Agency Information Collection Activities: Proposed Collection; Comment Request, 40025-40029 [05-13628]

Download as PDF Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices (District Court for the District of Columbia). EPA has reached an agreement with the plaintiffs. The agreement is embodied in a proposed Settlement Agreement. The proposed Settlement Agreement sets a series of deadlines for the Agency to make ‘‘effects determinations’’ on the potential for pesticides containing any of six active ingredients--atrazine, diazinon, carbaryl, prometon, metolachlor, and simazine-to affect the Barton Springs Salamander, Eurycea sosorum, or its designated critical habitat. An ‘‘effects determination’’ considers whether use of a pesticide: (1) Has no effect on a listed species; (2) may affect but is not likely to adversely affect a listed species; or (3) may affect and is likely to adversely affect a listed species. If the Agency determines a pesticide ‘‘may affect and is likely to adversely affect’’ the Barton Springs Salamander or designated critical habitat, EPA will initiate formal consultation with the U.S. Fish and Wildlife Service (FWS) as described in the Settlement Agreement. In addition, during the pendency of the schedule for effects determinations outlined in the Settlement Agreement, the plaintiffs agree not to seek any injunction or other use restriction for any of the pesticides subject to the Settlement Agreement. Pursuant to the Settlement Agreement, in the event EPA makes a ‘‘may affect and is likely to adversely affect’’ determination for any of the pesticides, the plaintiffs reserve the right to seek use restrictions for that pesticide by filing a new complaint with the Court. Beginning today, EPA is opening a 15–day comment period on the proposed Settlement Agreement. EPA will use the comments to determine whether all or part of the proposed Settlement Agreement warrants reconsideration. If EPA determines that any part of the proposed Settlement Agreement merits reconsideration, EPA will provide the plaintiffs with a written request for further negotiations and the proposed Settlement Agreement shall not be entered with the Court unless the parties can reach agreement on needed changes. If EPA determines that the proposed Settlement Agreement does not need to be reconsidered, the terms of the proposed Settlement Agreement shall become effective upon entry by the U.S. District Court for the District of Columbia. Once the Settlement Agreement is entered by the U.S. District Court for the District of Columbia, EPA will post on its web site atwww.epa.gov/pesticides a notice VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 indicating the Settlement Agreement has been so entered. List of Subjects Environmental protection, Endangered species. Dated: July 7, 2005. Susan B. Hazen, Acting Assistant Administrator, Office of Prevention, Pesticides and Toxic Substances. [FR Doc. 05–13768 Filed 7–11–05; 8:45 am] BILLING CODE 6560–50–S FEDERAL RESERVE SYSTEM Agency Information Collection Activities: Proposed Collection; Comment Request Board of Governors of the Federal Reserve System. SUMMARY: AGENCY: Background On June 15, 1984, the Office of Management and Budget (OMB) delegated to the Board of Governors of the Federal Reserve System (Board) its approval authority under the Paperwork Reduction Act, as per 5 CFR 1320.16, to approve of and assign OMB control numbers to collection of information requests and requirements conducted or sponsored by the Board under conditions set forth in 5 CFR part 1320 Appendix A.1. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. Copies of the OMB 83-Is and supporting statements and approved collection of information instruments are placed into OMB’s public docket files. The Federal Reserve may not conduct or sponsor, and the respondent is not required to respond to, an information collection that has been extended, revised, or implemented on or after October 1, 1995, unless it displays a currently valid OMB control number. Request for Comment on Information Collection Proposals The following information collections, which are being handled under this delegated authority, have received initial Board approval and are hereby published for comment. At the end of the comment period, the proposed information collections, along with an analysis of comments and recommendations received, will be submitted to the Board for final approval under OMB delegated authority. Comments are invited on the following: PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 40025 a. Whether the proposed collection of information is necessary for the proper performance of the Federal Reserve’s functions; including whether the information has practical utility; b. the accuracy of the Federal Reserve’s estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used; c. ways to enhance the quality, utility, and clarity of the information to be collected; and d. ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. DATES: Comments must be submitted on or before September 12, 2005. ADDRESSES: You may submit comments, identified by FR K–2, FR Y–1F, FR Y– 9C, by any of the following methods: • Agency Web Site: http:// www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • E-mail: regs.comments@federalreserve.gov. Include docket number in the subject line of the message. • FAX: (202) 452–3819 or (202) 452– 3102. • Mail: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW., Washington, DC 20551. All public comments are available from the Board’s Web site at http:// www.federalreserve.gov/generalinfo/ foia/ProposedRegs.cfm as submitted, unless modified as necessary for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room MP– 500 of the Board’s Martin Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on weekdays. FOR FURTHER INFORMATION CONTACT: A copy of the proposed form and instructions, the Paperwork Reduction Act Submission (OMB 83–I), supporting statement, and other documents that will be placed into OMB’s public docket files once approved may be requested from the agency clearance officer, whose name appears below. Michelle Long, Federal Reserve Board Clearance Officer (202) 452–3829, Division of Research and Statistics, Board of Governors of the Federal E:\FR\FM\12JYN1.SGM 12JYN1 40026 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices Reserve System, Washington, DC 20551. Telecommunications Device for the Deaf (TDD) users may contact (202) 263–4869, Board of Governors of the Federal Reserve System, Washington, DC 20551. Proposal To Approve Under OMB Delegated Authority the Extension for Three Years, Without Revision, of the Following Report Report title: Notifications Related to Community Development and Public Welfare Investments of State Member Banks. Agency form number: FR H–6. OMB control number: 7100–0278. Frequency: Event-generated. Reporters: State Member Banks. Annual reporting hours: 125. Estimated average hours per response: Investment notice, 2 hours; Application (Prior Approval) 5 hours; and Extension of divestiture period, 5 hours. Number of respondents: Investment notice, 10; Application (Prior Approval) 20; and Extension of divestiture period, 1. General description of report: This information collection is required to obtain a benefit (12 U.S.C. 338a, and 12 CFR 208.22). Individual respondent data generally are not regarded as confidential, but information that is proprietary or concerns examination ratings would be considered confidential. Abstract: Regulation H requires state member banks that want to make community development or public welfare investments to comply with the Regulation H notification requirements: (1) If the investment does not require prior Board approval, a written notice must be sent to the appropriate Federal Reserve Bank; (2) if certain criteria are not met, a request for approval must be sent to the appropriate Federal Reserve Bank; and, (3) if the Board orders divestiture but the bank cannot divest within the established time limit, a request or requests for extension of the divestiture period must be submitted to the appropriate Federal Reserve Bank. Proposal To Approve Under OMB Delegated Authority the Extension for Three Years, With Revision, of the Following Reports 1. Report title: Application for a Foreign Organization To Become a Bank Holding Company. Agency form number: FR Y–1F. OMB control number: 7100–0119. Frequency: On occasion. Reporters: any company organized under the laws of a foreign country seeking to acquire a U.S. subsidiary bank or bank holding company. VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 Annual reporting hours: 710. Estimated average hours per response: 70–90 hours. Number of respondents: 9. General description of report: This information collection is required to obtain or retain a benefit under sections 3(a), 3(c), and 5(a) through 5(c) of the Bank Holding Company Act (12 U.S.C. 1842(a) and (c) and 1844(a) through (c) and is not given confidential treatment unless the applicant specifically requests confidentiality and the Federal Reserve approves the request. Abstract: Under the Bank Holding Company Act (BHCA), submission of this application is required for any company organized under the laws of a foreign country seeking to acquire a U.S. subsidiary bank or bank holding company. Applicants must provide financial and managerial information, discuss the competitive effects of the proposed transaction, and discuss how the proposed transaction would enhance the convenience and needs of the community to be served. The Federal Reserve uses the information, in part, to fulfill its supervisory responsibilities with respect to foreign banking organizations in the United States. Current Actions: Foreign organizations seeking initial entry are currently required to file the FR Y–1F. However, the filing requirements are ambiguous for foreign organizations that are already subject to the BHCA and seek to acquire a U.S. bank or bank holding company. In order to clarify and streamline the application process for foreign organizations, the Federal Reserve proposes to explicitly state that these organizations should file the FR Y–1F. Thus, the FR Y–1F would be retitled, renumbered, and modified to achieve consistency with the FR Y–3, the Application for Prior Approval to Become a Bank Holding Company or for a Bank Holding Company to Acquire an Additional Bank or Bank Holding Company (OMB No. 7100–0121), the form used by domestic holding companies. Also, the Federal Reserve proposes technical clarifications to the instructions that would remove page number references to the Interagency Biographical or Financial Report (FR 2081c; OMB No. 7100–0134) and insert a sentence into the standard commitment language in order to make the commitments more enforceable. 2. Report title: International Applications and Prior Notifications Under Subpart B of Regulation K. Agency form number: FR K–2. OMB control number: 7100–0284. Frequency: On occasion. Reporters: Foreign banks. PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 Annual reporting hours: 420. Estimated average hours per response: 35. Number of respondents: 12. General description of report: This information collection is required to obtain or retain a benefit under sections 7 and 10 of the International Banking Act (12 U.S.C. 3105 and 3107) and Regulation K (12 CFR 211.24(a) and is not given confidential treatment unless the applicant specifically requests confidentiality and the Federal Reserve approves the request. Abstract: Foreign banks are required to obtain the prior approval of the Federal Reserve to establish a branch, agency, or representative office; to acquire ownership or control of a commercial lending company in the United States; or to change the status of any existing office in the United States. The Federal Reserve uses the information, in part, to fulfill its statutory obligation to supervise foreign banking organizations with offices in the United States. Current Actions: The Federal Reserve proposes technical clarifications to the instructions that would remove page number references to the Interagency Biographical or Financial Report (FR 2081c; OMB No. 7100–0134), correct language pertaining to representative offices, and insert a sentence into the standard commitment language in order to make the commitments more enforceable. Proposal To Approve Under OMB Delegated Authority the Revision of the Following Report Report title: Financial Statements for Bank Holding Companies. Agency form number: FR Y–9C, FR Y– 9LP, FR Y–9SP, FR Y–9CS, and FR Y– 9ES. OMB control number: 7100–0128. Frequency: Quarterly, semiannually, and annually. Reporters: BHCs. Annual reporting hours: 400,536. Estimated average hours per response: FR Y–9C: 35.55 hours; FR Y–9LP: 4.75 hours; FR Y–9SP: 4.85 hours; FR Y–9ES: 30 minutes; FR Y–9CS: 30 minutes. Number of respondents: FR Y–9C: 2,240; FR Y–9LP: 2,590; FR Y–9SP: 3,253; FR Y–9ES: 87; FR Y–9CS: 600. General description of report: This information collection is mandatory (12 U.S.C. 1844(c)). Confidential treatment is not routinely given to the data in these reports. However, confidential treatment for the reporting information, in whole or in part, can be requested in accordance with the instructions to the form, pursuant to sections (b)(4), (b)(6) E:\FR\FM\12JYN1.SGM 12JYN1 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices and (b)(8) of the Freedom of Information Act (5 U.S.C. 522(b)(4), (b)(6) and (b)(8)). Abstract: The FR Y–9C collects basic financial data from a domestic BHC on a consolidated basis in the form of a balance sheet, an income statement, and detailed supporting schedules, including a schedule of off-balancesheet items, similar to the Federal Financial Institutions Examination Council (FFIEC) Consolidated Reports of Condition and Income (Call Reports) (FFIEC 031 & 041; OMB No. 7100– 0036). The FR Y–9C collects data from the BHC as of the end of March, June, September, and December. The FR Y–9C is filed by top-tier BHCs with total consolidated assets of $150 million or more and lower-tier BHCs that have total consolidated assets of $1 billion or more. In addition, multibank holding companies with total consolidated assets of less than $150 million with debt outstanding to the general public or engaged in certain nonbank activities must file the FR Y–9C. The FR Y–9LP collects basic financial data from domestic BHCs on an unconsolidated, parent-only basis in the form of a balance sheet, an income statement, and supporting schedules relating to investments, cash flow, and certain memoranda items. This report is filed as of the end of March, June, September, and December on a parent company only basis by each BHC that files the FR Y–9C. In addition, for tiered BHCs, a separate FR Y–9LP must be filed for each lower-tier BHC. The FR Y–9SP is a parent company only financial statement filed by smaller BHCs as of the end of June and December. Respondents include onebank holding companies with total consolidated assets of less than $150 million and multibank holding companies with total consolidated assets of less than $150 million that meet certain other criteria. This form is a simplified or abbreviated version of the more extensive parent company only financial statement for large BHCs (FR Y–9LP). This report collects basic balance sheet and income information for the parent company, information on intangible assets, and information on intercompany transactions. The FR Y–9CS is a free form supplement that may be utilized to collect any additional information deemed to be critical and needed in an expedited manner. It is intended to supplement the FR Y–9C and FR Y–9SP reports. The FR Y–9ES collects financial information from employee stock ownership plans (ESOPs) that are also BHCs on their benefit plan activities as of December 31. It consists of four VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 schedules: Statement of Changes in Net Assets Available for Benefits, Statement of Net Assets Available for Benefits, Memoranda, and Notes to the Financial Statements. Current Actions: The Federal Reserve proposes to revise the FR Y–9C to collect information on purchased impaired loans in response to Statement of Position 03–3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03–3) issued by the American Institute of Certified Public Accountants (AICPA), and to collect information related to the Government National Mortgage Association (GNMA) mortgage loan optional repurchase program (rebooked loans backing GNMA securities). Proposed Revisions to the FR Y–9C The Federal Reserve proposes to revise the FR Y–9C to collect information on purchased impaired loans and rebooked loans backing GNMA securities. Revisions to the FR Y–9 family of reports are typically made once per year effective with the March 31st reporting date, however, in light of the change in generally accepted accounting principles (GAAP), 1 as it relates to reporting for purchased impaired loans and important supervisory considerations, the Federal Reserve proposes to revise the FR Y–9C report effective with the September 2005 report date. The proposed revisions would be consistent with the proposed changes to the FFIEC 031 Call Report, effective for the June 2005 report date. In addition to modifying instructions to incorporate the proposed reporting changes, instructions may be revised and clarified in an attempt to achieve greater consistency in reporting by respondents. Purchased Impaired Loans SOP 03–3 applies to ‘‘purchased impaired loans,’’ i.e., loans that an institution has purchased, including those acquired in a purchase business combination, when there is evidence of deterioration of credit quality since the origination of the loan and it is probable, at the purchase date, that the institution will be unable to collect all contractually required payments receivable. SOP 03–3 does not apply to the loans that an institution has originated, and also excludes certain acquired loans from its scope. Under SOP 03–3, a purchased impaired loan is initially recorded at its purchase price (in a purchase business combination, the present value of 1 For this purpose the AICPA Statement of Position is GAAP. PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 40027 amounts to be received). The Statement of Position limits the yield that may be accreted on the loan (the accretable yield) to the excess of the institution’s estimate of the undiscounted principal, interest, and other cash flows expected at acquisition to be collected on the loan over the institution’s initial investment in the loan. The excess of contractually required cash flows over the cash flows expected to be collected on the loan, which is referred to as the nonaccretable difference, must not be recognized as an adjustment of yield, loss accrual, or valuation allowance. Neither the accretable yield nor the nonaccretable difference may be shown on the balance sheet. After acquisition, increases in the cash flows expected to be collected generally should be recognized prospectively as an adjustment of the loan’s yield over its remaining life. Decreases in cash flows expected to be collected should be recognized as impairment. The Statement of Position prohibits an institution from ‘‘carrying over’’ or creating valuation allowances (loan loss allowances) in the initial accounting for purchased impaired loans. This prohibition applies to the purchase of an individual impaired loan, a pool or group of impaired loans, and impaired loans acquired in a purchase business combination. As a consequence, SOP 03–3 provides that valuation allowances should reflect only those losses incurred after acquisition, that is, the present value of all cash flows expected at acquisition that ultimately are not to be received. Thus, because of the accounting model set forth in SOP 03– 3, institutions will need to segregate their purchased impaired loans, if any, from the remainder of their loan portfolio for purposes of determining their overall allowance for loan and lease losses. According to the Basis for Conclusions of SOP 03–3, the AICPA’s Accounting Standards Executive Committee ‘‘believes that the accounting for acquired loans within the scope of this SOP is sufficiently different from the accounting for originated loans, particularly with respect to provisions for impairment * * *, such that the amount of loans accounted for in accordance with this SOP should be disclosed separately in the notes to financial statements.’’ The Federal Reserve agrees with this assessment and consistent with the disclosures required by SOP 03–3, proposes to add three items to the FR Y–9C to provide a better understanding of the relationship between the allowances for loan and lease losses and the carrying amount of the loan portfolios of those institutions E:\FR\FM\12JYN1.SGM 12JYN1 40028 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices whose portfolios include purchased impaired loans. All three of these items represent information included in the disclosures required by SOP 03–3. The Federal Reserve believes that not identifying the reporting effect of SOP 03–3 on these data may cause significant confusion regarding the historical credit quality of an organization’s loan portfolio. The Federal Reserve proposes to add two memorandum items to Schedule HC–C, ‘‘Loans and Leases,’’ and one memoranda item to Schedule HI–B, Part II, ‘‘Changes in Allowance for Loan and Lease Losses,’’ to collect information on purchased impaired loans held for investment accounted for in accordance with AICPA SOP 03–3. New Schedule HC–C memorandum item 5(a) would collect the outstanding balance 2 and new memorandum item 5(b) would collect the carrying amount 3 as of the report date of the purchased impaired loans held for investment 4 that are included in Schedule HC–C. New Schedule HI–B, Part II, memorandum item 4 would collect the amount of loan loss allowances for purchased impaired loans held for investment that is included in the total amount of the allowance for loan and lease losses as of the report date. The Federal Reserve also proposes to revise the instructions to Schedule HC– N, Past Due and Nonaccrual Loans, Leases, and Other Assets, to explain how purchased impaired loans should be reported in this schedule. SOP 03–3 does not prohibit placing loans on nonaccrual status and any nonaccrual purchased impaired loans should be reported accordingly in Schedule HC–N. For those purchased impaired loans that are not on nonaccrual status, institutions should determine their delinquency status in accordance with the contractual repayment terms of the loans without regard to the purchase price of (initial investment in) these 2 The outstanding balance is the undiscounted sum of all amounts, including amounts deemed principal, interest, fees, penalties, and other under the loan, owed to the bank holding company at the report date, whether or not currently due and whether or not any such amounts have been charged off by the bank holding company. The outstanding balance does not include amounts that would be accrued under the contract as interest, fees, penalties, and other after the report date. 3 The carrying amount reflects the recorded investment in all purchased impaired loans reported as held for investment, before any allowances established after acquisition for decreases in cash flows expected to be collected. 4 Loans held for investment are those loans that the institution has the intent and ability to hold for the foreseeable future or until maturity or payoff. Thus, the outstanding balance and carrying amount of any purchased impaired loans that are held for sale would not be reported in these proposed Memorandum items. VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 loans or the amount and timing of the cash flows expected at acquisition. Rebooked Loans Backing GNMA Securities Government National Mortgage Association (GNMA) mortgage-backed securities are backed by residential mortgage loans that are insured or guaranteed by the Federal Housing Administration (FHA), the Veterans Administration (VA), or the Farmers Home Administration (FmHA). GNMA programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. Under FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, this buyback option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the loans backing a GNMA security are initially securitized, Statement No. 140 permits the issuer of the security to treat the transaction as a sale for accounting purposes because the conditional nature of the buy-back option means that the issuer does not maintain effective control over the loans. The loans are removed from the issuer’s balance sheet. When individual loans later meet GNMA’s specified delinquency criteria and are eligible for repurchase, the issuer (provided the issuer is also the servicer) is deemed to have regained effective control over these loans and, under Statement No. 140, the loans can no longer be reported as sold. The delinquent GNMA loans must be brought back onto the issuerservicer’s books as assets and initially recorded at fair value, regardless of whether the issuer intends to exercise the buy-back option. The Federal Reserve proposes that all delinquent rebooked GNMA loans should be treated the same as any other delinquent loans carried on the balance sheet and reported as past due on Schedule HC–N, ‘‘Past Due and Nonaccrual Loans, Leases, and Other Assets.’’ In response to a similar change proposed to the Call Report, a number of institutions commented that they disagreed that delinquent rebooked GNMA loans should be reflected in total past due loans. Because the combined presentation of these assets may obscure their different risk profiles and PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 valuation methodologies, they suggested adding a memoranda line item to the Call Report to report such balances separate from the total. The FFIEC Reports Task Force (RTF) determined that including delinquent rebooked GNMA loans in the body of the past due schedule should not lead to inconsistent disclosure of these loans in the Call Report. The RTF further cited guidance provided by the Securities and Exchange Commission (SEC) indicating that aggregate reported amounts of past due and nonaccrual loans should include such ‘‘re-recognized’’ or rebooked delinquent assets, and that organizations may want to provide supplemental disclosure of the fact that these loans are guaranteed by the U.S. Government to assist users in understanding the aggregate amounts of past due loans.5 In response to public comment and in keeping with SEC guidance, the RTF plans to break out past due and nonaccrual rebooked GNMA loans so that users can make any desired adjustments to the reported values for total past due and nonaccrual loans. Consistent with changes to be made to the Call Report as of June 30, 2005, the Federal Reserve proposes to add an item to Schedule HC–N, ‘‘Past Due and Nonaccrual Loans, Leases, and Other Assets,’’ to collect information related to the GNMA mortgage loan optional repurchase program. Schedule HC–N, item 11, collects information on loans and leases past due or nonaccruing which are wholly or partially guaranteed by the U.S. government. New item 11(b) would collect information on rebooked loans backing GNMA securities that have been repurchased or are eligible for repurchase included in item 11. Current item 11(a), ‘‘Guaranteed portion of loans and leases included in item 11 above,’’ would be modified to include the parenthetical phrase ‘‘exclude rebooked ‘GNMA loans’.’’ The Federal Reserve also proposes to revise current reporting instructions for Schedule HC–N, item 11, which permit institutions to not report as past due delinquent GNMA loans that are repurchased when they are ‘‘in foreclosure status’’ at the time of repurchase, provided the government reimbursement process is proceeding 5 Accounting staff members in the SEC’s Division of Corporation Finance prepared guidance on ‘‘Current Accounting and Disclosure Issues in the Division of Corporation Finance’’ dated November 30, 2004, and updated on March 4, 2005. Both versions of this guidance discuss ‘‘Accounting for Loans or Other Receivables Covered by Buyback Provisions,’’ including, but not limited to, loans securitized through GNMA. E:\FR\FM\12JYN1.SGM 12JYN1 Federal Register / Vol. 70, No. 132 / Tuesday, July 12, 2005 / Notices normally. The exception from past due reporting for GNMA loans ‘‘in foreclosure status’’ predates FAS 140. More specifically, when this exception was added to the FR Y–9C instructions, the accounting standards then in effect did not require the seller to rebook delinquent GNMA loans for which the repurchase option became unconditional unless the loans were actually repurchased. Institutions could choose to repurchase delinquent GNMA loans ‘‘in foreclosure status’’ from the loan pool backing a GNMA security rather than continuing to make monthly advances to the pool on these delinquent loans while initiating foreclosure action. Until the exception was added, an institution that repurchased delinquent loans in foreclosure status had to report the loans as past due in its regulatory reports whereas an institution making monthly advances on delinquent loans without repurchasing them did not have to report these loans as past due. The creation of the exception eliminated this reporting difference, which depended on how the institution chose to handle its servicing responsibilities. In contrast, under FAS 140, delinquent GNMA loans must be rebooked as assets as soon as the repurchase option becomes unconditional, whether or not the loans are repurchased. Consequently, the difference in balance sheet treatment for repurchased delinquent GNMA loans versus those eligible for repurchase that led the agencies to create the exception from past due reporting no longer exists. Therefore the Federal Reserve proposes that all delinquent rebooked GNMA loans, including those in foreclosure status, should be treated consistently and reported as past due in new item 11(b). Clarifications In March 2005 the Federal Reserve began collecting information on the FR Y–9C on the name and address of the BHC’s external auditing firm and the name and e-mail address of the engagement partner. This information is completed only by top-tier BHCs that have a full-scope audit conducted. Effective for the December 31, 2005, report date, in order to confirm that a BHC did have a full-scope audit conducted, the FR Y–9C reporting form would be clarified by adding a checkbox for a respondent to indicate if they had engaged in a full-scope audit as of the December 31, report date. This check box would also be added to the FR Y– 9SP as of the December 31, 2005, reporting date. Schedule HC–R, Regulatory Capital, does not currently allow a BHC to report VerDate jul<14>2003 16:15 Jul 11, 2005 Jkt 205001 an amount in column B, ‘‘Items Not Subject to Risk-Weighting,’’ item 34, ‘‘Cash and balances due from depository institutions,’’ because such items were not expected to exist within this asset category when this schedule was originally designed. However, when amounts are included in column A, ‘‘Totals (from Schedule HC),’’ item 34 for certain embedded derivatives; these embedded derivatives should be riskweighted under the rules for derivatives rather than the rules that apply to the cash and due from asset account. Effective for the September 30, 2005, report date, in order to allow for the proper reporting of these embedded derivatives included in item 34, column A, the Federal Reserve would modify Schedule HC–R to permit the use of column B, item 34. Board of Governors of the Federal Reserve System, July 6, 2005. Jennifer J. Johnson, Secretary of the Board. [FR Doc. 05–13628 Filed 7–11–05; 8:45 am] BILLING CODE 6210–01–P FEDERAL RESERVE SYSTEM Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB Summary Background Notice is hereby given of the final approval of proposed information collections by the Board of Governors of the Federal Reserve System (Board) under OMB delegated authority, as per 5 CFR 1320.16 (OMB Regulations on Controlling Paperwork Burdens on the Public). Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. Copies of the OMB 83–Is and supporting statements and approved collection of information instrument(s) are placed into OMB’s public docket files. The Federal Reserve may not conduct or sponsor, and the respondent is not required to respond to, an information collection that has been extended, revised, or implemented on or after October 1, 1995, unless it displays a currently valid OMB control number. FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance Officer—Michelle Long—Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, DC 20551 (202) 452–3829. PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 40029 OMB Desk Officer—Mark Menchik— Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, Washington, DC 20503, or e-mail to mmenchik@omb.eop.gov. Final approval under OMB delegated authority of the extension for three years, with revision, of the following report: Report title: Reports of Foreign Banking Organizations. Agency form numbers: FR Y–7, FR Y– 7N, FR Y–7NS, and FR Y–7Q. OMB control number: 7100–0125. Frequency: Quarterly and annually. Reporters: Foreign banking organizations (FBOs). Annual reporting hours: 5,384 hours. Estimated average hours per response: FR Y–7: 3.50 hours; FR Y–7N (quarterly): 6 hours; FR Y–7N (annual): 6 hours; FR Y–7NS: 1 hour; FR Y–7Q (quarterly): 1.25 hours; FR Y–7Q (annual): 1 hour. Number of respondents: FR Y–7: 257; FR Y–7N (quarterly): 129; FR Y–7N (annual): 137; FR Y–7NS: 170; FR Y–7Q (quarterly): 52; FR Y–7Q (annual): 136. General description of report: This information collection is mandatory (12 U.S.C. 601–604a, 611–631, 1844(c), 3106, and 3108(a)). Confidential treatment is not routinely given to the data in these reports. However, the FR Y–7Q data will be held confidential until 120 days after the as-of date. Also, confidential treatment for information, in whole or in part, on any of the reporting forms can be requested in accordance with the instructions to the form, pursuant to sections (b)(4) and (b)(6) of the Freedom of Information Act [5 U.S.C. 522(b)(4) and (b)(6)]. Abstract: The FR Y–7 is filed by all foreign banking organizations (FBOs) that engage in banking in the United States, either directly or indirectly, to update their financial and organizational information. The Federal Reserve uses information to assess an FBO’s ability to be a continuing source of strength to its U.S. banking operations and to determine compliance with U.S. laws and regulations. The FR Y–7N collects financial information for U.S. nonbank subsidiaries held by FBOs other than through a U.S. bank holding company or bank. This report consists of a balance sheet and income statement; information on changes in equity capital, changes in the allowance for loan and lease losses, off-balance-sheet items, and loans; and a memoranda section. The FR Y–7NS collects net income, total assets, equity capital, and E:\FR\FM\12JYN1.SGM 12JYN1

Agencies

[Federal Register Volume 70, Number 132 (Tuesday, July 12, 2005)]
[Notices]
[Pages 40025-40029]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-13628]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Proposed Collection; 
Comment Request

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY:

Background

    On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board of Governors of the Federal Reserve System 
(Board) its approval authority under the Paperwork Reduction Act, as 
per 5 CFR 1320.16, to approve of and assign OMB control numbers to 
collection of information requests and requirements conducted or 
sponsored by the Board under conditions set forth in 5 CFR part 1320 
Appendix A.1. Board-approved collections of information are 
incorporated into the official OMB inventory of currently approved 
collections of information. Copies of the OMB 83-Is and supporting 
statements and approved collection of information instruments are 
placed into OMB's public docket files. The Federal Reserve may not 
conduct or sponsor, and the respondent is not required to respond to, 
an information collection that has been extended, revised, or 
implemented on or after October 1, 1995, unless it displays a currently 
valid OMB control number.

Request for Comment on Information Collection Proposals

    The following information collections, which are being handled 
under this delegated authority, have received initial Board approval 
and are hereby published for comment. At the end of the comment period, 
the proposed information collections, along with an analysis of 
comments and recommendations received, will be submitted to the Board 
for final approval under OMB delegated authority. Comments are invited 
on the following:
    a. Whether the proposed collection of information is necessary for 
the proper performance of the Federal Reserve's functions; including 
whether the information has practical utility;
    b. the accuracy of the Federal Reserve's estimate of the burden of 
the proposed information collection, including the validity of the 
methodology and assumptions used;
    c. ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    d. ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.

DATES: Comments must be submitted on or before September 12, 2005.

ADDRESSES: You may submit comments, identified by FR K-2, FR Y-1F, FR 
Y-9C, by any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified as necessary for technical reasons. 
Accordingly, your comments will not be edited to remove any identifying 
or contact information. Public comments may also be viewed 
electronically or in paper in Room MP-500 of the Board's Martin 
Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on 
weekdays.

FOR FURTHER INFORMATION CONTACT: A copy of the proposed form and 
instructions, the Paperwork Reduction Act Submission (OMB 83-I), 
supporting statement, and other documents that will be placed into 
OMB's public docket files once approved may be requested from the 
agency clearance officer, whose name appears below.

Michelle Long, Federal Reserve Board Clearance Officer (202) 452-3829, 
Division of Research and Statistics, Board of Governors of the Federal

[[Page 40026]]

Reserve System, Washington, DC 20551. Telecommunications Device for the 
Deaf (TDD) users may contact (202) 263-4869, Board of Governors of the 
Federal Reserve System, Washington, DC 20551.

Proposal To Approve Under OMB Delegated Authority the Extension for 
Three Years, Without Revision, of the Following Report

    Report title: Notifications Related to Community Development and 
Public Welfare Investments of State Member Banks.
    Agency form number: FR H-6.
    OMB control number: 7100-0278.
    Frequency: Event-generated.
    Reporters: State Member Banks.
    Annual reporting hours: 125.
    Estimated average hours per response: Investment notice, 2 hours; 
Application (Prior Approval) 5 hours; and Extension of divestiture 
period, 5 hours.
    Number of respondents: Investment notice, 10; Application (Prior 
Approval) 20; and Extension of divestiture period, 1.
    General description of report: This information collection is 
required to obtain a benefit (12 U.S.C. 338a, and 12 CFR 208.22). 
Individual respondent data generally are not regarded as confidential, 
but information that is proprietary or concerns examination ratings 
would be considered confidential.
    Abstract: Regulation H requires state member banks that want to 
make community development or public welfare investments to comply with 
the Regulation H notification requirements: (1) If the investment does 
not require prior Board approval, a written notice must be sent to the 
appropriate Federal Reserve Bank; (2) if certain criteria are not met, 
a request for approval must be sent to the appropriate Federal Reserve 
Bank; and, (3) if the Board orders divestiture but the bank cannot 
divest within the established time limit, a request or requests for 
extension of the divestiture period must be submitted to the 
appropriate Federal Reserve Bank.

Proposal To Approve Under OMB Delegated Authority the Extension for 
Three Years, With Revision, of the Following Reports

    1. Report title: Application for a Foreign Organization To Become a 
Bank Holding Company.
    Agency form number: FR Y-1F.
    OMB control number: 7100-0119.
    Frequency: On occasion.
    Reporters: any company organized under the laws of a foreign 
country seeking to acquire a U.S. subsidiary bank or bank holding 
company.
    Annual reporting hours: 710.
    Estimated average hours per response: 70-90 hours.
    Number of respondents: 9.
    General description of report: This information collection is 
required to obtain or retain a benefit under sections 3(a), 3(c), and 
5(a) through 5(c) of the Bank Holding Company Act (12 U.S.C. 1842(a) 
and (c) and 1844(a) through (c) and is not given confidential treatment 
unless the applicant specifically requests confidentiality and the 
Federal Reserve approves the request.
    Abstract: Under the Bank Holding Company Act (BHCA), submission of 
this application is required for any company organized under the laws 
of a foreign country seeking to acquire a U.S. subsidiary bank or bank 
holding company. Applicants must provide financial and managerial 
information, discuss the competitive effects of the proposed 
transaction, and discuss how the proposed transaction would enhance the 
convenience and needs of the community to be served. The Federal 
Reserve uses the information, in part, to fulfill its supervisory 
responsibilities with respect to foreign banking organizations in the 
United States.
    Current Actions: Foreign organizations seeking initial entry are 
currently required to file the FR Y-1F. However, the filing 
requirements are ambiguous for foreign organizations that are already 
subject to the BHCA and seek to acquire a U.S. bank or bank holding 
company. In order to clarify and streamline the application process for 
foreign organizations, the Federal Reserve proposes to explicitly state 
that these organizations should file the FR Y-1F. Thus, the FR Y-1F 
would be retitled, renumbered, and modified to achieve consistency with 
the FR Y-3, the Application for Prior Approval to Become a Bank Holding 
Company or for a Bank Holding Company to Acquire an Additional Bank or 
Bank Holding Company (OMB No. 7100-0121), the form used by domestic 
holding companies. Also, the Federal Reserve proposes technical 
clarifications to the instructions that would remove page number 
references to the Interagency Biographical or Financial Report (FR 
2081c; OMB No. 7100-0134) and insert a sentence into the standard 
commitment language in order to make the commitments more enforceable.
    2. Report title: International Applications and Prior Notifications 
Under Subpart B of Regulation K.
    Agency form number: FR K-2.
    OMB control number: 7100-0284.
    Frequency: On occasion.
    Reporters: Foreign banks.
    Annual reporting hours: 420.
    Estimated average hours per response: 35.
    Number of respondents: 12.
    General description of report: This information collection is 
required to obtain or retain a benefit under sections 7 and 10 of the 
International Banking Act (12 U.S.C. 3105 and 3107) and Regulation K 
(12 CFR 211.24(a) and is not given confidential treatment unless the 
applicant specifically requests confidentiality and the Federal Reserve 
approves the request.
    Abstract: Foreign banks are required to obtain the prior approval 
of the Federal Reserve to establish a branch, agency, or representative 
office; to acquire ownership or control of a commercial lending company 
in the United States; or to change the status of any existing office in 
the United States. The Federal Reserve uses the information, in part, 
to fulfill its statutory obligation to supervise foreign banking 
organizations with offices in the United States.
    Current Actions: The Federal Reserve proposes technical 
clarifications to the instructions that would remove page number 
references to the Interagency Biographical or Financial Report (FR 
2081c; OMB No. 7100-0134), correct language pertaining to 
representative offices, and insert a sentence into the standard 
commitment language in order to make the commitments more enforceable.

Proposal To Approve Under OMB Delegated Authority the Revision of the 
Following Report

    Report title: Financial Statements for Bank Holding Companies.
    Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9CS, and FR 
Y-9ES.
    OMB control number: 7100-0128.
    Frequency: Quarterly, semiannually, and annually.
    Reporters: BHCs.
    Annual reporting hours: 400,536.
    Estimated average hours per response: FR Y-9C: 35.55 hours; FR Y-
9LP: 4.75 hours; FR Y-9SP: 4.85 hours; FR Y-9ES: 30 minutes; FR Y-9CS: 
30 minutes.
    Number of respondents: FR Y-9C: 2,240; FR Y-9LP: 2,590; FR Y-9SP: 
3,253; FR Y-9ES: 87; FR Y-9CS: 600.
    General description of report: This information collection is 
mandatory (12 U.S.C. 1844(c)). Confidential treatment is not routinely 
given to the data in these reports. However, confidential treatment for 
the reporting information, in whole or in part, can be requested in 
accordance with the instructions to the form, pursuant to sections 
(b)(4), (b)(6)

[[Page 40027]]

and (b)(8) of the Freedom of Information Act (5 U.S.C. 522(b)(4), 
(b)(6) and (b)(8)).
    Abstract: The FR Y-9C collects basic financial data from a domestic 
BHC on a consolidated basis in the form of a balance sheet, an income 
statement, and detailed supporting schedules, including a schedule of 
off-balance-sheet items, similar to the Federal Financial Institutions 
Examination Council (FFIEC) Consolidated Reports of Condition and 
Income (Call Reports) (FFIEC 031 & 041; OMB No. 7100-0036). The FR Y-9C 
collects data from the BHC as of the end of March, June, September, and 
December. The FR Y-9C is filed by top-tier BHCs with total consolidated 
assets of $150 million or more and lower-tier BHCs that have total 
consolidated assets of $1 billion or more. In addition, multibank 
holding companies with total consolidated assets of less than $150 
million with debt outstanding to the general public or engaged in 
certain nonbank activities must file the FR Y-9C.
    The FR Y-9LP collects basic financial data from domestic BHCs on an 
unconsolidated, parent-only basis in the form of a balance sheet, an 
income statement, and supporting schedules relating to investments, 
cash flow, and certain memoranda items. This report is filed as of the 
end of March, June, September, and December on a parent company only 
basis by each BHC that files the FR Y-9C. In addition, for tiered BHCs, 
a separate FR Y-9LP must be filed for each lower-tier BHC.
    The FR Y-9SP is a parent company only financial statement filed by 
smaller BHCs as of the end of June and December. Respondents include 
one-bank holding companies with total consolidated assets of less than 
$150 million and multibank holding companies with total consolidated 
assets of less than $150 million that meet certain other criteria. This 
form is a simplified or abbreviated version of the more extensive 
parent company only financial statement for large BHCs (FR Y-9LP). This 
report collects basic balance sheet and income information for the 
parent company, information on intangible assets, and information on 
intercompany transactions.
    The FR Y-9CS is a free form supplement that may be utilized to 
collect any additional information deemed to be critical and needed in 
an expedited manner. It is intended to supplement the FR Y-9C and FR Y-
9SP reports.
    The FR Y-9ES collects financial information from employee stock 
ownership plans (ESOPs) that are also BHCs on their benefit plan 
activities as of December 31. It consists of four schedules: Statement 
of Changes in Net Assets Available for Benefits, Statement of Net 
Assets Available for Benefits, Memoranda, and Notes to the Financial 
Statements.
    Current Actions: The Federal Reserve proposes to revise the FR Y-9C 
to collect information on purchased impaired loans in response to 
Statement of Position 03-3, Accounting for Certain Loans or Debt 
Securities Acquired in a Transfer (SOP 03-3) issued by the American 
Institute of Certified Public Accountants (AICPA), and to collect 
information related to the Government National Mortgage Association 
(GNMA) mortgage loan optional repurchase program (rebooked loans 
backing GNMA securities).

Proposed Revisions to the FR Y-9C

    The Federal Reserve proposes to revise the FR Y-9C to collect 
information on purchased impaired loans and rebooked loans backing GNMA 
securities. Revisions to the FR Y-9 family of reports are typically 
made once per year effective with the March 31st reporting date, 
however, in light of the change in generally accepted accounting 
principles (GAAP), \1\ as it relates to reporting for purchased 
impaired loans and important supervisory considerations, the Federal 
Reserve proposes to revise the FR Y-9C report effective with the 
September 2005 report date. The proposed revisions would be consistent 
with the proposed changes to the FFIEC 031 Call Report, effective for 
the June 2005 report date. In addition to modifying instructions to 
incorporate the proposed reporting changes, instructions may be revised 
and clarified in an attempt to achieve greater consistency in reporting 
by respondents.
---------------------------------------------------------------------------

    \1\ For this purpose the AICPA Statement of Position is GAAP.
---------------------------------------------------------------------------

Purchased Impaired Loans

    SOP 03-3 applies to ``purchased impaired loans,'' i.e., loans that 
an institution has purchased, including those acquired in a purchase 
business combination, when there is evidence of deterioration of credit 
quality since the origination of the loan and it is probable, at the 
purchase date, that the institution will be unable to collect all 
contractually required payments receivable. SOP 03-3 does not apply to 
the loans that an institution has originated, and also excludes certain 
acquired loans from its scope.
    Under SOP 03-3, a purchased impaired loan is initially recorded at 
its purchase price (in a purchase business combination, the present 
value of amounts to be received). The Statement of Position limits the 
yield that may be accreted on the loan (the accretable yield) to the 
excess of the institution's estimate of the undiscounted principal, 
interest, and other cash flows expected at acquisition to be collected 
on the loan over the institution's initial investment in the loan. The 
excess of contractually required cash flows over the cash flows 
expected to be collected on the loan, which is referred to as the 
nonaccretable difference, must not be recognized as an adjustment of 
yield, loss accrual, or valuation allowance. Neither the accretable 
yield nor the nonaccretable difference may be shown on the balance 
sheet. After acquisition, increases in the cash flows expected to be 
collected generally should be recognized prospectively as an adjustment 
of the loan's yield over its remaining life. Decreases in cash flows 
expected to be collected should be recognized as impairment.
    The Statement of Position prohibits an institution from ``carrying 
over'' or creating valuation allowances (loan loss allowances) in the 
initial accounting for purchased impaired loans. This prohibition 
applies to the purchase of an individual impaired loan, a pool or group 
of impaired loans, and impaired loans acquired in a purchase business 
combination. As a consequence, SOP 03-3 provides that valuation 
allowances should reflect only those losses incurred after acquisition, 
that is, the present value of all cash flows expected at acquisition 
that ultimately are not to be received. Thus, because of the accounting 
model set forth in SOP 03-3, institutions will need to segregate their 
purchased impaired loans, if any, from the remainder of their loan 
portfolio for purposes of determining their overall allowance for loan 
and lease losses.
    According to the Basis for Conclusions of SOP 03-3, the AICPA's 
Accounting Standards Executive Committee ``believes that the accounting 
for acquired loans within the scope of this SOP is sufficiently 
different from the accounting for originated loans, particularly with 
respect to provisions for impairment * * *, such that the amount of 
loans accounted for in accordance with this SOP should be disclosed 
separately in the notes to financial statements.'' The Federal Reserve 
agrees with this assessment and consistent with the disclosures 
required by SOP 03-3, proposes to add three items to the FR Y-9C to 
provide a better understanding of the relationship between the 
allowances for loan and lease losses and the carrying amount of the 
loan portfolios of those institutions

[[Page 40028]]

whose portfolios include purchased impaired loans. All three of these 
items represent information included in the disclosures required by SOP 
03-3. The Federal Reserve believes that not identifying the reporting 
effect of SOP 03-3 on these data may cause significant confusion 
regarding the historical credit quality of an organization's loan 
portfolio.
    The Federal Reserve proposes to add two memorandum items to 
Schedule HC-C, ``Loans and Leases,'' and one memoranda item to Schedule 
HI-B, Part II, ``Changes in Allowance for Loan and Lease Losses,'' to 
collect information on purchased impaired loans held for investment 
accounted for in accordance with AICPA SOP 03-3. New Schedule HC-C 
memorandum item 5(a) would collect the outstanding balance \2\ and new 
memorandum item 5(b) would collect the carrying amount \3\ as of the 
report date of the purchased impaired loans held for investment \4\ 
that are included in Schedule HC-C. New Schedule HI-B, Part II, 
memorandum item 4 would collect the amount of loan loss allowances for 
purchased impaired loans held for investment that is included in the 
total amount of the allowance for loan and lease losses as of the 
report date.
---------------------------------------------------------------------------

    \2\ The outstanding balance is the undiscounted sum of all 
amounts, including amounts deemed principal, interest, fees, 
penalties, and other under the loan, owed to the bank holding 
company at the report date, whether or not currently due and whether 
or not any such amounts have been charged off by the bank holding 
company. The outstanding balance does not include amounts that would 
be accrued under the contract as interest, fees, penalties, and 
other after the report date.
    \3\ The carrying amount reflects the recorded investment in all 
purchased impaired loans reported as held for investment, before any 
allowances established after acquisition for decreases in cash flows 
expected to be collected.
    \4\ Loans held for investment are those loans that the 
institution has the intent and ability to hold for the foreseeable 
future or until maturity or payoff. Thus, the outstanding balance 
and carrying amount of any purchased impaired loans that are held 
for sale would not be reported in these proposed Memorandum items.
---------------------------------------------------------------------------

    The Federal Reserve also proposes to revise the instructions to 
Schedule HC-N, Past Due and Nonaccrual Loans, Leases, and Other Assets, 
to explain how purchased impaired loans should be reported in this 
schedule. SOP 03-3 does not prohibit placing loans on nonaccrual status 
and any nonaccrual purchased impaired loans should be reported 
accordingly in Schedule HC-N. For those purchased impaired loans that 
are not on nonaccrual status, institutions should determine their 
delinquency status in accordance with the contractual repayment terms 
of the loans without regard to the purchase price of (initial 
investment in) these loans or the amount and timing of the cash flows 
expected at acquisition.

Rebooked Loans Backing GNMA Securities

    Government National Mortgage Association (GNMA) mortgage-backed 
securities are backed by residential mortgage loans that are insured or 
guaranteed by the Federal Housing Administration (FHA), the Veterans 
Administration (VA), or the Farmers Home Administration (FmHA). GNMA 
programs allow financial institutions to buy back individual delinquent 
mortgage loans that meet certain criteria from the securitized loan 
pool for which the institution provides servicing. At the servicer's 
option and without GNMA's prior authorization, the servicer may 
repurchase such a delinquent loan for an amount equal to 100 percent of 
the remaining principal balance of the loan. Under FASB Statement No. 
140, Accounting for Transfers and Servicing of Financial Assets and 
Extinguishments of Liabilities, this buy-back option is considered a 
conditional option until the delinquency criteria are met, at which 
time the option becomes unconditional.
    When the loans backing a GNMA security are initially securitized, 
Statement No. 140 permits the issuer of the security to treat the 
transaction as a sale for accounting purposes because the conditional 
nature of the buy-back option means that the issuer does not maintain 
effective control over the loans. The loans are removed from the 
issuer's balance sheet. When individual loans later meet GNMA's 
specified delinquency criteria and are eligible for repurchase, the 
issuer (provided the issuer is also the servicer) is deemed to have 
regained effective control over these loans and, under Statement No. 
140, the loans can no longer be reported as sold. The delinquent GNMA 
loans must be brought back onto the issuer-servicer's books as assets 
and initially recorded at fair value, regardless of whether the issuer 
intends to exercise the buy-back option.
    The Federal Reserve proposes that all delinquent rebooked GNMA 
loans should be treated the same as any other delinquent loans carried 
on the balance sheet and reported as past due on Schedule HC-N, ``Past 
Due and Nonaccrual Loans, Leases, and Other Assets.'' In response to a 
similar change proposed to the Call Report, a number of institutions 
commented that they disagreed that delinquent rebooked GNMA loans 
should be reflected in total past due loans. Because the combined 
presentation of these assets may obscure their different risk profiles 
and valuation methodologies, they suggested adding a memoranda line 
item to the Call Report to report such balances separate from the 
total. The FFIEC Reports Task Force (RTF) determined that including 
delinquent rebooked GNMA loans in the body of the past due schedule 
should not lead to inconsistent disclosure of these loans in the Call 
Report. The RTF further cited guidance provided by the Securities and 
Exchange Commission (SEC) indicating that aggregate reported amounts of 
past due and nonaccrual loans should include such ``re-recognized'' or 
rebooked delinquent assets, and that organizations may want to provide 
supplemental disclosure of the fact that these loans are guaranteed by 
the U.S. Government to assist users in understanding the aggregate 
amounts of past due loans.\5\ In response to public comment and in 
keeping with SEC guidance, the RTF plans to break out past due and 
nonaccrual rebooked GNMA loans so that users can make any desired 
adjustments to the reported values for total past due and nonaccrual 
loans.
---------------------------------------------------------------------------

    \5\ Accounting staff members in the SEC's Division of 
Corporation Finance prepared guidance on ``Current Accounting and 
Disclosure Issues in the Division of Corporation Finance'' dated 
November 30, 2004, and updated on March 4, 2005. Both versions of 
this guidance discuss ``Accounting for Loans or Other Receivables 
Covered by Buyback Provisions,'' including, but not limited to, 
loans securitized through GNMA.
---------------------------------------------------------------------------

    Consistent with changes to be made to the Call Report as of June 
30, 2005, the Federal Reserve proposes to add an item to Schedule HC-N, 
``Past Due and Nonaccrual Loans, Leases, and Other Assets,'' to collect 
information related to the GNMA mortgage loan optional repurchase 
program. Schedule HC-N, item 11, collects information on loans and 
leases past due or nonaccruing which are wholly or partially guaranteed 
by the U.S. government. New item 11(b) would collect information on 
rebooked loans backing GNMA securities that have been repurchased or 
are eligible for repurchase included in item 11. Current item 11(a), 
``Guaranteed portion of loans and leases included in item 11 above,'' 
would be modified to include the parenthetical phrase ``exclude 
rebooked `GNMA loans'.''
    The Federal Reserve also proposes to revise current reporting 
instructions for Schedule HC-N, item 11, which permit institutions to 
not report as past due delinquent GNMA loans that are repurchased when 
they are ``in foreclosure status'' at the time of repurchase, provided 
the government reimbursement process is proceeding

[[Page 40029]]

normally. The exception from past due reporting for GNMA loans ``in 
foreclosure status'' predates FAS 140. More specifically, when this 
exception was added to the FR Y-9C instructions, the accounting 
standards then in effect did not require the seller to rebook 
delinquent GNMA loans for which the repurchase option became 
unconditional unless the loans were actually repurchased. Institutions 
could choose to repurchase delinquent GNMA loans ``in foreclosure 
status'' from the loan pool backing a GNMA security rather than 
continuing to make monthly advances to the pool on these delinquent 
loans while initiating foreclosure action.
    Until the exception was added, an institution that repurchased 
delinquent loans in foreclosure status had to report the loans as past 
due in its regulatory reports whereas an institution making monthly 
advances on delinquent loans without repurchasing them did not have to 
report these loans as past due. The creation of the exception 
eliminated this reporting difference, which depended on how the 
institution chose to handle its servicing responsibilities. In 
contrast, under FAS 140, delinquent GNMA loans must be rebooked as 
assets as soon as the repurchase option becomes unconditional, whether 
or not the loans are repurchased. Consequently, the difference in 
balance sheet treatment for repurchased delinquent GNMA loans versus 
those eligible for repurchase that led the agencies to create the 
exception from past due reporting no longer exists. Therefore the 
Federal Reserve proposes that all delinquent rebooked GNMA loans, 
including those in foreclosure status, should be treated consistently 
and reported as past due in new item 11(b).

Clarifications

    In March 2005 the Federal Reserve began collecting information on 
the FR Y-9C on the name and address of the BHC's external auditing firm 
and the name and e-mail address of the engagement partner. This 
information is completed only by top-tier BHCs that have a full-scope 
audit conducted. Effective for the December 31, 2005, report date, in 
order to confirm that a BHC did have a full-scope audit conducted, the 
FR Y-9C reporting form would be clarified by adding a checkbox for a 
respondent to indicate if they had engaged in a full-scope audit as of 
the December 31, report date. This check box would also be added to the 
FR Y-9SP as of the December 31, 2005, reporting date.
    Schedule HC-R, Regulatory Capital, does not currently allow a BHC 
to report an amount in column B, ``Items Not Subject to Risk-
Weighting,'' item 34, ``Cash and balances due from depository 
institutions,'' because such items were not expected to exist within 
this asset category when this schedule was originally designed. 
However, when amounts are included in column A, ``Totals (from Schedule 
HC),'' item 34 for certain embedded derivatives; these embedded 
derivatives should be risk-weighted under the rules for derivatives 
rather than the rules that apply to the cash and due from asset 
account. Effective for the September 30, 2005, report date, in order to 
allow for the proper reporting of these embedded derivatives included 
in item 34, column A, the Federal Reserve would modify Schedule HC-R to 
permit the use of column B, item 34.

    Board of Governors of the Federal Reserve System, July 6, 2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05-13628 Filed 7-11-05; 8:45 am]
BILLING CODE 6210-01-P