Part I, item 53, ``Eligible
retained income,'' have been revised to incorporate the revisions
reflected in the ERI interim final rule. Beginning with the March 31,
2020, report date, institutions that are required to report amounts in
item 53 should report the greater of (1) an institution's net income
for the four preceding calendar quarters, net of any distributions and
associated tax effects not already reflected in net income, and (2) the
average of an institution's net income over the four preceding calendar
quarters.
2. Money Market Mutual Fund Liquidity Facility
To enhance the liquidity and functioning of money markets, the
Federal Reserve Bank of Boston (FRBB) launched the Money Market Mutual
Fund Liquidity Facility, or MMLF, on March 18, 2020.\7\ On March 23,
2020, the agencies published an interim final rule, which permits
banking organizations to exclude from regulatory capital requirements
exposures related to the MMLF (MMLF interim final rule).\8\
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\7\ See https://www.federalreserve.gov/newsevents/pressreleases/monetary20200318a.htm.
\8\ 85 FR 16232.
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The MMLF interim final rule modifies the agencies' capital rule to
allow banking organizations to neutralize the effects of purchasing
assets from money market mutual funds under the MMLF on their risk-
based and leverage capital ratios. This treatment extends to the
community bank leverage ratio. Specifically, a banking organization may
exclude from its total leverage exposure, average total consolidated
assets, standardized total risk-weighted assets, and advanced
approaches total risk-weighted assets, as applicable, any exposure
acquired from an eligible money market mutual fund pursuant to a non-
recourse loan under the MMLF and pledged to the FRBB. The MMLF interim
final rule applies only to activities under the MMLF. The facility is
scheduled to terminate on September 30, 2020, unless the facility is
extended by the Board.
Consistent with U.S. GAAP, the agencies would expect banking
organizations to report assets purchased from money market mutual funds
under the MMLF on their balance sheets. To be eligible collateral for
pledging to the FRBB, assets must be purchased from an eligible money
market mutual fund at either the seller's amortized cost or fair value.
Thereafter, banking organizations would subsequently measure the assets
at amortized cost or fair value depending on the asset category in
which the assets are reported on their balance sheets. The non-recourse
nature of the transaction through the MMLF would impact the valuation
of the liability to the FRBB. After reflecting any appropriate
discounts on the assets purchased and the associated liabilities,
organizations are not expected to report any material net gains or
losses (if any) at the time of purchase. Any discounts generally would
be accreted over time into income and expense.
On May 12, 2020, the FDIC approved a proposed rule modifying its
deposit insurance assessment rules to mitigate the effects of
participation in the MMLF on insured depository institutions (IDIs).\9\
The proposed changes would remove the effect of participation in the
MMLF program on certain adjustments to an IDI's assessment rate,
provide an offset to an IDI's assessment for the increase to its
assessment base attributable to participation in the MMLF, and remove
the effect of participation in the MMLF program when classifying IDIs
as small, large, or highly complex for assessment purposes. On June 26,
2020, the FDIC published a final rule that mitigates the deposit
insurance assessment effects of participating in the MMLF program on
IDIs as proposed.\10\
---------------------------------------------------------------------------
\9\ 85 FR 30649 (May 20, 2020). As discussed in Section II.A.5
below, the FDIC's proposed rule also would modify its deposit
insurance assessment rules to mitigate the effects of participation
in the Paycheck Protection Program and the Paycheck Protection
Program Liquidity Facility on IDIs.
\10\ 85 FR 38282 (June 26, 2020). See also Section II.A.5 below.
---------------------------------------------------------------------------
Call Report Revisions
Starting with the March 31, 2020, report date, banking
organizations that file Call Reports would include their holdings of
assets purchased from money market mutual funds under the MMLF in the
appropriate asset category on Schedule RC, Balance Sheet, and Schedule
RC-R, Regulatory Capital. On Schedule RC, banking organizations would
report negotiable certificates of deposit not held for trading in item
1.b, held-to-maturity securities in item 2.a, available-for-sale (AFS)
securities in item 2.b, and negotiable certificates of deposit and
securities held for trading in item 5, as appropriate.\11\ For
regulatory capital reporting purposes, the balance sheet amounts of
assets purchased through the MMLF would be reported in both Column A
(Totals From Schedule RC) and Column C (0% risk-weight category) of the
corresponding balance sheet asset categories of Schedule RC-R, Part II
(i.e., in items 1, 2.a, 2.b, and 7, respectively).\12\
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\11\ In addition, held-to-maturity and available-for-sale
securities would be reported by securities category in Schedule RC-
B, Securities, and as pledged securities in Memorandum item 1 of
this schedule on all three versions of the Call Report. Negotiable
certificates of deposit and securities held for trading would be
reported by asset category in Schedule RC-D, Trading Assets and
Liabilities, by institutions required to complete this schedule on
the FFIEC 031 and the FFIEC 041. Securities held for trading also
would be reported as pledged securities in Schedule RC-D, Memorandum
item 4.a, on the FFIEC 031.
\12\ Reporting in Schedule RC-R, Part II, applies only to
institutions that do not have a community bank leverage ratio
framework election in effect as of the quarter-end report date, as
reported in Schedule RC-R, Part I, item 31.a.
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If a consolidated broker-dealer subsidiary of an institution that
files Call Reports has purchased assets from money market mutual funds
under the MMLF that the institution reports as ``Other assets'' on its
consolidated balance sheet for financial reporting purposes, the
institution should also
[[Page 44366]]
report these assets in Schedule RC, Balance Sheet, item 11, ``Other
assets.'' Further, for risk-based capital reporting purposes, if
applicable, the parent institution of the broker-dealer should report
these assets in Column A (Totals From Schedule RC) and Column C (0%
risk-weight category) of Schedule RC-R, Part II, item 8, ``All other
assets.''
The quarterly average of an institution's holdings of assets
purchased from money market mutual funds under the MMLF, including
those purchased by a consolidated broker-dealer subsidiary of the
institution, would be included as a deduction in Schedule RC-R, Part I,
item 29, ``LESS: Other deductions from (additions to) assets for
leverage ratio purposes,'' and thus excluded from Schedule RC-R, Part
I, item 30, ``Total assets for the leverage ratio.''
Borrowings from the FRBB would be included in Schedule RC, item 16,
``Other borrowed money,'' and included in Schedule RC-M, items
5.b.(1)(a), Other borrowings with a remaining maturity or next
repricing date of ``One year or less,'' 5.b.(2), ``Other borrowings
with a remaining maturity of one year or less,'' and 10.b, ``Amount of
`Other borrowings' that are secured.''
Starting with the June 30, 2020, report date, banking organizations
that file Call Reports would report the outstanding balance of assets
purchased under the MMLF program in new item 18.a on Schedule RC-M and
the quarterly average amount outstanding of assets purchased under the
MMLF that were excluded from Schedule RC-R, Part I, item 30, ``Total
assets for the leverage ratio,'' in new item 18.b on Schedule RC-M. The
amounts reported in these items would include assets purchased by a
consolidated broker-dealer subsidiary. These new items would enable the
agencies to monitor the impact of the MMLF interim final rule on a
banking organization's leverage ratio and, if applicable, its risk-
weighted assets. In addition, the FDIC would use these new items to
implement the modifications to its deposit insurance assessment rules
to mitigate the effects of participation in the MMLF on IDIs.
The collection of the two new Schedule RC-M data items related to
the MMLF program is expected to be time-limited. The agencies plan to
propose to discontinue the collection of each item once the aggregate
industry activity has diminished to a point where individual
institution information is of limited practical utility and is no
longer needed for deposit insurance assessment purposes, where
applicable.\13\
---------------------------------------------------------------------------
\13\ These new items will be reviewed in connection with the
statutorily mandated review of the Call Report that the agencies
must complete by year-end 2022. Per Section 604 of the Financial
Services Regulatory Relief Act of 2006, the agencies must conduct a
review of the information and schedules collected on the Call Report
every five years with the purpose of reducing or eliminating
requirements that are no longer necessary or appropriate.
---------------------------------------------------------------------------
Institutions subject to the supplementary leverage ratio
requirement would report their adjusted ``Total leverage exposure'' and
``Supplementary leverage ratio'' in Schedule RC-R, Part I, items 55.a
and 55.b, respectively. These institutions would adjust their existing
calculations of ``Total leverage exposure'' by excluding assets
purchased from money market funds under the MMLF. The instructions for
item 55.a would be revised to state that institutions should measure
their total leverage exposure in accordance with section 10(c)(4) of
the regulatory capital rules and section 302 of these rules for
exposures related to the MMLF.
FFIEC 101 Revisions
Starting with the March 31, 2020, report date, advanced approaches
banking organizations should not include assets purchased from money
market funds under the MMLF in the ``Total risk-weighted assets''
reported in the FFIEC 101, Schedule A, item 60, or, for advanced
approaches banking organizations that file Call Reports, in Schedule
RC-R, Part I, item 48.b. For banking organizations subject to the
supplementary leverage ratio requirement that file the FFIEC 101,
assets purchased from money market funds under the MMLF would receive
similar treatment as under the ``leverage ratio'' and should be
reported in the FFIEC 101, Schedule A, SLR Tables. The outstanding
balance of these assets would continue to be reported in SLR Table 1,
item 1.1, ``Total consolidated assets as reported in published
financial statements,'' and Table 2, item 2.1, ``The balance sheet
carrying value of all on-balance sheet assets.'' The average amount of
these assets calculated as of each day of the reporting quarter also
would be reported in SLR Table 1, item 1.7.c, ``Adjustments for
deductions of qualifying central bank deposits for custodial banking
organizations,'' and in SLR Table 2, item 2.2.b, ``Deductions of
qualifying central bank deposits from total on-balance sheet exposures
for custodial banking organizations,'' even if a banking organization
is not a custodial banking organization. Banking organizations subject
to the supplementary leverage ratio requirement that file Call Reports
would report their adjusted ``Total leverage exposure'' and
``Supplementary leverage ratio'' in Schedule RC-R, Part I, items 55.a
and 55.b.
FFIEC 002 Revisions
In connection with the FDIC's deposit insurance assessments final
rule, starting with the FFIEC 002 report as of June 30, 2020, FDIC-
insured branches would be required to separately report in Schedule O,
Memorandum item 7, the quarterly average amount outstanding of assets
purchased from money market funds under the MMLF with the collection of
this item expected to be time-limited. The agencies plan to propose to
discontinue the collection of this item once individual institution
information is no longer needed for deposit insurance assessment
purposes.\14\
---------------------------------------------------------------------------
\14\ Findings from the statutorily mandated review of the Call
Report will also be used for evaluating the FFIEC 002 new items. See
footnote 13.
---------------------------------------------------------------------------
3. 5-Year 2020 CECL Transition Provision
The instructions for certain items in Call Report Schedule RC-R,
Parts I and II, and the FFIEC 101 have been revised effective as of the
March 31, 2020, report date to incorporate revisions reflected in the
interim final rule, Regulatory Capital Rule: Revised Transition for the
Current Expected Credit Losses Methodology for Allowances, published in
the Federal Register on March 27, 2020 (CECL interim final rule).\15\
This interim final rule provides institutions that were required to
adopt the current expected credit losses methodology (CECL) for
accounting purposes during the 2020 calendar year with the option to
delay for two years the estimated impact of CECL on regulatory capital,
followed by a three-year transition period to phase out the aggregate
amount of the capital benefit provided during the initial two-year
delay (i.e., a five-year transition, in total). The CECL interim final
rule does not replace the current CECL transition option in the
agencies' capital rule, which was adopted in 2019 and allows banking
organizations to phase in over a three-year period the day-one effects
on regulatory capital that may result from the adoption of CECL (2019
CECL rule).\16\ This transition option remains available to
institutions that adopt CECL. Thus, institutions required to adopt CECL
in 2020, including those
[[Page 44367]]
that began reporting in accordance with CECL in their first quarter
2020 regulatory reports, have the option to elect the three-year
transition option contained in the 2019 CECL rule or the five-year CECL
transition option contained in the CECL interim final rule, beginning
with the Call Report and, if applicable, the FFIEC 101 for the March
31, 2020, report date or such later report date in 2020 as of which
institutions first report in accordance with CECL. Call Report
Revisions
---------------------------------------------------------------------------
\15\ 85 FR 17723. The agencies published a correcting amendment
in the Federal Register on May 19, 2020 (85 FR 29839).
\16\ 84 FR 4222 (February 14, 2019).
---------------------------------------------------------------------------
The agencies have revised the Call Report Schedule RC-R
instructions for the following items in Part I of the schedule to
enable institutions that elect the five-year CECL transition option to
report their regulatory capital data in accordance with the CECL
interim final rule:
Item 2, ``Retained earnings,''
Item 15 on the FFIEC 041 and FFIEC 051 and items 15.a and
15.b on the FFIEC 031, for certain deferred tax assets arising from
temporary differences that exceed an institution's applicable common
equity tier 1 capital deduction threshold,
Item 27, ``Average total consolidated assets,''
Item 42 on the FFIEC 041 and FFIEC 051 and item 42.a on
the FFIEC 031, for the amount of adjusted allowances for credit losses
includable in tier 2 capital,
Item 42.b on the FFIEC 31, ``Eligible credit reserves
includable in tier 2 capital,'' and
Item 55.a on the FFIEC 031 and FFIEC 041, ``Total leverage
exposure.''
The instructions for Schedule RC-R, Part II, item 8, ``All other
assets,'' also have been revised to account for the five-year CECL
transition option.
In addition, beginning with the June 30, 2020, Call Report,
Schedule RC-R, Part I, item 2.a, ``Does your institution have a CECL
transition election in effect as of the quarter-end report date? (enter
``1'' for Yes; enter ``0'' for No.),'' will be revised to allow
institutions that have adopted CECL to choose from among three entries
rather than the current two entries. An institution that has adopted
CECL will choose from the following CECL transition election entries:
``0'' for adopted CECL with no transition election; ``1'' for a 3-year
CECL transition election; and ``2'' for a 5-year 2020 CECL transition
election. An institution that has not adopted CECL will continue to
leave item 2.a blank.
FFIEC 101 Revisions
The agencies have revised the FFIEC 101 instructions for the
following items in Schedule A to enable advanced approaches
institutions and top-tier Category III institutions that elect the
five-year CECL transition option to report their regulatory capital
data in accordance with the CECL interim final rule:
Item 2, ``Retained earnings,''
Item 21, ``DTAs arising from temporary differences that
could not be realized through net operating loss carrybacks, net of
related valuation allowances and net of DTLs, that exceed the 10
percent common equity tier 1 capital deduction threshold,''
Item 50, ``Eligible credit reserves includable in Tier 2
capital,'' and
SLR Table 1, Item 1.8, and Table 2, Item 2.21, ``Total
leverage exposure.''
4. Community Bank Leverage Ratio
Section 4012 of the CARES Act required the agencies to reduce the
community bank leverage ratio (CBLR) requirement to 8 percent and
provide a qualifying community banking organization whose leverage
ratio falls below this community bank leverage ratio requirement a
reasonable grace period to satisfy this requirement. Section 4012 also
required that these CBLR changes be effective for a temporary period
ending on the earlier of the termination date of the national emergency
concerning the COVID-19 outbreak declared by the President on March 13,
2020, under the National Emergencies Act (National Emergency) or
December 31, 2020. The agencies implemented the requirements of Section
4012 through an interim final rule.\17\ To provide further clarity
around the possible end date of the statutory relief, the agencies also
issued an interim final rule extending relief for the 8 percent
leverage ratio for the remainder of 2020, providing relief through an
8.5 percent leverage ratio in 2021, and resuming the previous 9 percent
leverage ratio in 2022.\18\ Neither interim final rule changed the
methodology for calculating the CBLR, merely the qualifying ratio for
an institution to report as a CBLR bank.
---------------------------------------------------------------------------
\17\ 85 FR 22924 (April 23, 2020).
\18\ 85 FR 22930 (April 23, 2020).
---------------------------------------------------------------------------
There are no substantive Call Report revisions associated with the
revised CBLR ratio. However, it is possible that some additional
institutions that are now eligible CBLR banks under the lower ratio may
choose to use the less burdensome regulatory capital reporting for CBLR
banks on Schedule RC-R. At this time, the agencies cannot reliably
estimate the number of institutions that might use the CBLR framework
for regulatory capital reporting in the second quarter of 2020 under
the reduced ratio. However, the agencies plan to revise the burden
estimates after more data are available on institutions' use of the
CBLR framework.
5. Paycheck Protection Program (PPP) Loans and Liquidity Facility
(PPPLF)
Section 1102 of the CARES Act allows banking organizations to make
loans under the PPP of the U.S. Small Business Administration (SBA) in
connection with COVID-19 disruptions to small businesses. Although the
PPP loans are funded by lenders, the loans receive a guarantee from the
SBA. The statute specified that these PPP loans should receive a zero
percent risk weight for regulatory capital purposes. The Board
subsequently established a liquidity facility, the PPPLF, to extend
non-recourse loans to eligible financial institutions to fund PPP loans
pledged to the PPPLF and thereby provide additional liquidity to these
institutions.\19\
---------------------------------------------------------------------------
\19\ See https://www.federalreserve.gov/newsevents/pressreleases/monetary20200406a.htm and https://www.federalreserve.gov/newsevents/pressreleases/monetary20200416a.htm.
---------------------------------------------------------------------------
On April 13, 2020, the agencies published an interim final rule
with an immediate effective date, which permits banking organizations
to exclude from regulatory capital requirements PPP loans pledged to
the PPPLF.\20\ This interim final rule modifies the agencies' capital
rule to allow banking organizations to neutralize the effects on their
risk-based capital and leverage ratios of making PPP loans that are
pledged under the Board's liquidity facility. Specifically, a banking
organization may exclude from its total leverage exposure, average
total consolidated assets, standardized total risk-weighted assets, and
advanced approaches total risk-weighted assets, as applicable, any
exposure from a PPP loan pledged to the Board's liquidity facility. The
interim final rule also codified the statutory zero percent risk weight
for PPP loans.
---------------------------------------------------------------------------
\20\ 80 FR 20387 (April 13, 2020).
---------------------------------------------------------------------------
On May 12, 2020, the FDIC approved a proposed rule modifying its
deposit insurance assessment rules to mitigate the effects of
participation in the PPP and the PPPLF on IDIs.\21\ The proposed
changes would remove the effect of participation in the PPP and PPPLF
on various risk measures used to calculate an IDI's assessment rate,
remove the effect of participation in the PPPLF program on certain
adjustments to an IDI's assessment rate, provide an offset
[[Page 44368]]
to an IDI's assessment for the increase to its assessment base
attributable to participation in the PPPLF, and remove the effect of
participation in the PPPLF program when classifying IDIs as small,
large, or highly complex for assessment purposes.
---------------------------------------------------------------------------
\21\ 85 FR 30649 (May 20, 2020). As discussed in Section II.A.2
above, the FDIC's proposed rule also would modify its deposit
insurance assessment rules to mitigate the effects of participation
in the MMLF on IDIs.
---------------------------------------------------------------------------
On June 26, 2020, the FDIC published a final rule modifying its
deposit insurance assessments rule to mitigate the effects of
participation in the PPP and the PPPLF on IDIs.\22\ After the FDIC
considered the comments on the proposed rule, the final rule provides
an offset to an IDI's assessment amount for the increase to its
assessment base attributable to participation in the PPP rather than to
participation in the PPPLF as had been proposed.
---------------------------------------------------------------------------
\22\ 85 FR 38282 (June 26, 2020).
---------------------------------------------------------------------------
Call Report Revisions
Starting with the June 30, 2020, report date, institutions would
report the outstanding balances of their PPP loans held for investment
or held for sale in the appropriate loan category in Schedule RC-C,
Part I, and, as applicable, in other Call Report schedules in which
loan data are reported. The outstanding balance of such PPP loans
pledged to the Board's liquidity facility would be included in Schedule
RC-C, Part I, Memorandum item 14, ``Pledged loans and leases.'' Any PPP
loans held for trading would be reported by all institutions on the
Call Report balance sheet in Schedule RC, item 5, with the fair value
and amortized cost of such loans reported by loan category in Schedule
RC-D, Trading Assets and Liabilities, by institutions required to
complete this schedule on the FFIEC 031 and the FFIEC 041. The
outstanding balance of PPP loans held for trading that are pledged to
the Board's liquidity facility would be included in Schedule RC-D,
Memorandum item 4.b, ``Pledged loans,'' on the FFIEC 031.
For regulatory capital reporting purposes, the balance sheet
amounts of PPP loans should be reported in both Column A (Totals From
Schedule RC) and Column C (0% risk-weight category) of the
corresponding balance sheet asset categories of Schedule RC-R, Part II,
(i.e., in items 4, 5, and 7, as appropriate).\23\ The quarterly average
amount of PPP loans pledged to the Board's liquidity facility would be
included as a deduction in Schedule RC-R, Part I, item 29, ``LESS:
Other deductions from (additions to) assets for leverage ratio
purposes,'' and thus excluded from Schedule RC-R, Part I, item 30,
``Total assets for the leverage ratio.''
---------------------------------------------------------------------------
\23\ Reporting in Schedule RC-R, Part II, applies only to
institutions that do not have a community bank leverage ratio
framework election in effect as of the quarter-end report date, as
reported in Schedule RC-R, Part I, item 31.a.
---------------------------------------------------------------------------
Borrowings from Federal Reserve Banks under the PPPLF would be
included in Schedule RC, item 16, ``Other borrowed money;'' the
appropriate subitems of Schedule RC-M, item 5.b, ``Other borrowings,''
based on their remaining maturity; and Schedule RC-M, item 10.b,
``Amount of `Other borrowings' that are secured.''
In addition, to implement the modifications to its deposit
insurance assessment rules, the FDIC would remove the quarter-end
balance sheet amount of PPP loans from an IDI's total assets and
average total consolidated assets in certain risk measures and
adjustments used to calculate the IDI's assessment rate. Furthermore,
the FDIC would remove PPP loans from an IDI's loan portfolio in
measures used to calculate its assessment rate.
Since PPP loans, regardless of whether they are pledged to the
liquidity facility, receive a zero percent risk weight, the reporting
treatment described above for PPP loans effectively means that these
loans are not included in the standardized total risk-weighted assets
reported in Schedule RC-R. Similarly, advanced approaches banking
organizations would not reflect PPP loans in ``total risk-weighted
assets'' reported in Schedule RC-R, Part I, item 48.b.
Institutions subject to the supplementary leverage ratio
requirement would report their adjusted ``Total leverage exposure'' and
``Supplementary leverage ratio'' in Schedule RC-R, Part I, items 55.a
and 55.b, respectively. These institutions would adjust their existing
calculations of ``Total leverage exposure'' by excluding PPP loans
pledged to the Board's liquidity facility. The instructions for item
55.a would be revised to state that institutions should measure their
total leverage exposure in accordance with section 10(c)(4) of the
regulatory capital rules and section 305 of these rules for exposures
related to the Board's liquidity facility.
In addition, in connection with their missions to supervise
institutions, the agencies need to understand the number and total
balance of PPP loans, as well as the amount and quarterly average of
PPP loans pledged under the Board's liquidity facility. Therefore, the
agencies requested and received emergency approvals from OMB to add
four new data items to the Call Report to collect this information.
Accordingly, starting with the June 30, 2020, report date,
institutions will begin to report the total number of PPP loans
outstanding; the total outstanding balance of PPP loans; the total
outstanding balance of PPP loans pledged to the Board's liquidity
facility; and the quarterly average amount of PPP loans pledged to the
Board's liquidity facility and excluded from average total assets in
the calculation of the leverage ratio in Schedule RC-R, Part I. These
items have been added to Schedule RC-M as items 17.a, 17.b, 17.c, and
17.e.
In addition, in connection with the FDIC's final rule to mitigate
the deposit insurance assessment effects of participation in the PPP
and the PPPLF on IDIs, the FDIC needs to collect information on
outstanding borrowings under the PPPLF. Starting with the June 30,
2020, reporting period, the outstanding balance of borrowings from
Federal Reserve Banks under the PPPLF with a remaining maturity of one
year or less and the outstanding balance of borrowings from the Federal
Reserve Banks under the PPPLF with a remaining maturity of more than
one year would be reported in new items 17.d.(1) and 17.d.(2) of
Schedule RC-M, respectively.
The collection of the six data items related to PPP loans and the
PPPLF is expected to be time-limited. The agencies plan to propose to
discontinue the collection of each item once the aggregate industry
activity has diminished to a point where individual institution
information is of limited practical utility and is no longer needed for
assessment purposes, where applicable.\24\
---------------------------------------------------------------------------
\24\ These new items will be reviewed in connection with the
statutorily mandated review of the Call Report. See footnote 13.
---------------------------------------------------------------------------
FFIEC 101 Revisions
Starting with the June 30, 2020, report date, advanced approaches
banking organizations would not include PPP loans in ``total risk-
weight assets'' under the advanced approaches reported in the FFIEC
101, Schedule A, item 60. Since these loans already receive a zero
percent risk weight, PPP loans are effectively excluded from advanced
approaches total risk-weighted assets under the current capital rule.
For banking organizations subject to the supplementary leverage
ratio requirement that file the FFIEC 101, PPP loans pledged to the
Board's liquidity facility would be deducted as part of the calculation
of total leverage exposure for the supplementary leverage ratio. The
outstanding balance of PPP loans would continue to be reported in SLR
Table 1, item 1.1, ``Total consolidated assets as reported in published
financial
[[Page 44369]]
statements,'' and Table 2, item 2.1, ``The balance sheet carrying value
of all on-balance sheet assets.'' A banking organization calculating
its supplementary leverage ratio also would include the average amount
of PPP loans pledged to the PPPLF as of each day of the reporting
quarter in SLR Table 1, item 1.7.c, ``Adjustments for deductions of
qualifying central bank deposits for custodial banking organizations,''
and in SLR Table 2, item 2.2.b, ``Deductions of qualifying central bank
deposits from total on-balance sheet exposures for custodial banking
organizations,'' even if a banking organization is not a custodial
banking organization.
FFIEC 002 Revisions
In connection with the FDIC's deposit insurance assessments
proposed rule, the Board requested and received emergency approval from
OMB for FDIC-insured branches to separately report in Schedule O, Other
Data for Deposit Insurance Assessments, Memorandum item 6, the
quarterly average amount of PPP loans pledged to the PPPLF starting
with the FFIEC 002 report as of the June 30, 2020, report date.
In connection with the FDIC's deposit insurance assessments final
rule, the Board requested and received emergency approval from OMB to
change the information separately reported by FDIC-insured branches in
Schedule O, Other Data for Deposit Insurance Assessments, Memorandum
item 6, from the quarterly average of PPP loans pledged to the PPPLF to
the quarter-end amount of PPP loans starting with the FFIEC 002 report
as of the September 30, 2020, report date. The collection of this item
would be time-limited. The agencies would expect to propose to
discontinue the collection of this item once individual institution
information is no longer needed for deposit insurance assessment
purposes.\25\
---------------------------------------------------------------------------
\25\ Findings from the statutorily mandated review of the Call
Report will also be used for evaluating the FFIEC 002 new items. See
footnote 13.
---------------------------------------------------------------------------
6. Board Regulation D Amendments
The Board published in the Federal Register on April 28, 2020, an
interim final rule that amends the Board's Regulation D (Reserve
Requirements of Depository Institutions).\26\ The interim final rule
amends the ``savings deposit'' definition in Regulation D by deleting
the six-transfer-limit provisions in this definition that require
depository institutions either to prevent transfers and withdrawals in
excess of the limit or to monitor savings deposits ex post for
violations of the limit. The interim final rule also makes conforming
changes to other definitions in Regulation D that refer to ``savings
deposit'' as necessary.
---------------------------------------------------------------------------
\26\ 85 FR 23445.
---------------------------------------------------------------------------
The interim final rule permits, but does not require, depository
institutions to immediately suspend enforcement of the six-transfer
limit and allow their customers to make an unlimited number of
convenient transfers and withdrawals from their savings deposits. The
interim final rule also does not require any changes to the deposit
reporting practices of depository institutions.
To implement the interim final rule, the agencies temporarily
revised the instructions to the Call Reports and the FFIEC 002 via
emergency approvals from OMB to reflect the revised definition of
``savings deposits'' in Regulation D, beginning with reports for the
June 30, 2020, report date. Specifically, the agencies published
supplemental instructions to the Call Reports \27\ and the FFIEC
002,\28\ which include temporary revisions to the General Instructions
for Call Report Schedule RC-E and FFIEC 002 Schedule E, as well as the
Glossary entries for ``Deposits'' in the Call Report and the FFIEC 002
instructions, to remove references to the six-transfer limit. In
addition, the supplemental instructions temporarily revised the General
Instructions for Call Report Schedule RC-E and FFIEC 002 Schedule E to
state that if a depository institution chooses to suspend enforcement
of the six-transfer limit on a ``savings deposit,'' the depository
institution may continue to report that account as a ``savings
deposit'' or may instead choose to report that account as a
``transaction account'' based on an assessment of certain
characteristics of the account.
---------------------------------------------------------------------------
\27\ 2Q2020 COVID-19 Related Supplemental Instructions (Call
Report), https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_FFIEC051_suppinst_COVID_202006.pdf.
\28\ 2Q2020 COVID-19 Related Supplemental Instructions (FFIEC
002), https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC002_suppinst_COVID_202006.pdf.
---------------------------------------------------------------------------
Call Reports and FFIEC 002 Revisions
The agencies are revising the instructions to the Call Reports and
the FFIEC 002 to reflect the revised definition of ``savings deposits''
in accordance with the amendments to Regulation D in the interim final
rule, starting with the June 30, 2020, report date. Specifically, the
agencies are revising the General Instructions for Call Report Schedule
RC-E and FFIEC 002 Schedule E, as well as the Glossary entries for
``Deposits'' in the Call Report and FFIEC 002 instructions, to remove
references to the six-transfer limit from descriptions of ``savings
deposits.''
In the interim final rule, the Board amended the ``savings
deposit'' definition in Regulation D to allow customers to be able to
access savings deposits more easily. However, the agencies recognize
that the corresponding temporary revisions to the instructions for the
Call Reports and the FFIEC 002 created a reporting option that could
result in the collection of ambiguous data by allowing a depository
institution to report a savings deposit as either a ``savings deposit''
or a ``transaction account'' if the institution suspends enforcement of
the six-transfer limit. To resolve this potential issue, the agencies
propose to remove the reporting option and require instead that a
depository institution report each account as a ``savings deposit'' or
a ``transaction account'' based on the institution's assessment of
account characteristics. Specifically, the agencies propose to revise
the General Instructions for Call Report Schedule RC-E and FFIEC 002
Schedule E, effective for reporting beginning in the first quarter of
2021, to state that where the reporting institution has suspended the
enforcement of the six-transfer limit rule on an account that otherwise
meets the definition of a savings deposit, the institution must report
such deposits as a ``savings deposit'' (and as a ``nontransaction
account'') or a ``transaction account'' based on an assessment of the
following characteristics:
(i) If the reporting institution does not retain the reservation of
right to require at least seven days' written notice before an intended
withdrawal, the account must be reported as a demand deposit (and as a
``transaction account'').
(ii) If the reporting institution retains the reservation of right
to require at least seven days' written notice before an intended
withdrawal and the depositor is eligible to hold a NOW account, the
account must be reported as an ATS account, NOW account, or a telephone
and preauthorized transfer account (and as a ``transaction account'').
(iii) If the reporting institution retains the reservation of right
to require at least seven days' written notice before an intended
withdrawal and the depositor is ineligible to hold a NOW account, the
account must be reported as a savings deposit (and as a
``nontransaction account'').
The agencies anticipate that there will be no measurable increase
in burden associated with these proposed revisions. The agencies may
consider
[[Page 44370]]
further modifying the treatment of ``savings deposits'' and
``transaction accounts'' in the instructions for the Call Report and
the FFIEC 002 after a review of the reported data. Any such changes
would be proposed by the agencies through a separate Federal Register
notice pursuant to the PRA.
7. Loans to Executive Officers, Directors, and Principal Shareholders
Under section 22(h) of the Federal Reserve Act and the Board's
Regulation O (12 CFR 215), extensions of credit to insiders \29\ are
subject to quantitative limits, prior approval requirements by an
institution's board, and qualitative requirements concerning loan
terms.\30\ On April 22, 2020, the Board issued an interim final rule
that excepts certain loans that are guaranteed under the SBA's PPP from
the requirements of section 22(h) of the Federal Reserve Act and the
corresponding provisions of the Board's Regulation O.\31\ The interim
final rule states that the Board has determined that PPP loans pose
minimal risk because the SBA guarantees PPP loans at 100 percent of
principal and interest and that PPP loans have fixed terms prescribed
by the SBA. Accordingly, the interim final rule states that PPP loans
will not be subject to section 22(h) or the corresponding provisions of
Regulation O provided they are not prohibited by SBA lending
restrictions.
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\29\ ``Insider means an executive officer, director, or
principal shareholder, and includes any related interest of such a
person.'' 12 CFR 215.2(h).
\30\ 12 CFR 215.4.
\31\ 85 FR 22345 (April 22, 2020).
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The agencies currently collect data on the number and outstanding
balance of all ``extensions of credit'' to the reporting institution's
executive officers, directors, principal shareholders, and their
related interests that meet the definition of this term in Regulation
O. This information is collected in Call Report Schedule RC-M, items
1.a and 1.b. Call Report instructions refer to Regulation O for
guidance in reporting extensions of credit to insiders in these items.
In response to the changes to Regulation O, the agencies have revised
the Call Report instructions effective as of the June 30, 2020, report
date to note the PPP loan exception that has been added to Regulation O
and clarify that PPP loans should not be reported in items 1.a and 1.b
of Schedule RC-M. PPP loans did not exist in the first quarter of 2020,
so the current reporting on Call Report Schedule RC-M does not include
these loans. Therefore, the agencies do not believe that revising the
instructions for this exception would change burden, as institutions
would not need to revise the existing amounts reported in Schedule RC-
M, items 1.a and 1.b, in response to this change to Regulation O.
8. Temporary Exclusions From the Supplementary Leverage Ratio
On April 14, 2020, the Board published in the Federal Register an
interim final rule to temporarily exclude U.S. Treasury Securities
(Treasuries) and deposits in their accounts at Federal Reserve Banks
(deposits at Federal Reserve Banks) from total leverage exposure for
bank holding companies, savings and loan holding companies, and
intermediate holding companies subject to the supplementary leverage
ratio through March 31, 2021.\32\
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\32\ 85 FR 20578.
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On June 1, 2020, the agencies published in the Federal Register an
interim final rule (Depository Institution SLR IFR) to provide
depository institutions subject to the supplementary leverage ratio the
ability to temporarily exclude Treasuries and deposits at Federal
Reserve Banks from total leverage exposure.\33\ An electing depository
institution must notify its primary Federal banking regulator of its
election within 30 days after the interim final rule is effective. The
interim final rule will terminate after March 31, 2021.
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\33\ 85 FR 32980 (June 1, 2020).
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Call Report Revisions
Depository institutions subject to the supplementary leverage ratio
report Treasuries not held for trading in Schedule RC-B, item 1, ``U.S.
Treasury securities,'' and those held for trading in Schedule RC, item
5, ``Trading assets'' (and, if applicable, in Schedule RC-D, item 1,
``U.S. Treasury securities''). Such depository institutions report
deposits at Federal Reserve Banks in Schedule RC-A, item 4, ``Balances
due from Federal Reserve Banks.''
Starting as of the June 30, 2020, report date, advanced approaches
and Category III depository institutions that elect to opt into these
temporary exclusions would exclude Treasuries and deposits at Federal
Reserve Banks reported in the items identified above from Schedule RC-
R, Part I, item 55.a, ``Total leverage exposure.'' Custodial banking
organizations will also be able to deduct from total leverage exposure
deposits with qualifying foreign central banks reported as part of
Schedule RC-A, item 3, ``Balances due from banks in foreign countries
and foreign central banks,'' subject to the limits in the Section 402
rule,\34\ in addition to the deductions under this interim final rule.
For purposes of reporting the supplementary leverage ratio as of June
30, 2020, electing depository institutions may reflect the exclusion of
Treasuries and deposits at Federal Reserve Banks from total leverage
exposure as if this interim final rule had been in effect for the
entire second quarter of 2020. The instructions for item 55.a would be
revised to state that institutions should measure their total leverage
exposure in accordance with section 10(c)(4) of the regulatory capital
rules and, for electing advanced approaches and Category III depository
institutions, the applicable section of these rules for Treasuries and
deposits at Federal Reserve Banks (section 303 for institutions
supervised by the Board; section 304 for institutions supervised by the
OCC or the FDIC). The temporary exclusions from total leverage exposure
are available through the March 31, 2021, report date.
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\34\ The agencies recently issued a final rule, effective April
1, 2020, which implements section 402 of the Economic Growth,
Regulatory Relief, and Consumer Protection Act by amending the
capital rule to allow a banking organization that qualifies as a
custodial banking organization to exclude from total leverage
exposure deposits at qualifying central banks, subject to limits
(Section 402 rule). 85 FR 4569 (January 27, 2020).
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FFIEC 101 Revisions
For top-tier advanced approaches and Category III bank holding
companies, savings and loan holding companies, and intermediate holding
companies (and top-tier advanced approaches and Category III depository
institutions that elect to opt into these temporary exclusions),
Treasuries and deposits at Federal Reserve Banks would continue to be
reported in the FFIEC 101, Schedule A, SLR Table 1, item 1.1, ``Total
consolidated assets as reported in published financial statements,''
and Table 2, item 2.1, ``The balance sheet carrying value of all on-
balance sheet assets.'' Starting as of the June 30, 2020, report date,
the average amount of Treasuries and deposits at Federal Reserve Banks
calculated as of each day of the reporting quarter also would be
reported in SLR Table 1, item 1.7.c, ``Adjustments for deductions of
qualifying central bank deposits for custodial banking organizations,''
and in SLR Table 2, item 2.2.b, ``Deductions of qualifying central bank
deposits from total on-balance sheet exposures for custodial banking
organizations,'' even if a holding company or an electing depository
institution is not a custodial banking organization.\35\ For purposes
of
[[Page 44371]]
reporting the supplementary leverage ratio as of June 30, 2020, holding
companies and electing depository institutions would be permitted the
exclusion of Treasuries and deposits at Federal Reserve Banks from
total leverage exposure as if these interim final rules had been in
effect for the entire second quarter of 2020. The temporary exclusions
from total leverage exposure would be available through the March 31,
2021, report date.
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\35\ A holding company or electing depository institution may
not deduct on-balance Treasuries in SLR Table 2, item 2.12, ``Gross
assets for repo-style transactions, with no recognition of
netting,'' if it already reports such on-balance sheet Treasuries in
SLR Table 2, item 2.2.b.
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Custodial banking organizations would also be able to deduct from
total leverage exposure deposits with qualifying foreign central banks,
subject to the limits in the Section 402 rule, in addition to the
deductions of Treasuries and deposits at Federal Reserve Banks under
these interim final rules.
B. Revisions Related to Section 4013 of the CARES Act
As provided for under the CARES Act, a financial institution may
account for an eligible loan modification either under Section 4013 or
in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Subtopic 310-40, Receivables--
Troubled Debt Restructurings by Creditors. If a loan modification is
not eligible under Section 4013, or if the institution elects not to
account for the loan modification under Section 4013, the financial
institution should evaluate whether the modified loan is a troubled
debt restructuring (TDR) under ASC Subtopic 310-40.
To be an eligible loan under Section 4013 (Section 4013 loan), a
loan modification must be (1) related to COVID-19; (2) executed on a
loan that was not more than 30 days past due as of December 31, 2019;
and (3) executed between March 1, 2020, and the earlier of (A) 60 days
after the date of termination of the National Emergency or (B) December
31, 2020.
Financial institutions accounting for eligible loans under Section
4013 are not required to apply ASC Subtopic 310-40 to the Section 4013
loans for the term of the loan modification. Financial institutions do
not have to report Section 4013 loans as TDRs in regulatory reports.
Call Report and FFIEC 002 Revisions
Consistent with Section 4013, the agencies requested and received
emergency approvals from OMB to add two new data items for Section 4013
loans to the Call Report and FFIEC 002, which would be collected
quarterly beginning with the June 30, 2020, report date, with the
collection of these items expected to be time-limited. These new items,
Memorandum item 17.a, ``Number of Section 4013 loans outstanding,'' and
Memorandum item 17.b, ``Outstanding balance of Section 4013 loans,''
would be added to Call Report Schedule RC-C, Part I, Loans and Leases,
and Memorandum item 5.a, ``Number of Section 4013 loans outstanding,''
and Memorandum item 5.b, ``Outstanding balance of Section 4013 loans,''
would be added to FFIEC 002 Schedule C, Part I, Loans and Leases. These
items would enable the agencies to monitor individual institutions' and
the industry's use of the temporary relief provided by Section 4013 as
well as the volume of loans modified in accordance with Section 4013.
The agencies plan to propose to discontinue the collection of these
specific items once the aggregate industry activity has diminished to a
point where individual institution information is of limited practical
utility.\36\
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\36\ These new Call Report items will be reviewed in connection
with the statutorily mandated review of the Call Report. Findings
from the statutorily mandated Call Report review will also be used
for evaluating the FFIEC 002 new items. See footnote 13.
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The agencies will collect institution-level and branch-and-agency-
level Section 4013 loan information in the Call Report and the FFIEC
002 on a confidential basis. While the agencies generally make
institution-level Call Report and branch-and-agency-level FFIEC 002
data publicly available, the agencies are collecting Section 4013 loan
information as part of condition reports for the impacted entities and
the agencies believe disclosure of these items at the institution level
would not be in the public interest.\37\ Such information is permitted
to be collected on a confidential basis, consistent with 5 U.S.C.
552(b)(8).\38\
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\37\ 12 U.S.C. 1464(v)(2).
\38\ Exemption 8 of the Freedom of Information Act (FOIA)
specifically exempts from disclosure information ``contained in or
related to examination, operating, or condition reports prepared by,
on behalf of, or for the use of an agency responsible for the
regulation or supervision of financial institutions.''
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The public disclosure of supervisory information on Section 4013
loans could have a detrimental impact on financial institutions
offering modifications under this provision to borrowers that need
relief due to COVID-19. Financial institutions may be reluctant to
offer modifications under Section 4013 if information on these
modifications made by each institution is publicly available, as
analysts, investors, and other users of public Call Report and FFIEC
002 information may penalize an institution for using the relief
provided by the CARES Act. The agencies have encouraged financial
institutions to work with their borrowers during the National Emergency
related to COVID-19, including use of the relief under Section
4013.\39\
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\39\ See ``Interagency Statement on Loan Modifications and
Reporting for Financial Institutions Working with Customers Affected
by the Coronavirus (Revised)'' (April 7, 2020), available at https://www.occ.gov/news-issuances/news-releases/2020/nr-ia-2020-50a.pdf.
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The agencies may disclose Section 4013 loan data on an aggregated
basis, consistent with confidentiality.
C. Revisions Related to U.S. GAAP
1. Provisions for Credit Losses on Off-Balance-Sheet Credit Exposures
On June 16, 2016, the FASB issued Accounting Standards Update No.
2016-13, Topic 326, Financial Instruments--Credit Losses (ASU 2016-13).
Within Topic 326, paragraph 326-20-30-11 states, ``An entity shall
report in net income (as a credit loss expense) the amount necessary to
adjust the liability for credit losses for management's current
estimate of expected credit losses on off-balance-sheet credit
exposures.'' Off-balance-sheet credit exposures include unfunded loan
commitments, financial standby letters of credit, and financial
guarantees not accounted for as insurance, and other similar
instruments except for those within the scope of ASC Topic 815 on
derivatives and hedging.
Throughout Topic 326, the FASB refers to provisions for credit
losses as ``credit loss expense.'' For example, paragraph 326-20-30-1
states, ``An entity shall report in net income (as a credit loss
expense) the amount necessary to adjust the allowance for credit losses
for management's current estimate of expected credit losses on
financial assets(s).'' Thus, Topic 326 does not prohibit recording the
adjustment to the liability for expected credit losses on off-balance-
sheet credit exposures within the provisions for credit losses reported
in the income statement.
The Call Report income statement instructions currently direct
institutions that have adopted Topic 326 to report provisions for
expected credit losses on off-balance-sheet credit exposures in
Schedule RI, item 7.d, ``Other noninterest expense,'' and prohibit its
inclusion in Schedule RI, item 4,
[[Page 44372]]
``Provision for loan and lease losses.'' \40\ Therefore, to align
regulatory reporting to the guidance within Topic 326, the agencies
propose to change the Call Report instructions to direct institutions
that have adopted Topic 326 to report provisions for expected credit
losses on off-balance-sheet credit exposures as part of the total
amount of institutions' provisions for credit losses in Schedule RI,
item 4.\41\ This Schedule RI instructional change would carry over to
Schedule RI-D, Income from Foreign Offices, on the FFIEC 031.\42\ These
instructional changes would apply only to institutions that have
adopted Topic 326.
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\40\ A footnote to Schedule RI, item 4, on the Call Report forms
currently states, ``Institutions that have adopted ASU 2016-13
should report in item 4 the provisions for credit losses on all
financial assets that fall within the scope of the standard.''
\41\ The existing footnote to Schedule RI, item 4, also would be
revised in the same manner.
\42\ The existing footnote to Schedule RI-D, item 3, would be
revised in the same manner as the footnote to Schedule RI, item 4.
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The inclusion of provisions for expected credit losses on off-
balance-sheet credit exposures in the provisions for credit losses
presented in item 4 of the Call Report income statement will cause a
loss of transparency within the overall reported amount of provisions
for credit losses between provisions attributable to on- and off-
balance-sheet credit exposures. To enhance transparency and
differentiate these provisions, the agencies propose adding a new
Memorandum item 7, ``Provisions for credit losses on off-balance-sheet
credit exposures,'' to Schedule RI-B, Part II, Changes in Allowances
for Credit Losses, which will identify the portion of the overall
amount of the provisions for credit losses reported in Schedule RI,
item 4, attributable to the provisions for expected credit losses on
off-balance-sheet credit exposures. Adding the new memorandum item to
Schedule RI-B, Part II, will enable the agencies to monitor the
underlying components of the total amount of an institution's
provisions for credit losses (i.e., the separate provisions for
expected credit losses attributable to loans and leases held for
investment, held-to-maturity debt securities, AFS debt securities,
other financial assets measured at amortized cost, and off-balance-
sheet credit exposures) and how these components change over time in
relation to the amounts of the various categories of financial assets
and off-balance-sheet credit exposures within the scope of ASC Topic
326.
In addition, footnote 5 on Schedule RI-B, Part II, item 5,
``Provisions for credit losses,'' will be updated to reflect ``For
institutions that have adopted ASU 2016-13, the sum of item 5, Column A
through Column C, plus Schedule RI-B, Part II, Memorandum items 5 and
7, below, must equal Schedule RI, item 4.''
2. Expected Recoveries of Amounts Previously Charged Off Included
within the Allowances for Credit Losses
As noted above, the FASB issued ASU 2016-13 on June 16, 2016, which
has been amended by subsequent FASB ASUs. Within Topic 326, paragraph
326-20-30-1 states, ``The allowance for credit losses is a valuation
account that is deducted from, or added to, the amortized cost basis of
the financial asset(s) to present the net amount expected to be
collected on the financial asset. Expected recoveries of amounts
previously written off and expected to be written off shall be included
in the valuation account and shall not exceed the aggregate of amounts
previously written off and expected to be written off by an entity.''
The terms ``written off'' as used in Topic 326 and ``charged off'' as
used in Call Report instructions are used interchangeably in this
discussion.
Under GAAP before an institution's adoption of Topic 326, expected
recoveries of amounts previously written off would not be included in
the measurement of the allowance for loan and lease losses; recoveries
would be recorded only when received. Under Topic 326, including
expected recoveries of amounts previously written off within allowances
for credit losses reduces the overall amount of these allowances.
Amounts related to an individual asset are written off or charged off
when deemed uncollectible. However, under ASC Topic 326, institutions
could, in some circumstances, reduce the amount of the allowance for
credit losses that would otherwise be calculated for a pool of assets
with similar risk characteristics that includes charged-off assets on
the same day the charge-offs were taken by the estimated amount of
expected recoveries of amounts written off on these assets. Reducing
the allowance for credit losses by amounts of expected recoveries prior
to collection effectively ``reverses'' a charge-off. Therefore, to
provide transparency for amounts with inherently higher risk that,
before an institution's adoption of ASC Topic 326, were not allowed to
be recorded until they were received, the agencies propose to add new
Memorandum item 8 to Schedule RI-B, Part II, Changes in Allowances for
Credit Losses, to capture the ``Estimated amount of expected recoveries
of amounts previously written off included within the allowance for
credit losses on loans and leases held for investment (included in item
7, column A, `Balance end of current period,' above).'' This new item
would be applicable to institutions only after they have adopted Topic
326.
Not including the proposed memorandum item for expected recoveries
of amounts previously written off within the allowance for credit
losses on loans and leases will cause a loss of transparency within the
reported amount of this allowance between the portions of the allowance
attributable to (1) expected credit losses on the amortized cost basis
of loans and leases held for investment net of expected recoveries of
amounts expected to be charged off in the future and (2) expected
recoveries of loan and lease amounts previously charged off. Proposed
new Memorandum item 8 will enhance transparency and differentiate these
amounts within the period-end balance of the allowance for credit
losses on loans and leases by separately identifying the estimated
amount within this allowance attributable to expected recoveries of
amounts previously written off. This proposed new memorandum item will
enable the agencies, including their examiners, and other Call Report
users to better understand key components underlying institutions'
allowance for credit losses on loans and leases (i.e., amounts for
expected credit losses on the amortized cost basis of loans and leases
held for investment and amounts for expected recoveries of amounts
previously written off on such loans and leases) and how these
components change over time. This information will assist the agencies
and other users in monitoring amounts with inherently higher credit
risk, and changes therein, that contribute to reductions in the overall
amount of the allowance for credit losses on loans and leases. This
proposed new memorandum item will apply to loans and leases held for
investment because this is the Call Report category of financial assets
that is expected to have the greatest amount of estimated expected
recoveries of amounts previously written off.
3. Nonaccrual Treatment of Purchased Credit-Deteriorated Assets
ASU 2016-13 introduced the concept of purchased credit-deteriorated
(PCD) assets. PCD assets are acquired financial assets that, at
acquisition, have experienced more-than-insignificant deterioration in
credit quality since origination. When recording the acquisition of PCD
assets, the amount of expected credit losses as of the acquisition date
is recorded as an
[[Page 44373]]
allowance and added to the purchase price of the assets rather than
recording these acquisition date expected credit losses through
provisions for credit losses. The sum of the purchase price and the
initial allowance for credit losses (ACL) establishes the amortized
cost basis of the PCD assets at acquisition. Any difference between the
unpaid principal balance of the PCD assets and the amortized cost basis
of the assets as of the acquisition date is a noncredit discount or
premium. The initial ACL and any noncredit discount or premium
determined on a collective basis at the acquisition date are allocated
to the individual PCD assets.
After acquisition, any noncredit discount or premium is accreted or
amortized into interest income, as appropriate, over the remaining
lives of the PCD assets on a level-yield basis. However, if a PCD asset
is placed in nonaccrual status, institutions must cease accreting the
noncredit discount or amortizing the noncredit premium into interest
income consistent with the guidance in ASC paragraph 310-20-35-17.
The current instructions for Call Report Schedule RC-N, Past Due
and Nonaccrual Loans, Leases, and Other Assets, provide an exception to
the general rule for placing financial assets in nonaccrual status set
forth in the Call Report Glossary entry for ``Nonaccrual status'' for
purchased credit-impaired (PCI) assets. The instructions for FFIEC 002
Schedule N, Past Due, Nonaccrual, and Restructured Loans, include a
similar exception for PCI assets. Topic 326 replaces the concept of PCI
assets in previous GAAP with the concept of PCD assets.\43\ Although
there is some similarity between the concepts of PCI and PCD assets,
these two concepts are not identical. Nevertheless, ASU 2016-13
provides that, upon adoption of Topic 326, all PCI assets will be
deemed to be, and accounted for prospectively as, PCD assets. However,
the Schedule RC-N instructions indicate that the nonaccrual exception
for PCI assets was not extended to PCD assets by stating that ``For
purchased credit-deteriorated loans, debt securities, and other
financial assets that fall within the scope of ASU 2016-13, nonaccrual
status should be determined and subsequent nonaccrual treatment, if
appropriate, should be applied in the same manner as for other
financial assets held by an institution.''
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\43\ According to ASC paragraph 310-30-15-2, PCI assets, in
general, are loans and debt securities with evidence of
deterioration of credit quality since origination acquired by
completion of a transfer for which it is probable, at acquisition,
that the investor will be unable to collect all contractually
required payments receivable.
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As described in the Call Report Supplemental Instructions for March
2020, if an institution has adopted ASU 2016-13 and has a PCD asset,
including a PCD asset that was previously a PCI asset or part of a pool
of PCI assets, that would otherwise be required to be placed in
nonaccrual status (see the Glossary entry for ``Nonaccrual status''),
the institution may elect to continue accruing interest income and not
report the PCD asset as being in nonaccrual status if the following
criteria are met:
(1) The institution reasonably estimates the timing and amounts of
cash flows expected to be collected, and
(2) the institution did not acquire the asset primarily for the
rewards of ownership of the underlying collateral, such as use of
collateral in operations of the institution or improving the collateral
for resale.
Additionally, these Call Report Supplemental Instructions state
that when a PCD asset that meets the criteria above is not placed in
nonaccrual status, the asset should be subject to other alternative
methods of evaluation to ensure that the institution's net income is
not materially overstated. Further, an institution is not permitted to
accrete the credit-related discount embedded in the purchase price of a
PCD asset that is attributable to the acquirer's assessment of expected
credit losses as of the date of acquisition (i.e., the contractual cash
flows the acquirer did not expect to collect at acquisition). Interest
income should no longer be recognized on a PCD asset to the extent that
the net investment in the asset would increase to an amount greater
than the payoff amount. If an institution is required or has elected to
carry a PCD asset in nonaccrual status, the asset must be reported as a
nonaccrual asset at its amortized cost basis in Call Report Schedule
RC-N, column C.\44\
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\44\ Similarly, in the FFIEC 002, any PCD loans in nonaccrual
status would be reported in Schedule N, column C.
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For PCD assets for which the institution has made a policy election
to maintain a previously existing pool of PCI assets as a unit of
account for accounting purposes upon adoption of ASU 2016-13, the
determination of nonaccrual or accrual status should be made at the
pool level, not at the individual asset level.
For a PCD asset that is not reported in nonaccrual status, the
delinquency status of the PCD asset should be determined in accordance
with its contractual repayment terms for purposes of reporting the
amortized cost basis of the asset as past due in Schedule RC-N, column
A or B, and in FFIEC 002 Schedule N, column A or B, as appropriate. If
the PCD asset that is not reported in nonaccrual status consists of a
pool of loans that were previously PCI assets that is being maintained
as a unit of account after the adoption of ASU 2016-13, delinquency
status should be determined individually for each loan in the pool in
accordance with the individual loan's contractual repayment terms.
The agencies are proposing to update the Call Report and FFIEC 002
instructions to revise the nonaccrual treatment for PCD assets to
provide institutions the option to not report PCD assets in nonaccrual
status if they meet the criteria described above. The instructions also
would incorporate the other reporting guidance for PCD assets in the
Call Report Supplemental Instructions for March 2020 described above.
4. Last-of-Layer Hedging
In ASU No. 2017-12, Derivatives and Hedging (Topic 815)-Targeted
Improvements to Accounting for Hedging Activities, the FASB added the
last-of-layer method to its hedge accounting standards to lessen the
difficulties institutions encountered under existing accounting rules
when seeking to enter into a fair value hedge of the interest rate risk
of a closed portfolio of prepayable financial assets or one or more
beneficial interests secured by a portfolio of prepayable financial
instruments. Typically, prepayable financial assets would be loans and
AFS debt securities.\45\ Under ASU 2017-12, there are no limitations on
the types of qualifying assets that could be grouped together in a
last-of-layer hedge other than meeting the following two criteria: (1)
They must be prepayable financial assets that have a contractual
maturity date beyond the period being hedged and (2) they must be
eligible for fair value hedge accounting of interest rate risk (for
example, fixed-rate instruments). For example, fixed-rate residential
mortgages, auto loans, and collateralized mortgage obligations could
all be grouped and hedged together in a single last-of-layer closed
portfolio. For a last-of-layer hedge, ASC paragraph 815-10-50-5B states
that an institution may need to allocate the related fair value hedge
basis adjustment (FVHBA) ``to meet the objectives of disclosure
requirements in other Topics.'' This ASC paragraph then explains that
the
[[Page 44374]]
institution ``may allocate the basis adjustment on an individual asset
basis or on a portfolio basis using a systematic and rational method.''
Due to the aggregation of assets in a last-of-layer closed portfolio,
institutions may find it challenging to allocate the related FVHBA to
the individual loan or AFS debt security level when necessary for
financial reporting purposes.
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\45\ Prepayable held-to-maturity debt securities do not qualify
for last-of-layer hedging.
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In March 2018, the FASB added a project to its agenda to expand
last-of-layer hedging to multiple layers, thereby providing more
flexibility to entities when applying hedge accounting to a closed
portfolio of prepayable assets. In connection with this project, the
FASB anticipated that there would be diversity in practice if entities
were required to allocate portfolio-level, last-of-layer FVHBAs to more
granular levels, which in turn could potentially hamper data quality
and comparability. In addition, the allocation would increase
operational burden on institutions with little, if any, added value to
risk management or to users of the financial statements. As such, for
financial reporting purposes, the FASB Board has tentatively decided
that it would require these FVHBAs to be presented as a reconciling
item, i.e., in the aggregate for loans and AFS debt securities, in
disclosures required by other areas of GAAP.\46\
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\46\ The tentative decision was made at the FASB Board meeting
on October 16, 2019. The Board meeting minutes are available at
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage&cid=1176173617941. Currently, no exposure draft or ASU
associated with this project has been issued.
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Call Report Revisions
For regulatory reporting purposes, the agencies are proposing
similar treatment for last-of-layer FVHBAs on Call Report Schedule RC-
C, Part I, Loans and Leases, and Schedule RC-B, Securities. As such,
following the FASB's adoption of a final last-of-layer hedge accounting
standard, the instructions for Schedule RC-C, Part I, item 11, ``LESS:
Any unearned income on loans reflected in items 1-9 above,'' would be
revised to explicitly state that last-of-layer FVHBAs associated with
the loans reported in Schedule RC-C, Part I, should be included in this
item.
In addition, the agencies are proposing on Schedule RC-B,
Securities, to rename existing item 7, ``Investments in mutual funds
and other equity securities with readily determinable fair values,'' as
``Unallocated last-of-layer fair value hedge basis adjustments.''
Institutions would report amounts for last-of-layer FVHBAs on AFS debt
securities only in item 7, column C, ``Available-for-sale: Amortized
Cost.'' To note, only a small number of institutions that have not have
yet adopted ASU 2016-01, which includes provisions governing the
accounting for investments in equity securities, continue to report
amounts in item 7. Because all institutions are required to adopt ASU
2016-01 for Call Report purposes by the December 31, 2020, report date,
the agencies had previously determined that existing item 7 in Schedule
RC-B would no longer be applicable to institutions for reporting
purposes and could be removed as of that report date.\47\ Thus, the
need for a new item in Schedule RC-B for reporting unallocated FVHBAs
applicable to AFS debt securities following the FASB's adoption of a
final last-of-layer hedge accounting standard can be readily
accommodated through the redesignation of existing item 7, column C,
for this purpose.
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\47\ 83 FR 945-946 (January 8, 2018).
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FFIEC 002 Revisions
The agencies are also proposing similar treatment for last-of-layer
FVHBAs on FFIEC 002 Schedule C, Part I, Loans, and Schedule RAL, Assets
and Liabilities, Memorandum item 3.b, ``Amortized cost of available-
for-sale securities,'' following the FASB's adoption of a final last-
of-layer hedge accounting standard. The instructions for Schedule C,
Part I, item 10, ``LESS: Any unearned income on loans reflected in
items 1-8 above,'' would be revised to explicitly state that last-of-
layer FVHBAs associated with the loans reported in Schedule C, Part I,
should be included in this item.
In addition, the agencies are proposing to revise the FFIEC 002
instructions to state that institutions should report amounts for last-
of-layer FVHBAs applicable to available-for-sale debt securities in
Schedule RAL, Memorandum item 3.b, ``Amortized cost of available-for-
sale securities.''
D. Revisions Related to International Remittance Transfers
Section 1073 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) \48\ amended the Electronic Fund
Transfer Act (EFTA) \49\ to create comprehensive consumer protections
for remittance transfers sent by consumers in the United States to
individuals and businesses in foreign countries. The Bureau implemented
these EFTA amendments through the Remittance Rule (12 CFR 1005.30 et
seq.). EFTA and the Remittance Rule include a requirement that
remittance transfer providers generally must disclose (both prior to
and at the time the consumer pays for the transfer) the exact exchange
rate that applies to a remittance transfer and the amount to be
received by the designated recipient of the transfer. The Remittance
Rule also requires remittance transfer providers to disclose certain
fees and other information, among several other requirements.
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\48\ 12 U.S.C. 5601.
\49\ 15 U.S.C. 1693 et seq.
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A person that provides remittance transfers in the normal course of
its business is a remittance transfer provider subject to the
Remittance Rule's requirements. Generally, whether a person provides
remittance transfers in the normal course of its business depends on
the facts and circumstances, such as the number and frequency of the
remittance transfers the person provides. However, the Remittance Rule
as originally adopted contained a safe harbor whereby a person that
provided 100 or fewer remittance transfers in each of the previous and
current calendar years was deemed not to be providing remittance
transfers in the normal course of its business, and therefore was
outside of the Remittance Rule's coverage.
The EFTA and the Remittance Rule also contain exceptions that
permit some remittance transfer providers to estimate certain
information in the required disclosures in certain circumstances. Of
relevance to the current Call Reports, as discussed in greater detail
below, there is a ``temporary exception'' that permits certain insured
institutions \50\ to estimate certain fees and the exchange rate (and
information that depends on the fees and exchange rate) in their
disclosures if certain conditions are met. Importantly, EFTA section
919 expressly limits the length of the temporary exception to July 21,
2020. As a result, the temporary exception will expire on July 21,
2020.
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\50\ The term ``insured institution'' refers to ``an insured
depository institution, as defined in section 1813 of title 12, or
an insured credit union, as defined in section 1752 of title 12.''
15 U.S.C. 1693o-1(a)(4)(A).
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In 2014, item 16 was added to Schedule RC-M of the FFIEC 031 and
FFIEC 041 Call Reports, citing Section 1073 of the Dodd-Frank Act and
the Remittance Rule.\51\ In supporting the inclusion of this new item
in the Call Reports, the agencies ``stated that the new item regarding
remittance transfers could facilitate monitoring of market entry and
exit, which would improve
[[Page 44375]]
understanding of the consumer payments landscape generally, and
facilitate evaluation of the remittance transfer rule's impact. . .[as
well as] enable the FFIEC and the agencies to refine supervisory
procedures and policies. . .[and] help inform any later policy
decisions regarding remittance transfers and activities regarding
remittance transfers that are mandated by section 1073 of the Dodd-
Frank Act.'' \52\
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\51\ 79 FR 2509 (Feb. 14, 2014). Item 16 was later incorporated
into the FFIEC 051 Call Report when that report was created.
\52\ Ibid.
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In 2018, the Bureau published its report of its Dodd-Frank-mandated
assessment of the Remittance Rule (``Assessment Report'').\53\ Based on
information surfaced by the Bureau's assessment as well as a subsequent
Request for Information,\54\ the Bureau proposed amendments to the
Remittance Rule in 2019 (``Remittance Proposal'' or ``Proposal'').\55\
The Remittance Proposal included a proposed effective date of July 21,
2020. On June 5, 2020, the Bureau published a Final Rule amending the
Remittance Rule.\56\
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\53\ Bureau, Remittance Rule Assessment Report (Oct. 2018, rev.
Apr. 2019), https://files.consumerfinance.gov/f/documents/bcfp_remittance-rule-assessment_report_corrected_2019-03.pdf
\54\ 84 FR 17971 (Apr. 29, 2019).
\55\ 84 FR 67132 (Dec. 6, 2019).
\56\ 85 FR 34870 (Jun. 5, 2020).
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Currently, Schedule RC-M, Memoranda, item 16, ``International
remittance transfers offered to consumers,'' and its instructions are
identical across the FFIEC 031, FFIEC 041, and FFIEC 051 Call Report
forms. The item consists of four questions, two of which are further
subdivided into four and three questions, for a total of nine different
data points requested of respondents that meet certain criteria
outlined in the current Call Report instructions.
Through the Remittance Proposal process, the Bureau identified
certain proposed changes to the information collected in Schedule RC-M,
item 16. These changes would better align item 16 with the Remittance
Rule as amended, as well as streamline reporting for respondents and
reduce burden where appropriate. The agencies propose that revised item
16 would consist of two questions, one of which would be further
subdivided into three questions, for a total of four different data
points. Item 16.a would be renamed ``Estimated number of international
remittance transfers provided by your institution during the calendar
year ending on the report date.'' This data item would be proposed to
be collected annually in the December Call Report only. Item 16.b.(1)
through 16.b.(3) would be completed only by institutions that reported
501 or more international remittance transfers in Schedule RC-M, item
16.a, in either the current report or the report for the previous
calendar year-end report date.\57\ The revised items 16.b.(1) through
(3) would request data on the estimated dollar value of remittance
transfers provided by an institution during the calendar year ending on
the report date and its usage during this same period of the permanent
exceptions for insured institutions as incorporated into the Remittance
Rule by the Bureau's 2020 Final Rule. Specifically, an institution
would report the following information in revised items 16.b.(1)
through (3), if applicable:
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\57\ For the transitional December 2021 Call Report only, an
institution would complete Schedule RC-M, items 16.b.(1) through
16.b.(3), only if it reports 501 or more international remittance
transfers in Schedule RC-M, item 16.a, in the December 2021 Call
Report or it reported a combined total of 501 or more international
remittance transfers in Schedule RC-M, item 16.d.(1), in the June
and December 2020 Call Reports.
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(1) Estimated dollar value of international remittance transfers;
(2) Estimated number of international remittance transfers for
which your institution applied the permanent exchange rate exception;
and
(3) Estimated number of international remittance transfers for
which your institution applied the permanent covered third-party fee
exception.
Consistent with the current instructions for reporting estimated
numbers and dollar values for international remittance transfers in
Schedule RC-M, item 16, the estimates reported in revised items 16.a
and 16.b.(1) through (3) should be based on a reasonable and
supportable methodology and the estimated dollar value of international
remittance transfers, if required to be reported in item 16.b.(1), is
not required to be estimated in thousands of dollars.
III. Timing
The revisions associated with the interim final rules, the proposed
and final deposit insurance assessments rule, and the CARES Act
provisions have been approved by OMB through the emergency clearance
process, and these revisions have taken effect for the March 31, 2020,
Call Report and FFIEC 101 or the June 30, 2020, Call Report, FFIEC 101,
and FFIEC 002, or will take effect for the September 30, 2020, FFIEC
002, as discussed in Sections II.A and B. For the additional proposed
revisions to the Call Report and FFIEC 002 instructions that are
related to the amendment of the Board's Regulation D, as discussed in
section II.A, the agencies propose to make these revisions effective
for reporting beginning in the first quarter of 2021.
For the accounting changes discussed in Section II.C, the agencies
propose to make the revisions effective as of the March 31, 2021,
report date, except for the revisions for last-of-layer hedging, which
would be implemented following the FASB's adoption of a final last-of-
layer hedge accounting standard. A final standard is not expected to be
issued before the second half of 2021.
The agencies propose to make the revisions to Schedule RC-M for the
international remittance transfer items discussed in Section II.D
effective March 31, 2021.\58\
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\58\ Therefore, institutions will report current Schedule RC-M,
item 16, in December 2020; will not report current Schedule RC-M,
item 16, at all in June 2021; and will report the proposed revised
Schedule RC-M, item 16, in December 2021 (covering all of calendar
year 2021).
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The agencies invite comment on any difficulties that institutions
would expect to encounter in implementing the systems changes necessary
to accommodate the proposed revisions to the Call Reports, FFIEC 101,
and FFIEC 002 consistent with those effective dates.
The specific wording of the captions for the new or revised Call
Report, FFIEC 101, and FFIEC 002 data items discussed in this proposal
and the numbering of these data items should be regarded as
preliminary.
IV. Request for Comment
Public comment is requested on all aspects of this joint notice.
Comment is specifically invited on:
(a) Proposed new Memorandum item 8, ``Estimated amount of expected
recoveries of amounts previously written off included within the
allowances for credit losses on loans and leases held for investment
(included in item 7, ``Balance end of current period,'' above),'' would
be added to Schedule RI-B, Part II, Changes in Allowances for Credit
Losses.
(1) Do institutions have information readily available on the
estimated amount of these expected recoveries that is proposed to be
collected? If not, what additional steps would institutions need to
take to be able to report this estimated amount?
(2) Although, as proposed, this item applies to the overall
allowance for credit losses on loans and leases held for investment,
would reporting institutions or users of allowance data prefer a
different or more disaggregated
[[Page 44376]]
collection of information on expected recoveries? If so, please provide
specific reasons and describe the preferred different or more
disaggregated collection.
(b) Proposed changes for reporting last-of-layer FVHBAs would be
made to Call Report Schedule RC-B, Securities, and Schedule RC-C, Part
I, Loans and Leases, and FFIEC 002 Schedule RAL, Assets and
Liabilities, and Schedule C, Part I, Loans and Leases, following the
FASB's adoption of a final last-of-layer hedge accounting standard.
(1) How do institutions that have implemented last-of-layer hedging
under ASU 2017-12 currently report the FVHBAs associated with loans and
AFS debt securities in the Call Report or the FFIEC 002?
(2) Do such institutions find it challenging to allocate these
last-of-layer FVHBAs on an individual asset basis or on a portfolio
basis for financial and regulatory reporting purposes? If so, please
explain whether these challenges are greater for regulatory reporting
than financial reporting purposes and describe the reasons for this.
(3) Should the agencies consider implementing the changes for
reporting FVHBAs proposed in Section II.C.4 or some other interim
reporting treatment for FVHBAs before the FASB's adoption of a final
last-of-layer hedge accounting standard, provided the resulting
reporting of FVHBAs would not be inconsistent with GAAP? Please
describe any suggested other interim reporting treatment.
(c) Whether the proposed revisions to the collections of
information that are the subject of this notice are necessary for the
proper performance of the agencies' functions, including whether the
information has practical utility;
(d) The accuracy of the agencies' estimates of the burden of the
information collections as they are proposed to be revised, including
the validity of the methodology and assumptions used;
(e) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(f) Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(g) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Comments submitted in response to this joint notice will be shared
among the agencies.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
Board of Governors of the Federal Reserve System.
Michele Taylor Fennell,
Assistant Secretary of the Board.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, on July 16, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-15788 Filed 7-21-20; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P
