Agency Information Collection Activities: Submission for OMB Review; Joint Comment Request, 8649-8657 [06-1495]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY
• Comptroller of the Currency

[Federal Register Volume 71, Number 33 (Friday, February 17, 2006)]
[Notices]
[Pages 8649-8657]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-1495]



[[Page 8649]]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


Agency Information Collection Activities: Submission for OMB 
Review; Joint Comment Request

AGENCIES: 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: Notice of information collection to be submitted to OMB for 
review and approval under the Paperwork Reduction Act.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act of 1995 (44 U.S.C. chapter 35), 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. On August 23, 2005, the Financial Institutions 
Examination Council (FFIEC), of which the Agencies are members, 
requested public comment for 60 days on proposed revisions to the 
Consolidated Reports of Condition and Income (Call Report), which are 
currently approved collections of information. After considering the 
comments, the FFIEC has modified some of the proposed changes and will 
stagger the effective dates of the revisions from March 31, 2006, 
through March 31, 2008. The burden-reducing revisions included in the 
proposal will be implemented March 31, 2006, as proposed.

DATES: Comments must be submitted on or before March 20, 2006.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the Agencies. All comments, which should refer to the OMB 
control number(s), will be shared among the Agencies.
    OCC: You may submit comments, identified by [Attention: 1557-0081], 
by any of the following methods:
     E-mail: regs.comments@occ.treas.gov. Include [Attention: 
1557-0081] in the subject line of the message.
     Fax: (202) 874-4448.
     Mail: Public Information Room, Office of the Comptroller 
of the Currency, 250 E Street, SW., Mailstop 1-5, Washington, DC 20219; 
Attention: 1557-0081.
    Public Inspection: You may inspect and photocopy comments at the 
Public Information Room. You can make an appointment to inspect the 
comments by calling (202) 874-5043.
    Board: You may submit comments, which should refer to 
``Consolidated Reports of Condition and Income, 7100-0036,'' by any of 
the following methods:
     Agency Web site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments on the https://
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://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 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified 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.
    FDIC: You may submit comments, which should refer to ``Consolidated 
Reports of Condition and Income, 3064-0052,'' by any of the following 
methods:
     Agency Web site: https://www.FDIC.gov/regulations/laws/
federal/notices.html.
     E-mail: comments@FDIC.gov. Include ``Consolidated Reports 
of Condition and Income, 3064-0052'' in the subject line of the 
message.
     Mail: Steven F. Hanft (202-898-3907), Paperwork Clearance 
Officer, Room MB-3064, 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 a.m. and 5 p.m.
    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/regulations/laws/federal/notices.html 
including any personal information provided. Comments may be inspected 
at the FDIC Public Information Center, Room E-1002, 3502 North Fairfax 
Drive, Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
    Additionally, commenters should send a copy of their comments to 
the OMB desk officer 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, or by fax to (202) 395-6974.

FOR FURTHER INFORMATION CONTACT: For further information about the 
revisions discussed in this notice, please contact any of the agency 
clearance officers whose names appear below. In addition, copies of 
Call Report forms can be obtained at the FFIEC's Web site (https://
www.ffiec.gov/ffiec_report_forms.htm).
    OCC: Mary Gottlieb, OCC Clearance Officer, or Camille Dickerson, 
(202) 874-5090, Legislative and Regulatory Activities Division, Office 
of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 
20219.
    Board: Michelle E. Long, Federal Reserve Clearance Officer, (202) 
452-3829, Division of Research and Statistics, 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: Steven F. Hanft, Paperwork Clearance Officer, (202) 898-3907, 
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION: The Agencies are requesting OMB approval to 
revise and extend for three years the Call Report, which is currently 
an approved collection of information for each of the Agencies.
    Report Title: Consolidated Reports of Condition and Income (Call 
Report).
    Form Number: FFIEC 031 (for banks with domestic and foreign 
offices) and FFIEC 041 (for banks with domestic offices only).
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
    OCC:
    OMB Number: 1557-0081.
    Estimated Number of Respondents: 1,900 national banks.
    Estimated Time per Response: 43.73 burden hours (incorporates a 
reduction

[[Page 8650]]

of 4.47 hours resulting from the completion of testing and enrollment 
in the Central Data Repository (CDR) in 2005 and an average net 
increase of 1.81 hours for the Call Report revisions to be phased in 
from March 2006 to March 2008).
    Estimated Total Annual Burden: 332,331 burden hours.
    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 919 state member banks.
    Estimated Time per Response: 50.69 burden hours (incorporates a 
reduction of 4.01 hours resulting from the completion of testing and 
enrollment in the CDR in 2005 and an average net increase of 2.32 hours 
for the Call Report revisions to be phased in from March 2006 to March 
2008).
    Estimated Total Annual Burden: 186,321 burden hours.
    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 5,247 insured state nonmember 
banks.
    Estimated Time per Response: 34.94 burden hours (incorporates a 
reduction of 4.16 hours resulting from the completion of testing and 
enrollment in the CDR in 2005 and an average net increase of 2.00 hours 
for the Call Report revisions to be phased in from March 2006 to March 
2008).
    Estimated Total Annual Burden: 733,321 burden hours.
    The estimated time per response for 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). The average reporting burden for the 
Call Report is estimated to range from 16 to 625 hours per quarter, 
depending on an individual institution's circumstances.
    Furthermore, the effect on reporting burden of the revisions to the 
Call Report requirements will vary from institution to institution 
depending, in some cases, on the institution's asset size and, in other 
cases, on its involvement with the types of activities or transactions 
to which the changes apply.

General Description of Reports

    These information collections are mandatory: 12 U.S.C. 161 (for 
national banks), 12 U.S.C. 324 (for state member banks), and 12 U.S.C. 
1817 (for insured state nonmember commercial and savings banks). Except 
for selected items, these information collections are not given 
confidential treatment.

Abstract

    Institutions file Call Reports with 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. In 
addition, Call Reports provide the most current statistical data 
available for evaluating institutions' corporate applications such as 
mergers, for identifying areas of focus for both on-site and off-site 
examinations, and for monetary and other public policy purposes. Call 
Reports are also used to calculate all institutions' deposit insurance 
and Financing Corporation assessments and national banks' semiannual 
assessment fees.

Current Actions

I. Overview

    On August 23, 2005, the Agencies requested comment on proposed 
revisions to the Call Report. The proposed effective date for all of 
the revisions was March 31, 2006. After considering the comments, the 
Agencies approved several modifications to the initial set of proposed 
revisions and decided to phase-in the changes beginning March 31, 2006, 
through March 31, 2008, to provide banks sufficient time to make system 
and processing changes. The Agencies will move forward with reporting 
changes on March 31, 2006, that primarily consist of deletions, 
revisions to the reporting of international income, and certain new 
data on credit derivatives. The Agencies will delay the implementation 
for certain items providing additional detail on balance sheet items, 
mortgage banking activities, and credit derivatives to September 30, 
2006, and other items providing additional detail on income statement 
items and certain loans to March 31, 2007. The Agencies will also 
further delay implementation of certain loan items for small banks that 
meet specified criteria to March 31, 2008. In addition, revised officer 
signature requirements also take effect September 30, 2006.
    The Agencies collectively received comments from 30 respondents: 21 
banks and banking organizations, 3 national banking trade groups and 
other bankers' organizations, 2 insurance consultants, a nonbanking 
trade group, a government agency, a data processing company, and a 
federal bank examiner.
    Many of the commenters were concerned with the reporting burden 
being imposed by the changes and questioned whether the costs of the 
proposed changes outweighed the perceived supervisory benefit. Two 
commenters recommended the Agencies consider collecting different types 
of data on different frequencies for banks of different asset sizes. 
Several commenters expressed concerns about the accuracy of the 
Agencies' burden estimates, especially those associated with the CDR 
testing and enrollment. Other commenters recommended the Agencies 
reassess the importance of all supplemental schedule information to the 
Agencies' supervisory and other responsibilities and prioritize the 
collection of this data based on relative risk.
    Other commenters cited concerns with the relatively short 
implementation time-frame that the Agencies were providing banks to 
make the proposed changes. In particular, many of the commenters 
objected to the proposal to split ``Construction, land development, and 
other land loans'' (CLD&OL loans) into separate categories for 1-4 
family residential CLD&OL loans and all other CLD&OL loans, and to 
split loans ``Secured by nonfarm nonresidential properties'' 
(commercial real estate loans) into separate categories for owner-
occupied and other commercial real estate loans based on reporting 
burden related considerations. Other commenters objected to the 
proposed changes to the officer and director signature and attestation 
requirements based on burden and the perceived minimal benefit to the 
supervisory process. Three commenters requested that the Agencies 
consider materiality when proposing to collect further information on 
Federal Home Loan Bank advances and other supplemental and memorandum 
information. These commenters suggested imposing a minimum reporting 
threshold for certain information. Commenters also requested 
clarification on the maximum amount payable and receivable for credit 
derivatives and the meaningfulness of breaking out the trading revenue 
from credit derivatives.
    One commenter recommended a change to the reporting of deposits of 
``Individuals, partnerships, and corporations,'' which banks currently 
report in item 1 of Schedule RC-E, ``Deposits.'' The Agencies did not 
propose to make any changes to this category of depositor. The 
commenter recommended separating this category into three subcategories 
for ``Individuals,'' ``Sole proprietorships and partnerships,'' and 
``Corporations.'' At present, the Agencies'' supervisory and other 
primary mission objectives can be effectively accomplished without the 
additional breakouts recommended by the commenter. Therefore, the 
Agencies are not proposing to add any

[[Page 8651]]

additional breakouts for categories of depositors at this time.
    A summary of the Agencies' responses to the comments and the final 
revisions are presented below.

II. Discussion of Revisions

Overall Reporting Burden

    In March 2001, the Agencies revised the Call Report from four 
versions (FFIEC 031, 032, 033, and 034) to the existing two versions 
(FFIEC 031 and 041). A major reason for this change was to reduce 
burden and to more closely align the information collected in the Call 
Report to the Agencies' supervisory and other public policy objectives. 
Since that time, the Agencies have made efforts to target revisions to 
those areas of highest importance to these objectives. The Agencies 
realize that institutions of different sizes incur different amounts of 
burden and the estimates of burden hours are intended to reflect the 
average burden per institution. As indicated above following the 
Agencies' individual burden estimates as well as on the second page of 
the Call Report forms, the range of burden for the Call Report is 
estimated to be from 16 to 625 hours per response. The burden 
associated with the testing of and enrollment in the CDR was filed with 
OMB in 2004 when testing began and is required to be removed from the 
Agencies' records with OMB since this CDR-related burden is no longer 
applicable. As stated in the initial Federal Register notice, the 
Agencies have recently conducted a careful review of the information 
needed to accomplish the Agencies' supervisory and other public policy 
objectives and have proposed to delete those items determined to be no 
longer critical to this mission.

Call Report Revisions Effective as of the March 31, 2006, Report Date

A. Burden-Reducing Revisions
    Several commenters supported (or did not oppose) the four proposed 
burden-reducing revisions discussed below, but one commenter stated 
that these revisions would not meaningfully reduce burden.
1. Uninsured Deposits
    Banks with less than $1 billion in total assets will no longer be 
required to complete Memorandum item 2, ``Estimated amount of uninsured 
deposits,'' in Schedule RC-O, ``Other Data for Deposit Insurance and 
FICO Assessments.'' Banks with $1 billion or more in total assets will 
continue to report this estimate in Memorandum item 2. To determine 
whether a bank must complete Memorandum item 2 during 2006, the $1 
billion asset size test is based on the total assets reported on the 
bank's Call Report balance sheet for June 30, 2005. Each year 
thereafter, this asset size test will be determined based on the total 
assets reported in the previous year's June 30 Call Report. Once a bank 
surpasses the $1 billion total asset threshold, it must continue to 
report its estimated uninsured deposits regardless of subsequent 
changes in its total assets. When estimating the uninsured portion of 
its deposits, a bank with $1 billion or more in total assets should 
base its estimate on data that are readily available from the 
information systems and other records pertaining to its deposits that 
the bank has in place.
2. Holdings of Asset-Backed Securities
    Banks with domestic offices only and less than $1 billion in total 
assets will no longer provide a six-way breakdown of their holdings of 
asset-backed securities (not held for trading purposes) in Schedule RC-
B, ``Securities,'' items 5.a through 5.f. Instead, these banks would 
report only their total holdings of asset-backed securities in Schedule 
RC-B, item 5. Banks with foreign offices and other banks with $1 
billion or more in total assets will continue to report the existing 
breakdown of their asset-backed securities, but this information will 
be collected in new Memorandum items 5.a through 5.f of Schedule RC-B. 
The $1 billion asset size test will be applied in the same manner as 
discussed above under Uninsured Deposits.
3. Impact of Derivatives on Income
    In Schedule RI, ``Income Statement,'' the Agencies are eliminating 
Memorandum items 9.a through 9.c, which collect data on the ``Impact on 
income of derivatives held for purposes other than trading.'' These 
Memorandum items are currently reported by banks with foreign offices 
or with $100 million or more in total assets.
4. Bankers Acceptances
    The following items for reporting information on bankers 
acceptances will be eliminated:
     Schedule RC, ``Balance Sheet''
    [cir] Item 9, ``Customers' liability to this bank on acceptances 
outstanding''
    [cir] Item 18, ``Bank's liability on acceptances executed and 
outstanding''
     Schedule RC-L, ``Derivatives and Off-Balance Sheet 
Items,'' item 5, ``Participations in acceptances conveyed to others by 
the reporting bank''
     Schedule RC-H, ``Selected Balance Sheet Items for Domestic 
Offices'' (FFIEC 031 only)
    [cir] Item 1, ``Customers' liability to this bank on acceptances 
outstanding''
    [cir] Item 2, ``Bank's liability on acceptances executed and 
outstanding''
    With the elimination of separate balance sheet items for 
acceptances on Schedule RC, banks should include any acceptance assets 
and acceptance liabilities in ``Other assets'' (Schedule RC, item 11) 
and ``Other liabilities'' (Schedule RC, item 20), respectively.
B. Revisions of Existing Items and New Items
1. Life Insurance Assets
    At present, banks include their holdings of life insurance assets 
(e.g., the cash surrender value reported to the bank by the insurance 
carrier, less any applicable surrender charges not reflected by the 
carrier in this reported value) in Schedule RC-F, ``Other Assets,'' 
item 5, ``All other assets.'' If the carrying amount of a bank's life 
insurance assets included in item 5 is greater than $25,000 and exceeds 
25 percent of its ``All other assets,'' the bank must disclose this 
carrying amount in Schedule RC-F, item 5.b. Schedule RC-F will be 
revised by adding a new item 5 in which all banks will report their 
holdings of life insurance assets. Existing item 5, ``All other 
assets,'' in Schedule RC-F will be renumbered as item 6. Commenters 
specifically addressing this reporting change either supported it or 
indicated it would not present problems.
    For purposes of reporting ``Life insurance assets'' in new item 5 
of Schedule RC-F, banks should include the cash surrender value of life 
insurance reported by the insurance carrier, less any applicable 
surrender charges not reflected by the carrier in this reported value, 
on all forms of permanent life insurance policies owned by the bank, 
its consolidated subsidiaries, and grantor (rabbi) trusts established 
by the bank or its consolidated subsidiaries, regardless of the 
purposes for acquiring the insurance and regardless of whether the 
insurance is a general account obligation of the insurer or a separate 
account obligation of the insurer. Permanent life insurance refers to 
whole and universal life insurance, including variable universal life 
insurance. Purposes for which insurance may be acquired include 
offsetting pre- and post-retirement costs for employee compensation and 
benefit plans, protecting against the loss of key persons, and 
providing retirement and death benefits to employees. Include as

[[Page 8652]]

life insurance assets the bank's interest in insurance policies under 
split-dollar life insurance arrangements with directors, officers, and 
employees under both the endorsement and collateral assignment methods.
2. Credit Derivatives by Type and Remaining Maturity
    In item 7 of Schedule RC-L, ``Derivatives and Off-Balance Sheet 
Items,'' banks currently report the notional amounts of the credit 
derivatives on which they are the guarantor and on which they are the 
beneficiary as well as the gross positive and negative fair values of 
these credit derivatives. These existing items will be revised so that 
banks with credit derivatives will provide a breakdown of these 
notional amounts by type of credit derivative--credit default swaps, 
total return swaps, credit options, and other credit derivatives--in 
items 7.a.(1) through 7.a.(4) of Schedule RC-L, with those on which the 
bank is the guarantor reported in column A and those on which the bank 
is the beneficiary in column B. Banks will continue to separately 
report the gross positive and negative fair values of credit 
derivatives on which they are the guarantor and the beneficiary without 
a breakdown by type of credit derivative (items 7.b.(1) and 7.b.(2), 
columns A and B).
    In addition, banks currently present a maturity distribution for 
six categories of derivative contracts that are subject to the risk-
based capital standards in Schedule RC-R, ``Regulatory Capital,'' 
Memorandum item 2. A new category will be added for credit derivatives 
that are subject to these standards. The remaining maturities of these 
credit derivatives will be reported separately for those where the 
underlying reference asset is rated investment grade or, if not rated, 
is the equivalent of investment grade under the bank's internal credit 
rating system (Memorandum item 2.g.(1)) and those where the underlying 
reference asset is rated below investment grade (``subinvestment 
grade'') or, if not rated, is the equivalent of below investment grade 
under the bank's internal credit rating system (Memorandum item 
2.g.(2)).
    None of the commenters specifically addressed these two reporting 
changes.
3. Income From Foreign Offices
    At present in the FFIEC 031 version of the Call Report, banks with 
foreign offices whose international operations account for more than 10 
percent of total revenues, total assets, or net income must complete 
Schedule RI-D, ``Income from International Operations.'' Banks that 
complete this schedule are currently directed to report estimates of 
the amounts of their income and expense attributable to international 
operations. These estimates must eliminate intrabank accounts and 
should reflect all appropriate internal allocations of income and 
expense.
    Existing Schedule RI-D will be revised to capture income from 
foreign offices (as that term is currently defined for Call Report 
purposes) in place of income from ``international operations.'' The 
schedule will be renamed ``Income from Foreign Offices'' and the 
threshold for completing revised Schedule RI-D will continue to be 
based on a 10 percent test, but the test would compare a bank's foreign 
office revenues, assets, and net income to its consolidated total 
revenues, total assets, and net income. Total revenues (net interest 
income plus noninterest income) and net income will be determined from 
the preceding calendar year (2005 for purposes of reporting in Schedule 
RI-D beginning March 31, 2006) and total assets will be measured as of 
the preceding calendar year end (December 31, 2005, for purposes of 
reporting in Schedule RI-D beginning March 31, 2006).
    The following categories of foreign office income and expense will 
be reported in revised Schedule RI-D:
     Total interest income.
     Total interest expense.
     Provision for loan and lease losses.
     Trading revenue.
     Investment banking, advisory, brokerage, and underwriting 
fees and commissions.
     Net securitization income.
     All other noninterest income.
     Realized gains (losses) on held-to-maturity and available-
for-sale securities.
     Total noninterest expense.
     Adjustments to pretax income in foreign offices for 
internal allocations to foreign offices to reflect the effect of equity 
capital on overall bank funding costs.
     Applicable income taxes.
     Extraordinary items and other adjustments, net of income 
taxes.
     Internal allocations of income and expense applicable to 
foreign offices.
     Eliminations arising from the consolidation of foreign 
offices with domestic offices.
    The amounts reported in the preceding income and expense categories 
(except the categories for adjustments to pretax income, internal 
allocations, and eliminations) are to be reported on a foreign office 
consolidated basis, i.e., before eliminating the effects of 
transactions with domestic offices, but after eliminating the effects 
of transactions between foreign offices. This is a change from the 
current Schedule RI-D approach under which amounts are reported net of 
all intrabank transactions.
    The Agencies received no comments specifically addressing the 
proposed revisions to Schedule RI-D.
4. Standby Letters of Credit Issued by a Federal Home Loan Bank
    Banks are currently required to report standby letters of credit 
issued by a Federal Home Loan Bank on their behalf in Schedule RC-L, 
item 9, ``All other off-balance sheet liabilities,'' when these letters 
of credit exceed 10 percent of the bank's total equity capital. When 
these letters of credit exceed 25 percent of total equity capital, the 
amount must also be separately identified and disclosed in Schedule RC-
L. To facilitate the reporting and identification of these standby 
letters of credit when the amount exceeds 25 percent of total equity 
capital, banks with this volume of standby letters of credit issued by 
a Federal Home Loan Bank will report them in Schedule RC-L, item 9.c., 
to which the Agencies are adding an appropriate preprinted caption.
    No comments were received on this specific element of the Agencies' 
proposal.
5. Scope of Securitizations To Be Included in Schedule RC-S
    In column G of Schedule RC-S, ``Servicing, Securitization, and 
Asset Sale Activities,'' banks report information on securitizations 
and on asset sales with recourse or other seller-provided credit 
enhancements involving loans (other than those covered in columns A 
through F of the schedule) and all leases. Although the scope of 
Schedule RC-S was intended to cover all of a bank's securitizations and 
credit-enhanced asset sales, as currently structured column G does not 
capture transactions involving assets other than loans and leases. 
Therefore, the Agencies are revising the scope of column G to encompass 
``All Other Loans, All Leases, and All Other Assets.'' As a result, 
column G will begin to reflect securitization transactions involving 
such assets as securities.
    The Agencies received no comments on this change in scope.
C. Instructional Clarification for Servicing of Home Equity Lines
    Banks report the outstanding principal balance of assets serviced 
for others in Memorandum item 2 of Schedule RC-S, ``Servicing,

[[Page 8653]]

Securitization, and Asset Sale Activities.'' In Memorandum items 2.a 
and 2.b, the amounts of 1-4 family residential mortgages serviced with 
recourse and without recourse, respectively, are reported. Memorandum 
item 2.c covers all other financial assets serviced for others, but 
banks are required to report the amount of such servicing only if the 
servicing volume is more than $10 million.
    The Agencies will clarify the instructions by stating that 
servicing of home equity lines should be included in Memorandum item 
2.c. Memorandum items 2.a and 2.b should include servicing of closed-
end loans secured by first or junior liens on 1-4 family residential 
properties only. The only commenter addressing this clarification 
stated that it was reasonable.

Call Report Revisions Effective as of the September 30, 2006, Report 
Date

A. Revisions of Existing Items and New Items
1. Federal Home Loan Bank Advances and Other Borrowings
    Banks currently report separate breakdowns by remaining maturity of 
Federal Home Loan Bank (FHLB) advances and other borrowings in Schedule 
RC-M, items 5.a and 5.b., respectively. The Agencies proposed to add 
two additional breakdowns of FHLB advances. The first would collect 
data on four categories of advances: Fixed rate, variable rate, 
callable structured advances, and other structured advances. The second 
would collect data on advances by time remaining until the next 
repricing date using four time intervals: One year or less, over one 
year through three years, over three years through five years, and over 
five years. In addition, the existing remaining maturity data for both 
FHLB advances and other borrowings were to be modified by adding a new 
remaining maturity period of over five years.
    Three commenters suggested the Agencies limit the application of 
certain information on FHLB advances to institutions whose FHLB 
advances are material to their overall operations. In contrast, another 
commenter, a banking trade group, stated that its members did not 
believe it would be burdensome in most cases to provide the proposed 
additional information. The Agencies evaluated various alternative 
materiality thresholds for FHLB advances and concluded that, for many 
institutions, such thresholds would effectively increase, rather than 
reduce, the burden associated with providing the requested information. 
Burden would effectively increase because these institutions would have 
to assess whether they exceed the reporting threshold as of each report 
date and would need to develop a system for capturing the information 
whenever the threshold is exceeded. Once the threshold is exceeded 
institutions would continue to report the information until the volume 
of FHLB advances declined and remained below a threshold for a 
sufficient period of time to indicate that the advances were no longer 
an integral part of the institution's operations. Therefore, the 
Agencies are not establishing a materiality threshold for these items. 
Nevertheless, in response to commenters' concerns about burden, the 
Agencies reconsidered the amount of data they proposed to collect on 
FHLB advances and other borrowings and decided to modify their proposal 
by reducing the amount of information to be reported by banks.
    Thus, banks will separately report their FHLB advances and their 
other borrowings based on the amount of time until the next repricing 
date (one year or less, over one year through three years, over three 
years through five years, and over five years) in items 5.a.(1)(a)-(d) 
and 5.b.(1)(a)-(d) of Schedule RC-M, respectively.\1\ Banks will also 
report the amounts of advances and other borrowings with a remaining 
maturity of one year or less in items 5.a.(2) and 5.b.(2), 
respectively, rather than the proposed four-period breakdown by 
remaining maturity.
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    \1\ The sum of Schedule RC-M, items 5.a.(1)(a)-(d) and items 
5.b.(1)(a)-(d), must equal Schedule RC, item 16, ``Other borrowed 
money.''
---------------------------------------------------------------------------

    In addition, banks will report only the amount of structured FHLB 
advances included in their advances outstanding in item 5.a.(3) of 
Schedule RC-M instead of the four-way breakdown of advances that had 
been proposed. Structured advances are advances containing options. 
Structured advances include (1) callable advances, i.e., fixed rate 
advances that the FHLB has the option to call after a specified amount 
of time, (2) convertible advances, i.e., fixed rate advances that the 
FHLB has the option to convert to floating rate after a specified 
amount of time, and (3) putable advances, i.e., fixed rate advances 
that the bank has the option to prepay without penalty on a specified 
date or dates. Any other advances that have caps, floors, or other 
embedded derivatives should also be reported as structured advances.
2. Nonaccrual Assets
    Two new items will be added to Schedule RC-N, ``Past Due and 
Nonaccrual Loans, Leases, and Other Assets,'' pertaining to nonaccrual 
assets: Memorandum item 7, ``Additions to nonaccrual assets during the 
quarter,'' and Memorandum item 8, ``Nonaccrual assets sold during the 
quarter.'' Identical items are already collected from bank holding 
companies that file the Consolidated Financial Statements for Bank 
Holding Companies (FR Y-9C). The one institution that specifically 
commented on the proposed new nonaccrual items observed that, because 
it files the FR Y-9C, these items would not create additional burden.
    In Memorandum item 7, report the gross amount of all loans, leases, 
debt securities, and other assets (net of unearned income) that have 
been placed in nonaccrual status since the prior quarter-end. Include 
those assets placed in nonaccrual status during the quarter that are 
included as of the quarter-end report date in Schedule RC-N, column C, 
items 1 through 9. Also include those assets placed in nonaccrual 
status during the quarter that, before the current quarter-end, have 
been sold, paid off, charged-off, settled through foreclosure or 
concession of collateral (or any other disposition of the nonaccrual 
asset) or have been returned to accrual status. In other words, the 
gross amount of assets placed in nonaccrual status since the prior 
quarter-end that should be reported in Memorandum item 7 should not be 
reduced, for example, by any charge-offs or sales of such nonaccrual 
assets. If a given asset is placed in nonaccrual status more than once 
during the quarter, report the amount of the asset only once.
    In Memorandum item 8, report the gross outstanding balance of all 
loans, leases, debt securities, and other assets held in nonaccrual 
status (i.e., reportable in Schedule RC-N, column C, items 1 through 9) 
that were sold during the current quarter. The amount to be reported is 
the outstanding balance of the asset at the time of the sale. Do not 
include any gains or losses from the sale. For purposes of this item, 
only include those nonaccrual asset sales that meet the criteria for a 
sale as set forth in FASB Statement No. 140, Accounting for Transfers 
and Servicing of Financial Assets and Extinguishments of Liabilities.
3. Secured Borrowings
    The Agencies are adding two items to Schedule RC-M, ``Memoranda,'' 
in which banks will report the amount of their ``Federal funds 
purchased'' (as reported in Schedule RC, item 14.a), and their ``Other 
borrowings'' (as reported in Schedule RC-M, item 5.b) that are secured. 
Two commenters specifically

[[Page 8654]]

addressed these proposed items. One did not object to these items, but 
the other suggested that materiality thresholds be applied to the 
reporting of these two items. Consistent with the discussion above 
under FHLB advances and other borrowings, the Agencies decided against 
establishing a materiality threshold for these items.
    Banks should include in these items the amount of ``Federal funds 
purchased'' and ``Other borrowings'' for which the bank (or a 
consolidated subsidiary) has pledged securities, loans, or other assets 
as collateral for the borrowings. Transfers of financial assets 
accounted for as financing transactions because they do not satisfy the 
criteria for sale accounting under FASB Statement No. 140, mortgages 
payable on bank premises and other real estate owned, and obligations 
under capitalized leases should be included as ``Secured other 
borrowings.''
4. Closed-End 1-4 Family Residential Mortgage Banking Activities
    The Agencies will add a new Schedule RC-P to the Call Report that 
will contain a series of items that are focused on closed-end 1-4 
family residential mortgage banking activities. The schedule will 
include items for the principal amount of retail originations during 
the quarter of mortgage loans for resale, wholesale originations and 
purchases during the quarter of mortgage loans for resale, and mortgage 
loans sold during the quarter. The schedule will also collect 
information on the carrying amount of mortgage loans held for sale at 
quarter-end. Data will be reported separately for first lien and junior 
lien mortgages.\2\
---------------------------------------------------------------------------

    \2\ As will be discussed in the following section, an additional 
item on noninterest income earned during the quarter from these 
mortgage banking activities will be added to Schedule RC-P effective 
March 31, 2007.
---------------------------------------------------------------------------

    The Agencies proposed that Schedule RC-P would be completed by all 
banks with $1 billion or more in total assets and that smaller banks 
that are significantly involved in mortgage banking activities, as 
determined by their primary federal regulator, could be directed by 
their regulator to complete the schedule. One commenter stated that 
this reporting approach for banks with less than $1 billion in total 
assets could result in confusion and inconsistent treatment of such 
banks. This commenter recommended against leaving the reporting 
decision up to a bank's regulator, suggesting instead that a reporting 
threshold by mortgage volume be established for banks with less than $1 
billion in assets. This commenter also stated that data collection for 
this new schedule would be time consuming and some information may need 
to be compiled manually. Three other commenters urged the Agencies to 
delay the implementation of proposed Schedule RC-P to provide more lead 
time to prepare for it. Another commenter requested clear instructional 
guidance for the information to be reported in this new Call Report 
schedule. As discussed in the following paragraph, the Agencies have 
established a mortgage volume threshold for reporting in Schedule RC-P 
by banks with less than $1 billion in total assets. The effective date 
of the schedule has also been delayed from the proposed March 31, 2006, 
implementation date. The instructions have been refined from those 
included in the proposal.
    Schedule RC-P is to be completed by (1) all banks with $1 billion 
or more in total assets \3\ and (2) banks with less than $1 billion in 
total assets whose closed-end 1-4 family residential mortgage banking 
activities exceed a specified level. More specifically, if either 
closed-end (first lien and junior lien) 1-4 family residential mortgage 
loan originations and purchases for resale from all sources, loan 
sales, or quarter-end loans held for sale exceed $10 million for two 
consecutive quarters, a bank with less than $1 billion in total assets 
must complete Schedule RC-P beginning the second quarter and continue 
to complete the schedule through the end of the calendar year. For 
example, for a bank with less than $1 billion in total assets, if the 
bank's closed-end 1-4 family residential mortgage loan originations 
plus purchases for resale from all sources exceeded $10 million during 
the quarter ended June 30, 2006, and the bank's sales of such loans 
exceeded $10 million during the quarter ended September 30, 2006, the 
bank would be required to complete Schedule RC-P in its September 30 
and December 31, 2006, Call Reports. The level of the bank's mortgage 
banking activities during the fourth quarter of 2006 and the first 
quarter of 2007 would determine whether it would need to complete 
Schedule RC-P each quarter during 2007 beginning March 31, 2007.
---------------------------------------------------------------------------

    \3\ The $1 billion asset size test is generally based on the 
total assets reported on the Call Report balance sheet (Schedule RC, 
item 12) as of June 30 of the preceding year. Banks with $1 billion 
or more in total assets as of June 30, 2005, must complete Schedule 
RC-P beginning September 30, 2006.
---------------------------------------------------------------------------

    Retail originations of closed-end 1-4 family residential mortgage 
loans for resale include those mortgage loans for which the origination 
and underwriting process was handled exclusively by the bank or a 
consolidated subsidiary of the bank. Therefore, retail originations 
would exclude those closed-end 1-4 family residential mortgage loans 
for which the origination and underwriting process was handled in whole 
or in part by another party, such as a correspondent or mortgage 
broker, even if the loan was closed in the name of the bank or a 
consolidated subsidiary of the bank. Such loans would be treated as 
wholesale originations or purchases, as would acquisitions of closed-
end 1-4 family residential mortgage loans that were closed in the name 
of a party other than the bank or a consolidated subsidiary of the 
bank. Closed-end 1-4 family residential mortgage loans originated or 
purchased for the reporting bank's own loan portfolio should be 
excluded from amounts reported as originations or purchases for resale 
in Schedule RC-P.
    Closed-end 1-4 family residential mortgage loans sold during the 
quarter include those transfers of loans originated or purchased for 
resale from retail or wholesale sources that have been accounted for as 
sales in accordance with FASB Statement No. 140, i.e., those transfers 
where the loans are no longer included in the bank's consolidated total 
assets. Sales of closed-end 1-4 family residential mortgage loans 
directly from the bank's loan portfolio during the quarter should also 
be reported as loans sold.
    Closed-end 1-4 family residential mortgage loans held for sale at 
quarter-end should be reported at the lower of cost or fair value 
consistent with their presentation in the Call Report balance sheet. 
Such loans would include any mortgage loans transferred at any time 
from the bank's loan portfolio to a held-for-sale account that have not 
been sold by quarter-end.
5. Amounts Payable and Receivable on Credit Derivatives
    Banks with credit derivatives currently report the notional amount 
and fair value of these instruments in item 7 of Schedule RC-L, 
``Derivatives and Off-Balance Sheet Instruments.'' The Agencies will 
add new items 7.c.(1) and (2) to Schedule RC-L to collect information 
on the maximum amounts that the reporting bank can collect or must pay 
on the credit derivatives it has entered into. One commenter requested 
further clarification regarding what is meant by ``maximum'' in this 
context and the agencies will make such a clarification.

[[Page 8655]]

B. Other Revisions
1. Officer and Director Signature Requirements
    Several commenters expressed concern regarding the Agencies' 
proposal to revise the Call Report's existing officer declaration to 
require that the report be signed by each bank's chief executive 
officer (or the person performing similar functions) and chief 
financial officer (or the person performing similar functions) rather 
than by an ``authorized officer.'' Under the proposal, the officer 
declaration was also to be revised to state that these officers are 
responsible for establishing and maintaining internal control over 
financial reporting, including controls over regulatory reports. In 
addition, the Agencies proposed to revise the director attestation to 
require that the directors who sign the Call Report be members of the 
bank's audit committee, if one exists. Commenters indicated that it 
would be difficult to obtain the required review and signatures of the 
audit committee members, chief executive officer, and chief financial 
officer in the short timeframe allowed for completion and submission of 
the Call Report.
    Several commenters also expressed concern that the Agencies were 
trying to impose certification and internal control standards similar 
to those contained in the Sarbanes-Oxley Act of 2002 for compliance 
with regulatory reporting guidelines. However, statutory requirements 
already specify that the Call Report must be signed by an authorized 
officer of the bank and attested to by not less than two directors 
(trustees) for state nonmember banks and three directors for national 
and state member banks. These statutes further require that, in signing 
the Call Report, the officer and directors address the correctness of 
the reported information. The statutes also recognize that banks are 
responsible for maintaining procedures to ensure the accuracy of this 
information.
    After considering the comments received, the Agencies are revising 
the existing officer signature requirement so that the Call Report must 
be signed by the bank's chief financial officer (or the individual 
performing an equivalent function) rather than by any authorized 
officer of the bank. In signing the Reports of Condition and Income, 
the chief financial officer would attest that the reports have been 
prepared in conformance with the instructions and are true and correct 
to the best of the officer's knowledge and belief. The requirement for 
signatures by directors would not be changed (i.e., the directors 
signing the Call Report need not be members of the bank's audit 
committee).
    The introductory paragraph preceding the statements concerning the 
preparation of the Call Report that must be signed by the chief 
financial officer and two or three directors will note that each bank's 
board of directors and senior management are responsible for 
establishing and maintaining an effective system of internal control, 
including controls over the Reports of Condition and Income. (This 
language concerning internal control does not appear in the statements 
to be signed by the chief financial officer and the directors.) Similar 
references to the responsibility of the board and senior management for 
the internal control system are contained in the Agencies' March 2003 
Interagency Policy Statement on the Internal Audit Function and Its 
Outsourcing. Internal control and its relationship to timely and 
accurate regulatory reports are also addressed in the Interagency 
Guidelines Establishing Standards for Safety and Soundness.

Call Report Revisions To Be Implemented March 31, 2007 (and 2008)

A. Revisions of Existing Items and New Items
1. Construction, Land Development, and Other Land Loans
    At present, banks report the total amount of their ``Construction, 
land development, and other land loans'' in the loan schedule (Schedule 
RC-C, part I, item 1.a) and they also disclose the amount of these 
loans that are past due 30 days or more or in nonaccrual status 
(Schedule RC-N, item 1.a) and that have been charged off and recovered 
(Schedule RI-B, part I, item 1.a). The agencies proposed to split the 
existing item for ``Construction, land development, and other land 
loans'' in these three schedules into separate items for ``1-4 family 
residential construction, land development, and other land loans'' and 
``Other construction, land development, and other land loans.'' In 
addition, the agencies would similarly split the item for ``Commitments 
to fund commercial real estate, construction, and land development 
loans secured by real estate'' in the off-balance sheet items schedule 
(Schedule RC-L, item 1.c.(1)) into two items.
    A significant number of commenters expressed concern about the 
burden associated with distinguishing 1-4 family residential 
construction loans from other loans currently reported in the existing 
construction loan category and making the system changes that would be 
required to provide this information, particularly in light of the 
relatively short timeframe banks would be provided to make these 
changes, i.e., by March 31, 2006, under the proposal. One other 
commenter, a nonbanking trade group, recommended that all residential 
construction loans, both 1-4 family and multifamily, be segregated from 
other construction loans and that banks separately report data on 1-4 
family and multifamily residential construction loans. Based on the 
comments received, the Agencies are retaining a two-way breakout of 
``Construction, land development, and other land loans,'' but are 
clarifying the scope of the two new loan categories and implementing 
the changes in two phases through March 31, 2008. The changes will take 
effect March 31, 2007, for (1) all banks with $300 million or more in 
total assets as of December 31, 2005, or with foreign offices, and (2) 
banks without foreign offices and with less than $300 million in total 
assets whose total construction, multifamily, and nonfarm 
nonresidential real estate loans (Schedule RC-C, sum of items 1.a, 1.d, 
and 1.e) is greater than 150 percent of total equity capital (Schedule 
RC, item 28) as of December 31, 2005. Banks with less than $300 million 
in total assets that do not meet this percentage test will begin 
reporting the breakdown of their construction loans as of March 31, 
2008.
    The Agencies are splitting the existing construction loan item in 
schedules RC-C, RC-N, and RI-B into separate items for ``1-4 family 
residential construction loans'' and ``Other construction loans and all 
land development and other land loans.'' In addition, the Agencies will 
split the existing item for commitments to fund commercial real estate, 
construction, and land development loans secured by real estate in 
Schedule RC-L into separate items for ``1-4 family residential 
construction loan commitments'' and ``Commercial real estate, other 
construction loan, and land development loan commitments.''
    ``1-4 family residential construction loans'' are those loans for 
the purpose of constructing 1-4 family residential properties, which 
will secure the loan. The term ``1-4 family residential properties'' is 
defined in Schedule RC-C, part I, item 1.c. The new loan category for 
``1-4 family residential construction loans'' would exclude loans for 
the development of building lots and loans secured by vacant land, 
unless the same loan finances the construction of 1-4 family 
residential properties on the property.

[[Page 8656]]

2. Loans Secured by Nonfarm Nonresidential Properties
    Banks currently report the total amount of their loans ``Secured by 
nonfarm nonresidential properties'' in the loan schedule (Schedule RC-
C, part I, item 1.e) along with the amounts of these loans that are 
past due 30 days or more or in nonaccrual status (Schedule RC-N, item 
1.e) and the amounts that have been charged off and recovered (Schedule 
RI-B, part I, item 1.e). The agencies proposed to split the existing 
item for loans ``Secured by nonfarm nonresidential properties'' in 
these three schedules into separate items for loans secured by owner-
occupied nonfarm nonresidential properties and loans secured by other 
nonfarm nonresidential properties.
    A significant number of commenters expressed concern about the 
burden of the nonfarm nonresidential real estate loan proposal similar 
to that discussed above with respect to construction loans. One 
commenter noted in particular the difficulties in determining how 
``mixed-use'' properties should be categorized in the Call Report loan 
schedule. Commenters also expressed concern about the relatively short 
timeframe banks would be provided to make these changes, i.e., by March 
31, 2006, under the proposal. Based on the comments received, the 
Agencies are modifying the scope of the two new loan categories and 
implementing the changes in two phases through March 31, 2008, in a 
manner consistent with the phase-in schedule for the construction loan 
items listed above. As with the changes for construction loans 
discussed above, the changes for nonfarm nonresidential real estate 
loans will take effect March 31, 2007, for (1) all banks with $300 
million or more in total assets as of December 31, 2005, or with 
foreign offices, and (2) banks without foreign offices and with less 
than $300 million in total assets whose total construction, 
multifamily, and nonfarm nonresidential real estate loans (Schedule RC-
C, sum of items 1.a, 1.d, and 1.e) is greater than 150 percent of total 
equity capital (Schedule RC, item 28) as of December 31, 2005. Banks 
with less than $300 million in total assets that do not meet this 
percentage test will begin reporting the breakdown of their nonfarm 
nonresidential real estate loans as of March 31, 2008.
    The new category for ``Loans secured by other nonfarm 
nonresidential properties'' includes those nonfarm nonresidential real 
estate loans where the primary or a significant source of repayment is 
derived from rental income associated with the property (i.e., loans 
for which 50 percent or more of the source of repayment comes from 
third party, nonaffiliated, rental income) or the proceeds of the sale, 
refinancing, or permanent financing of the property. Thus, the primary 
or a significant source of repayment for ``Loans secured by owner-
occupied nonfarm nonresidential properties'' is the cash flow from the 
ongoing operations and activities conducted by the party, or an 
affiliate of the party, who owns the property, rather than from third 
party, nonaffiliated, rental income or the proceeds of the sale, 
refinancing, or permanent financing of the property. The determination 
as to whether a property is considered ``owner-occupied'' should be 
made upon acquisition (origination or purchase) of the loan. However, 
for purposes of determining whether existing nonfarm nonresidential 
real estate loans should be reported as ``owner-occupied'' beginning 
March 31, 2007, or 2008, banks may consider the source of repayment 
either when the loan was acquired or based on the most recent available 
information. Once a bank determines whether a loan should be reported 
as ``owner-occupied'' or not, this determination need not be reviewed 
thereafter.
3. Retail and Commercial Leases
    Banks with foreign offices or with $300 million or more in total 
assets currently report a breakdown of their lease financing 
receivables between those from U.S. and non-U.S. addressees in Schedule 
RC-C, part I, items 10.a and 10.b. Addressee information on leases is 
also reported in the past due and nonaccrual schedule (Schedule RC-N, 
item 8 on the FFIEC 031 and Memorandum item 3.d on the FFIEC 041) and 
on the charge-offs and recoveries schedule (Schedule RI-B, part I, item 
8 on the FFIEC 031 and Memorandum item 2.d on the FFIEC 041).\4\ The 
Agencies are replacing the existing addressee breakdown of leases with 
a breakdown between retail (consumer) leases and commercial leases in 
these three Call Report schedules effective March 31, 2007. Retail 
(consumer) leases would be defined in a manner similar to consumer 
loans, i.e., as leases to individuals for household, family, and other 
personal expenditure purposes. Commercial leases would encompass all 
other lease financing receivables. The only commenter who specifically 
addressed the proposed revision to the reporting of leases did not 
foresee any difficulty with the change.
---------------------------------------------------------------------------

    \4\ Banks with domestic offices only and less than $300 million 
in total assets are not required to provide this breakdown.
---------------------------------------------------------------------------

4. Income From Annuity Sales, Investment Banking, Advisory, Brokerage, 
and Underwriting
    In the Call Report income statement (Schedule RI), banks currently 
report commissions and fees from sales of annuities (fixed, variable, 
and deferred) and related referral and management fees in one of three 
items: Income from sales of annuities by a bank's trust department (or 
a consolidated trust company subsidiary) that are executed in a 
fiduciary capacity is reported in ``Income from fiduciary activities'' 
(Schedule RI, item 5.a); income from sales of annuities to bank 
customers by a bank's securities brokerage subsidiary is reported in 
``Investment banking, advisory, brokerage, and underwriting fees and 
commissions'' (Schedule RI, item 5.d); and income from all other 
annuity sales is reported in ``Income from other insurance activities'' 
(Schedule RI, item 5.h.(2)). Existing item 5.d also collects the amount 
of noninterest income from a variety of other activities.
    To better distinguish between banks' noninterest income from 
investment banking (dealer) activities and their sales (brokerage) 
activities, the Agencies are revising the noninterest income section of 
the Call Report income statement effective March 31, 2007. A new item 
will be added for ``Fees and commissions from annuity sales,'' which 
will include income from sales of annuities and related referral and 
management fees (other than income from sales by a bank's trust 
department or a consolidated trust company subsidiary executed in a 
fiduciary capacity, which will continue to be reported in Schedule RI, 
item 5.a). Existing item 5.d will be replaced by separate items for 
``Fees and commissions from securities brokerage'' and ``Investment 
banking, advisory, and underwriting fees and commissions.'' Securities 
brokerage income would include fees and commissions from sales of 
mutual funds and from purchases and sales of other securities and money 
market instruments for customers (including other banks) where the bank 
is acting as agent. Other than moving annuity-related income to the new 
item for such income, there would be no other changes to the existing 
item 5.h.(2), ``Income from other insurance activities.'' In connection 
with these changes, the items in the noninterest income section of the 
Call Report income statement (Schedule RI) would be renumbered.

[[Page 8657]]

    One commenter, an insurance consultant, supported the proposed 
income statement changes relating to income from annuity sales, 
securities brokerage, and investment banking. However, this commenter 
also recommended that banks report additional detail on income from 
annuity sales, a change that the Agencies are not implementing.
5. Income From 1-4 Family Residential Mortgage Banking Activities
    In new Schedule RC-P on 1-4 family residential mortgage banking 
activities, which will begin to be completed by certain banks beginning 
September 30, 2006, an item will be added to the schedule on March 31, 
2007, to collect data on noninterest income generated from these 
activities. New item 5 of Schedule RC-P, ``Noninterest income for the 
quarter from the sale, securitization, and servicing of closed-end 1-4 
family residential mortgage loans,'' will capture the portion of a 
bank's ``Net servicing fees,'' ``Net securitization income,'' and ``Net 
gains (losses) on sales of loans and leases'' (current items 5.f, 5.g, 
and 5.i of Schedule RI) earned during the quarter that is attributable 
to 1-4 family residential mortgage loans. The March 31, 2007, effective 
date for this new Schedule RC-P item responds to commenters' request 
that the Agencies delay the implementation of this schedule from its 
proposed March 31, 2006, effective date.
6. Revenues From Credit Derivatives and Related Exposures
    In Schedule RI, Memorandum item 8, banks that reported average 
trading assets of $2 million or more for any quarter of the preceding 
calendar year currently provide a four-way breakdown of trading revenue 
by type of risk exposure: interest rate, foreign exchange, equity, and 
commodity. Although banks also trade credit derivatives and credit cash 
instruments, there is no specific existing category in which to report 
the revenue from these trading activities. Accordingly, the Agencies 
proposed to add a new risk exposure category to Memorandum item 8 for 
credit derivatives.
    One commenter stated that adding credit derivatives to the 
breakdown of trading revenue by type of exposure may not be meaningful 
because credit derivative positions are often hedged with cash 
instruments. After considering this comment, the Agencies have modified 
their proposal and will instead add a new risk exposure category for 
credit-related exposures effective March 31, 2007. In this new 
Memorandum item 8.e, a bank should report its net gains (losses) from 
trading cash instruments and derivative contracts that it manages as 
credit exposures. The sum of Memorandum items 8.a through 8.e must 
equal the amount of trading revenue reported in the Call Report income 
statement in Schedule RI, item 5.c.
    The Agencies are also adding new Memorandum items 9.a and 9.b to 
Schedule RI, ``Income Statement,'' as of March 31, 2007, in which banks 
must report the net gains (losses) recognized in earnings on credit 
derivatives that economically hedge credit exposures held outside the 
trading account, regardless of whether the credit derivative is 
designated as and qualifies as a hedging instrument under generally 
accepted accounting principles. Credit exposures outside the trading 
account include, for example, nontrading assets (such as available-for-
sale securities or loans held for investment) and unused lines of 
credit. To address the commenter's concern about the use of credit 
derivatives for hedging, banks will report such net gains (losses) on 
credit derivatives held for trading in Memorandum item 9.a and on 
credit derivatives held for purposes other than trading in Memorandum 
item 9.b. Thus, those net gains (losses) on credit derivatives reported 
in Schedule RI, Memorandum item 9.a, will also have been included in 
the amount reported in new Memorandum item 8.e of Schedule RI.

III. Request for Comment

    Public comment is requested on all aspects of this joint notice. In 
addition, comments are invited on:
    (a) Whether the proposed revisions to the Call Report collections 
of information are necessary for the proper performance of the 
agencies' functions, including whether the information has practical 
utility;
    (b) 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;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) 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
    (e) 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. All comments will become a matter of public record. 
Written comments should address the accuracy of the burden estimates 
and ways to minimize burden as well as other relevant asp