Proposed Agency Information Collection Activities; Comment Request, 63580-63592 [E7-21960]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Notices]
[Pages 63580-63592]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21960]


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FEDERAL RESERVE SYSTEM


Proposed Agency Information Collection Activities; 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 
(PRA), 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 
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 Paperwork Reduction Act 
Submission, 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;

[[Page 63581]]

    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 January 8, 2008.

ADDRESSES: You may submit comments, identified by FR Y-9, FR Y-11, FR 
2314, FR Y-7N, or FR 2886b by any of the following methods:
     Agency Web Site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at 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 form 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.
    Additionally, commenters should send a copy of their comments to 
the OMB Desk Officer 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: A copy of the PRA OMB submission 
including the proposed reporting form and instructions, supporting 
statement, and other documentation will be placed into OMB's public 
docket files, once approved. These documents will also be made 
available on the Federal Reserve Board's public Web site at: https://
www.federalreserve.gov/boarddocs/reportforms/review.cfm or may be 
requested from the agency clearance officer, whose name appears below.
    Michelle Shore, Federal Reserve Board Clearance Officer (202-452-
3829), Division of Research and Statistics, Board of Governors of the 
Federal 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, With Revision, of the Following Reports:

    1. Report title: Financial Statements for Bank Holding Companies.
    Agency form number: FR Y-9C, FR Y-9LP, and FR Y-9SP.
    OMB control number: 7100-0128.
    Frequency: Quarterly and semiannually.
    Reporters: Bank holding companies.
    Annual reporting hours: FR Y-9C: 160,056; FR Y-9LP: 25,662; FR Y-
9SP: 47,135.
    Estimated average hours per response: FR Y-9C: 40.50; FR Y-9LP: 
5.25; FR Y-9SP: 5.25.
    Number of respondents: FR Y-9C: 988; FR Y-9LP: 1,222; FR Y-9SP: 
4,489.
    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)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, FR Y-9LP, and FR Y-9SP are standardized 
financial statements for the consolidated bank holding company (BHC) 
and its parent. The FR Y-9 family of reports historically has been, and 
continues to be, the primary source of financial information on BHCs 
between on-site inspections. Financial information from these reports 
is used to detect emerging financial problems, to review performance 
and conduct pre-inspection analysis, to monitor and evaluate capital 
adequacy, to evaluate BHC mergers and acquisitions, and to analyze a 
BHC's overall financial condition to ensure safe and sound operations.
    The FR Y-9C consists of standardized financial statements similar 
to the Federal Financial Institutions Examination Council (FFIEC) 
Consolidated Reports of Condition and Income (Call Reports) (FFIEC 031 
& 041; OMB No. 7100-0036) filed by commercial banks. The FR Y-9C 
collects consolidated data from BHCs. The FR Y-9C is filed by top-tier 
BHCs with total consolidated assets of $500 million or more. (Under 
certain circumstances defined in the General Instructions, BHCs under 
$500 million may be required to file the FR Y-9C.)
    The FR Y-9LP includes standardized financial statements filed 
quarterly on a parent company only basis from 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. Respondents include BHCs with total consolidated assets 
of less than $500 million. 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 is designed to obtain basic 
balance sheet and income information for the parent company, 
information on intangible assets, and information on intercompany 
transactions.
    Current actions: The Federal Reserve proposes to modify information 
collected on the FR Y-9C to: report interest and fee income on and the 
quarterly average for 1-4 family residential mortgages and income on 
and the quarterly average for all other real estate loans separately 
from income on and the quarterly average for all other loans; add new 
data items for restructured troubled mortgages and mortgage loans in 
process of foreclosure; expand the schedule for closed-end 1-4 family 
residential mortgage banking activity to include originations, 
purchases, and sales of open-end mortgages as well as closed-end and 
open-end mortgage loan repurchases and indemnifications during the 
quarter; modify the trading account definition and enhance information 
available on instruments accounted for under the fair value option on 
the loan schedule and the fair value measurements schedule; revise the 
schedule on trading assets and liabilities; clarify the instructions 
for reporting credit derivative data in the risk-based capital schedule 
and make a corresponding change to the schedule itself; modify the 
threshold for reporting significant items of other noninterest income 
and expense in the income statement; and revise the instructions for 
reporting fully insured brokered deposits in the deposit liabilities 
schedule to conform to the instructions for reporting time deposits in 
this schedule. The proposed changes would be effective as of March 31, 
2008.
    The Federal Reserve proposes to modify the FR Y-9LP to: collect 
certain

[[Page 63582]]

data from all institutions that choose, under generally accepted 
accounting principles (GAAP), to apply a fair value option to one or 
more financial instruments and one or more classes of servicing assets 
and liabilities; add two data items on cash flows related to business 
acquisitions and divestitures; and combine two cash flow statement 
items into a single net item. The proposed changes would be effective 
as of March 31, 2008.
    The Federal Reserve proposes to modify the FR Y-9SP to also collect 
certain data from all institutions that choose, under GAAP, to apply a 
fair value option to one or more financial instruments and one or more 
classes of servicing assets and liabilities. The proposed changes would 
be effective as of June 30, 2008.

Proposed Revisions Related to Call Report Revisions

    The Federal Reserve proposes to make the following revisions to the 
FR Y-9C to parallel proposed changes to the Call Report. BHCs have 
commented that changes should be made to the FR Y-9C in a manner 
consistent with changes to the Call Report to reduce reporting burden.

Revisions Related to 1-4 Family Residential Mortgage Loans

    Since year-end 2000, FR Y-9C respondent holdings of 1-4 family 
residential mortgage loans in domestic offices have increased nearly 
118 percent to more than $2.1 trillion. Nearly all of FR Y-9C 
respondents hold such mortgages. 1-4 family residential mortgages 
continue to represent the single largest category of loans held by FR 
Y-9C respondents. As a percentage of total loans and leases, 1-4 family 
residential mortgages have grown from 26 percent at year-end 2000 to 35 
percent at year-end 2006. Similarly, 1-4 family residential mortgages 
have increased from less than 15 percent of total assets to over 17 
percent of total assets during this period. In addition, there has been 
a growing use of nontraditional residential mortgage products and an 
increasing number of BHC subsidiaries offering such products. The 
volume of 1-4 family residential mortgage loans extended to subprime 
borrowers has increased. At the same time, home prices have stagnated 
or declined in many areas of the country.
    The higher concentration of 1-4 family residential mortgages across 
the industry and the changing risk profile of the loans with which BHCs 
are associated in some capacity has led the Federal Reserve to evaluate 
the information they collect about such loans in the FR Y-9C. As a 
result, the Federal Reserve proposes several reporting changes that are 
intended to enhance its ability to monitor the nature and extent of 
BHCs' involvement with 1-4 family residential mortgage loans as 
originators, holders, sellers, and servicers of such loans.

Interest and Fee Income and Quarterly Average

    At present, BHCs include the total amount of interest and fee 
income on their loans secured by real estate (in domestic offices) in 
the income statement (Schedule HI, data item 1.a.(1), Interest and fee 
income on loans: in domestic offices) and include the quarterly average 
for these loans (in domestic offices) in the quarterly averages 
schedule (Schedule HC-K, data item 3, Loans and leases). The Federal 
Reserve proposes to split these existing income statement and quarterly 
average items into separate data items for the interest and fee income 
on and the quarterly averages of, Loans secured by 1-4 family 
residential properties, All other loans secured by real estate, and All 
other loans in domestic offices.

Restructured Mortgages

    BHCs currently report information on the amount of loans whose 
terms have been modified, because of deterioration in the financial 
condition of the borrower, to provide for a reduction of either 
interest or principal. When such restructured loans are past due thirty 
days or more or are in nonaccrual status in relation to their modified 
terms as of the report date, they are reported in Schedule HC-N, 
Memorandum item 1. In contrast, when such restructured loans are less 
than thirty days past due and are not otherwise in nonaccrual status, 
that is, when they are deemed to be in compliance with their modified 
terms as discussed in the FR Y-9C reporting instructions, BHCs report 
the amount of these loans in the loan schedule (Schedule HC-C, 
Memorandum item 1). However, the instructions advise respondents to 
exclude restructured loans secured by 1-4 family residential properties 
from these memoranda items.
    This exclusion was incorporated into the reporting instructions 
because the original disclosure requirements for troubled debt 
restructurings under GAAP provided that creditors need not disclose 
information on restructured real estate loans secured by 1-4 family 
residential properties.\1\ However, this exemption from disclosure 
under GAAP has since been eliminated.\2\ Accordingly, the Federal 
Reserve proposes to add a new memorandum item to Schedule HC-C, for 
Loans secured by 1-4 family residential properties, that have been 
restructured and are in compliance with their modified terms and a new 
memorandum item to Schedule HC-N, for restructured Loans secured by 1-4 
family residential properties, that are past due 30 days or more or in 
nonaccrual status.
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    \1\ See Financial Accounting Standards Board Statement No. 15, 
Accounting by Debtors and Creditors for Troubled Debt 
Restructurings, footnote 25.
    \2\ See Financial Accounting Standards Board Statement No. 114, 
Accounting by Creditors for Impairment of a Loan, paragraph 22(f).
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Mortgages in Foreclosure

    BHCs currently report data on the amount of loans secured by 1-4 
family residential properties that are past due thirty days or more or 
are in nonaccrual status (Schedule HC-N, data item 1.c) with the amount 
of foreclosed 1-4 family residential properties held by the BHC 
included in real estate acquired in satisfaction of debts previously 
contracted (Schedule HC-M, data item 13.a). However, regardless of 
whether the BHC owns the loans or services the loans for others, BHCs 
do not report the volume of 1-4 family residential mortgage loans that 
are in process of foreclosure. These data are an important indicator of 
potential additions to the BHC's other real estate owned in the near 
term. The Federal Reserve proposes to add two new memoranda items for 
the amount of 1-4 family residential mortgage loans owned by the BHC 
and serviced by the BHC that are in foreclosure as of the quarter-end 
report date. Mortgage loans in foreclosure would be defined as those 
for which the legal process of foreclosure has been initiated, but for 
which the foreclosure process has not yet been resolved at quarter-
end.\3\ These memoranda items would be added to the loan schedule 
(Schedule HC-C) and the servicing, securitization, and asset sale 
activities schedule (Schedule HC-S), with the carrying amount (before 
any applicable allowance for loan and leases losses) reported in the 
former memorandum item and the principal amount reported in the latter 
memorandum item.

[[Page 63583]]

Reporting mortgage loans as being in process of foreclosure will not 
exempt those loans owned by the BHC from being reported as past due or 
nonaccrual, as appropriate, in Schedule HC-N, and will not exempt those 
loans serviced by the BHC that are reported in Schedule HC-S, data item 
1, from being reported as past due, as appropriate, in that schedule.
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    \3\ For BHCs with banks that participate in the Mortgage Bankers 
Association's (MBA) National Delinquency Survey, the time at which 
mortgage loans would become reportable as being in process of 
foreclosure for FR Y-9C reporting purposes would be the same time at 
which mortgage loans become reportable as being in ``foreclosure 
inventory'' for MBA survey purposes (although the dollar amount of 
such loans would be reported in the FR Y-9C while the number of such 
loans are reported for MBA survey purposes).
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Open-End 1-4 Family Residential Mortgage Banking Activities

    BHCs with $1 billion or more in total assets and smaller BHCs that 
meet certain criteria currently provide data on originations, 
purchases, and sales of closed-end 1-4 family residential mortgage 
loans during the quarter arising from their mortgage banking activities 
in Schedule HC-P. These BHCs also report the amount of closed-end 1-4 
family residential mortgage loans held for sale at quarter-end as well 
as the noninterest income for the quarter from the sale, 
securitization, and servicing of these mortgage loans. Data (other than 
for noninterest income) are provided separately for first lien and 
junior lien mortgages in Schedule HC-P. About 450 BHCs complete 
Schedule HC-P, 110 of which have total assets of less than $1 billion. 
However, this information does not provide a complete picture of BHCs' 
mortgage banking activities since it excludes open-end 1-4 family 
residential mortgages extended under lines of credit. From year-end 
2001 to year-end 2006, FR Y-9C respondent holdings of 1-4 family 
residential mortgage loans extended under lines of credit nearly 
tripled to about $470 billion. Accordingly, the Federal Reserve 
proposes to expand the scope of Schedule HC-P to include separate data 
items for originations, purchases, and sales of open-end 1-4 family 
residential mortgages during the quarter; the amount of such mortgages 
held for sale at quarter-end; and noninterest income for the quarter 
from the sale, securitization, and servicing of open-end residential 
mortgages. When reporting the originations, purchases, sales, and 
mortgages held for sale, BHCs would report both the total commitment 
under the line of credit and the principal amount funded under the 
line. For BHCs with less than $1 billion in total assets, the criteria 
used to determine whether Schedule HC-P must be completed would be 
modified to include both closed-end and open-end 1-4 family residential 
mortgage bank activities.

Mortgage Repurchases and Indemnifications

    As a result of their 1-4 family residential mortgage banking 
activities, BHCs may be obligated to repurchase mortgage loans that 
they have sold or otherwise indemnify the loan purchaser against loss 
because of borrower defaults, loan defects, other breaches of 
representations and warranties, or for other reasons, thereby exposing 
BHCs to additional risk. Such information is not currently captured in 
Schedule HC-P. Therefore, the Federal Reserve proposes to add four new 
data items to Schedule HC-P to collect data on mortgage loan 
repurchases and indemnifications during the quarter. For both closed-
end first lien and closed-end junior lien 1-4 family residential 
mortgages, BHCs would report the principal amount of mortgages 
repurchased or indemnified. For open-end 1-4 family residential 
mortgages, BHCs would report both the total commitment under the line 
of credit and the principal amount funded under the line for mortgages 
repurchased or indemnified.

Trading Assets and Liabilities and Other Assets and Liabilities 
Accounted for Under a Fair Value Option

Reporting of Assets and Liabilities Under the Fair Value Option as 
Trading

    On February 15, 2007, the Financial Accounting Standards Board 
(FASB) issued Statement No. 159, The Fair Value Option for Financial 
Assets and Financial Liabilities (FAS 159), which is effective for 
fiscal years beginning after November 15, 2007. Earlier adoption of FAS 
159 was permitted as of the beginning of an earlier fiscal year, 
provided the BHC (i) also adopts all of the requirements of FASB 
Statement No. 157, Fair Value Measurements (FAS 157) at the early 
adoption date of FAS 159; (ii) has not yet issued a financial statement 
or submitted FR Y-9C data for any period of that fiscal year; and (iii) 
satisfies certain other conditions. Thus, a BHC with a calendar-year 
fiscal year may have voluntarily adopted FAS 159 as of January 1, 2007. 
Changes in the fair value of financial assets and liabilities to which 
the fair value option is applied are reported in current earnings as is 
currently the case for trading assets and liabilities. The Federal 
Reserve understands that some institutions would like to reclassify 
certain loans elected to be accounted for under the fair value option 
as trading assets. The FR Y-9C reporting instructions currently do not 
specifically allow loans to be reported as trading assets.
    Under FAS 159, all securities within the scope of FASB Statement 
No. 115, Accounting for Certain Investments in Debt and Equity 
Securities (FAS 115), that a BHC has elected to report at fair value 
under a fair value option should be classified as trading securities. 
Recognizing the provisions of FAS 159, the Federal Reserve proposes the 
following clarification to the reporting instructions, including the 
Glossary entry for Trading Account.
    BHCs may classify assets (other than securities within the scope of 
FAS 115 for which a fair value option is elected) and liabilities as 
trading if the BHC applies fair value accounting, with changes in fair 
value reported in current earnings, and manages these assets and 
liabilities as trading positions, subject to the controls and 
applicable regulatory guidance related to trading activities. For 
example, a BHC would generally not classify a loan to which it has 
applied the fair value option as a trading asset unless the BHC holds 
the loan, which it manages as a trading position, for one of the 
following purposes: (1) For market making activities, including such 
activities as accumulating loans for sale or securitization, (2) to 
benefit from actual or expected price movements, or (3) to lock in 
arbitrage profits.

Revision of Certain Fair Value Measurement and Fair Value Option 
Information

    Effective for the March 31, 2007, reporting date, the Federal 
Reserve started collecting information on certain assets and 
liabilities measured at fair value on Schedule HC-Q, Financial Assets 
and Liabilities Measured at Fair Value. Schedule HC-Q was intended to 
be consistent with the disclosure and other requirements contained in 
FAS 157 and FAS 159. Based on the Federal Reserve's review of initial 
industry practice and inquiries from BHCs, the Federal Reserve has 
determined that industry practice for preparing and reporting FAS 157 
disclosures has evolved differently than the process for the 
information collected on Schedule HC-Q. This divergence has resulted in 
unnecessary burden and less transparency for the affected BHCs in two 
material respects.
    First, Schedule HC-Q does not allow BHCs to separately identify 
each of the three levels of fair value measurements prescribed by FAS 
157. The Federal Reserve included Level 1 fair value measurements in 
the total fair value amount in column A of Schedule HC-Q as a means of 
minimizing reporting burden. However, the omission of a separate column 
on Schedule HC-Q for Level 1 fair value measurements has increased the 
time BHC management spends preparing and reviewing

[[Page 63584]]

Schedule HC-Q because the fair value disclosures on Schedule HC-Q 
differ from those in the BHCs' other financial statements. Second, 
Schedule HC-Q does not allow BHCs to separately identify any amounts by 
which the gross fair values of assets and liabilities reported for 
Level 2 and 3 fair value measurements included in columns B and C have 
been offset (netted) in the determination of the total fair value 
reported on the balance sheet (Schedule HC), which is disclosed in 
column A of Schedule HC-Q. Based on a review of industry practice, 
these disclosures are commonly made in the BHCs' other financial 
statements.
    To reduce confusion related to the differences in industry practice 
and the FR Y-9C, the Federal Reserve proposes to add two columns to 
Schedule HC-Q to allow BHCs to report any netting adjustments and Level 
1 fair value measurements separately in a manner consistent with 
industry practice. The new columns would be captioned column B, Amounts 
Netted in the Determination of Total Fair Value Reported on Schedule 
HC, and column C, Level 1 Fair Value Measurements. Existing column B, 
Level 2 Fair Value Measurements, and column C, Level 3 Fair Value 
Measurements, of Schedule HC-Q would be recaptioned as columns D and E, 
respectively. Column A would remain unchanged.
    The Federal Reserve has also given further consideration to the 
information that will be necessary to effectively assess the safety and 
soundness of BHCs that utilize the fair value option pursuant to FAS 
159. Based on this assessment, the Federal Reserve proposes to amend 
certain other FR Y-9C schedules to improve the Federal Reserve's 
ability to make comparisons between entities that elect a fair value 
option and those that do not. The primary focus of these proposed 
changes is to enhance the information provided by BHCs that elect the 
fair value option for loans. The proposed changes are based on the 
principal objectives for disclosures and the required disclosures in 
FAS 159, which were intended to provide ``information to enable users 
to understand the differences between fair value and contractual cash 
flows'' and to provide information ``that would have been disclosed if 
the fair value option had not been elected.''
    Specifically, the Federal Reserve proposes to add data items to 
Schedule HC-C, Loans and Leases, to collect data on the loans reported 
in this schedule that are measured at fair value under a fair value 
option: (1) The fair value of such loans measured by major loan 
category, (2) the unpaid principal balance of such loans by major loan 
category, and (3) the aggregate amount of the difference between the 
fair value and the unpaid principal balance of such loans that is 
attributable (a) to changes in the credit risk of the loan since its 
origination and (b) to all other factors. The Federal Reserve seeks 
public comment on: (1) The availability of information necessary to 
separately report the aggregate difference between fair value and the 
unpaid principal that is attributable to changes in credit risk since 
origination, (2) the reliability of estimating the amount attributable 
to changes in credit risk since origination, and (3) ways to minimize 
the burden of collecting information regarding the effect of changes in 
credit risk on the carrying amount of loans measured at fair value.
    Because Schedule HC-C provides data on loans held for investment 
and for sale, the Federal Reserve proposes to add the same data items 
to Schedule HC-D, Trading Assets and Liabilities, for loans measured at 
fair value under a fair value option that are designated as held for 
trading. The Federal Reserve also proposes to add a new data item to 
Schedule HC-D, Other trading liabilities, in recognition of a BHC's 
ability to elect to measure certain liabilities at fair value (for 
example, repurchase agreements) in accordance with FAS 159 and 
designate them as held for trading.
    The Federal Reserve proposes to add two data items to Schedule HC-
N, Past Due and Nonaccrual Loans, Leases, and Other Assets, to collect 
data on the fair value and unpaid principal balance of loans measured 
at fair value under a fair value option that are past due or in 
nonaccrual status. The data items would follow the existing three 
column breakdown on Schedule HC-N that BHCs utilize to report all other 
past due and nonaccrual loans. Since trading assets are not currently 
reported on Schedule HC-N, the Federal Reserve proposes to add similar 
data items to Schedule HC-D to collect the total fair value and unpaid 
principal balance of loans ninety days or more past due that are 
classified as trading based on the loan's contractual maturity. 
Finally, the Federal Reserve proposes to add memoranda items to 
Schedule HI, Income Statement, to collect information on: (1) Net gains 
(losses) recognized in earnings on assets that are reported at fair 
value under a fair value option, (2) estimated net gains (losses) on 
loans attributable to changes in instrument-specific credit risk, (3) 
net gains (losses) recognized in earnings on liabilities that are 
reported at fair value under a fair value option, and (4) estimated net 
gains (losses) on liabilities attributable to changes in the 
instrument-specific credit risk. The Federal Reserve seeks public 
comment on the reliability of estimating the amount of net gains 
(losses) on loans or liabilities attributable to changes in the 
instrument-specific credit risk.

Other Revisions to Information Collected on Trading Assets and 
Liabilities

    Since 2000, the total trading assets reported by FR Y-9C 
respondents has increased approximately 156 percent to over $1.4 
trillion or nearly 11 percent of total industry assets as of March 31, 
2007. In terms of concentrations, approximately 41 percent of total 
trading assets now are either reported in the category of Trading 
assets held in foreign offices (approximately 27 percent of total 
trading assets) or Other trading assets in domestic offices 
(approximately 14 percent of total trading assets). Schedule HC-D, 
Trading Assets and Liabilities, currently does not provide any specific 
detail on the trading assets held in foreign offices or other trading 
assets in domestic offices. This lack of detail limits the Federal 
Reserve's ability to assess BHC exposures to market, liquidity, credit, 
operational, and other risks posed by these assets. To appropriately 
assess the safety and soundness of BHCs with these exposures and BHCs 
with significant concentrations in trading assets, the Federal Reserve 
proposes three revisions to Schedule HC-D.
    First, the Federal Reserve proposes to eliminate the single data 
item for trading assets in foreign offices and revise the schedule to 
include separate columns for the consolidated BHC and for domestic 
offices. This will provide detail on the assets in foreign offices in a 
manner consistent with disclosures about trading assets throughout the 
BHC.
    Second, the Federal Reserve proposes to change the reporting 
threshold for Schedule HC-D. At present, a BHC must complete Schedule 
HC-D each quarter during a calendar year if the BHC reported a 
quarterly average for trading assets of $2 million or more in Schedule 
HC-K, data item 4.a, for any quarter of the preceding calendar year. As 
proposed, Schedule HC-D would be completed in any quarter when the 
quarterly average for trading assets was $2 million or more in Schedule 
HC-K, data item 4.a, in any of the four preceding quarters. This change 
will enable the Federal Reserve to more quickly and readily monitor the 
composition and risk exposures of the

[[Page 63585]]

trading accounts of BHCs that become more significantly involved in 
trading activities. During 2006, eighty-nine BHCs reported average 
trading assets of $2 million or more in any quarter of the year.
    Third, the Federal Reserve proposes to require BHCs with average 
trading assets of $1 billion or more in any of the four preceding 
quarters to provide additional detail on trading assets and liabilities 
included in the currently collected trading asset and liability 
categories. These BHCs would provide additional breakouts for asset-
backed securities by major category, collateralized debt obligations 
(both synthetic and non-synthetic), retained interests in 
securitizations, equity securities (both with and without readily 
determinable fair values), and loans held pending securitization. In 
addition, these BHCs would be required to provide a description of and 
the fair value of any type of trading asset or liability in the Other 
trading assets and Other trading liabilities categories that is greater 
than $25,000 and exceeds 25 percent of the amount reported in that 
trading category.

Reporting Credit Derivative Data for Risk-Based Capital Purposes

    For credit derivative contracts that are covered by the Federal 
Reserve's risk-based capital standards, the FR Y-9C reporting 
instructions require BHCs to report these credit derivatives in data 
item 52, All other off-balance sheet liabilities, of Schedule HC-R, 
Regulatory Capital, unless the credit derivatives represent recourse 
arrangements or direct credit substitutes and are reported in one of 
the preceding data items in the Derivatives and Off-Balance Sheet Items 
section of the schedule. This reporting approach was developed to 
enable BHCs that sold credit protection and held the credit derivative 
to apply a 100-percent risk weight to the notional amount consistent 
with the risk-based capital treatment of standby letters of credit and 
guarantees. At present, Schedule HC-R, data item 54, Derivative 
contracts, specifically excludes credit derivatives and does not 
include a 100-percent risk weight column because the maximum risk 
weight on the counterparty credit risk charge for other types of 
derivatives is 50 percent.
    However, this reporting approach does not consider that some credit 
derivative positions are subject to a counterparty credit risk charge, 
which is calculated for other derivative positions in data item 54, 
even if the credit derivatives are held by a BHC that is subject to the 
market risk capital rules. The Federal Reserve also understands that 
credit derivatives often are included in bilateral netting 
arrangements. When derivatives are subject to such an arrangement, the 
instructions to Schedule HC-R, data item 54, permit a BHC to report a 
net amount representing its exposure to a counterparty for all 
derivative transactions under the bilateral netting arrangement with 
that counterparty. However, by instructing a BHC not to report its 
counterparty credit risk exposure for credit derivatives in Schedule 
HC-R, data item 54, the Federal Reserve is, in effect, requiring the 
BHC to separate its exposures resulting from credit derivatives from 
its net exposure to a counterparty. As a consequence, the BHC is unable 
to recognize the netting benefit in its risk-based capital calculation.
    The Federal Reserve proposes to modify the reporting instructions 
for Schedule HC-R to allow the reporting of the credit equivalent 
amount of credit derivatives subject to the counterparty credit risk 
charge in data item 54 of the schedule. In addition, the Federal 
Reserve proposes to extend the existing 100 percent risk weight column 
in Schedule RC-R to data item 54.

Revision of Reporting Threshold for Other Noninterest Income and Other 
Noninterest Expense

    In 2001, the Federal Reserve changed the threshold for reporting 
detail on the components of Other noninterest income, included in 
Schedule HI, data item 5.l, and Other noninterest expense, reported in 
Schedule HI, data item 7.d, to require BHCs to separately disclose on 
Schedule HI, Memoranda items 6 and 7, the description and amount of any 
component included in other noninterest income and other noninterest 
expense that exceeded 1 percent of the sum of interest income and 
noninterest income. Since that time, the Federal Reserve has monitored 
BHC disclosures of the types of noninterest income and noninterest 
expenses in excess of this threshold to assess the safety and soundness 
considerations associated with the changing sources of these income and 
expense streams. Based on this review, the Federal Reserve has 
determined that the current threshold does not provide sufficient 
information on the sources of BHC noninterest income and noninterest 
expenses to adequately address their safety and soundness concerns. As 
a result, the Federal Reserve proposes to change the threshold for 
reporting detail information on the components of other noninterest 
income and other noninterest expense.
    Prior to 2001, BHCs were required to separately disclose the 
description and amount of any data item included in other noninterest 
income that exceeded 10 percent of other noninterest income and any 
data item included in other noninterest expense that exceeded 10 
percent of other noninterest expense. The Federal Reserve has 
determined that thresholds based on a percentage of other noninterest 
income and other noninterest expense are more relevant criteria for 
determining when a BHC should provide more detail on the components of 
other noninterest income or other noninterest expense, respectively. 
The Federal Reserve proposes to change the threshold to require BHCs to 
separately disclose the description and amount of any data item 
included in other noninterest income that exceeds 3 percent of other 
noninterest income and any data item included in other noninterest 
expense that exceeds 3 percent of other noninterest expense. This 
percentage is intended to initially result in a level of disclosure 
detail that is comparable to the current 1 percent of interest income 
plus noninterest income threshold. It is also expected to provide more 
relevant disclosures than the current threshold as the amounts reported 
in noninterest income and noninterest expense change over time.
    In addition, based on a review of recent BHC disclosures of 
components of other noninterest income and other noninterest expense 
reported in Schedule HI, Memoranda items 6 and 7, the Federal Reserve 
proposes to add one new preprinted caption for other noninterest income 
and four new preprinted captions for other noninterest expense to help 
BHCs comply with the disclosure requirements. As with the existing 
preprinted captions for other noninterest income and other noninterest 
expense, BHCs are only required to use these descriptions and provide 
the amounts for these components when the amounts included in other 
noninterest income or other noninterest expense exceed the reporting 
threshold. The new preprinted other noninterest income caption is bank 
card and credit card interchange fees. The new preprinted noninterest 
expense captions are accounting and auditing expenses, consulting and 
advisory expenses, automated teller machine (ATM) and interchange 
expenses, and telecommunications expenses.

[[Page 63586]]

Reporting Brokered Time Deposits Participated Out by the Broker

    The Federal Reserve revised the instructions for Schedule HC-E, 
data items 1.d, Time deposits of less than $100,000, 1.e, Total time 
deposits of $100,000 or more, held in domestic offices of commercial 
bank subsidiaries, 2.d, Time deposits of less than $100,000 and 2.e., 
Time deposits of $100,000 or more, held in domestic offices of 
subsidiary depository institutions other than commercial banks, in 
March 2007, so that brokered time deposits issued in denominations of 
$100,000 or more that are participated out by the broker in shares of 
less than $100,000 would be reported in data items 1.d and 2.d rather 
than in data items 1.e and 2.e. However, the conforming instructional 
revision to Schedule HC-E, Memoranda items 1, 2, and 3, was not made to 
the FR Y-9C for collecting information on maturity breakdowns of 
brokered deposits and time deposits, which means that these 
participated brokered time deposits continue to be reported as brokered 
deposits of greater than $100,000 rather than brokered deposits of less 
than $100,000. Consistent reporting of these brokered time deposits 
across these Schedule HC-E memoranda items is needed for purposes of 
measuring a BHC's non-core liabilities. Therefore, the Federal Reserve 
proposes to revise Schedule HC-E, Memoranda items 1, 2, and 3, so that 
brokered time deposits issued in denominations of $100,000 or more that 
are participated out by the broker in shares of less than $100,000 are 
reported in Memoranda items 1 and 2 and not reported in Memorandum item 
3.

FR Y-9LP

    The Federal Reserve proposes to make the following revisions to the 
FR Y-9LP effective as of March 31, 2008. These proposed revisions are 
not related to the revisions proposed to the Call Report.

Reporting on Fair Value Measurements and the Use of the Fair Value 
Option

    On September 15, 2006, FASB issued FAS 157, which is effective for 
BHCs and other entities for fiscal years beginning after November 15, 
2007. The fair value measurements standard provides guidance on how to 
measure fair value and describes the type of inputs used to measure 
fair value based on a three-level hierarchy for all assets and 
liabilities that are re-measured at fair value on a recurring basis.\4\
---------------------------------------------------------------------------

    \4\ The FASB's three-level fair value hierarchy gives the 
highest priority to quoted prices in active markets for identical 
assets or liabilities (Level 1) and the lowest priority to 
unobservable inputs (Level 3). Level 1 inputs are quoted prices in 
active markets for identical assets or liabilities that the 
reporting BHC has the ability to access at the measurement date 
(e.g., the FR Y-9LP or FR Y-9SP reporting date). Level 2 inputs are 
inputs other than quoted prices included within Level 1 that are 
observable for the asset or liability, either directly or 
indirectly. Level 3 inputs are unobservable inputs for the asset or 
liability.
---------------------------------------------------------------------------

    As previously mentioned, on February 15, 2007, FASB issued FAS 159, 
which is effective for fiscal years beginning after November 15, 2007. 
The FASB's Fair Value Option standard allows BHCs and other entities to 
report certain financial assets and liabilities at fair value with the 
changes in fair value included in earnings.
    FAS 159 can be applied on a contract by contract basis. Currently 
there is no means to determine to what extent the reporting entity is 
applying this standard and the basis used to value assets and 
liabilities. Therefore, the Federal Reserve proposes to add two new 
memoranda items to Schedule PC, Parent Company Only Balance Sheet, and 
one new memorandum item to Schedule PI, Income Statement, that would be 
completed by BHCs that have adopted FAS 157 and have elected to account 
for financial instruments or servicing assets and liabilities on the 
books of the parent BHC at fair value under a fair value option. The 
Federal Reserve proposes to add to Schedule PC, Memorandum item 1, 
Financial assets and liabilities measured at fair value, collecting 
data in Memoranda items 1.a, Total assets and 1.b, Total liabilities. 
The Federal Reserve proposes to add to Schedule PI, Memorandum item 5, 
Net change in fair values of financial instruments accounted for under 
a fair value option.

Revisions Related to the Reporting of Cash Flows

    The Federal Reserve proposes to add two new data items to Schedule 
PI-A, Cash Flow Statement, Part II, Cash Flows from Investing 
Activities for Outlays for business acquisitions and Proceeds from 
business divestitures. Collection of this information is important for 
the analysis of the consolidation of the banking industry. 
Specifically, this information would provide the Federal Reserve a 
better understanding not only of the effects of mergers of whole 
entities, but also of acquisitions or disposals of major business 
operations as part of BHCs' corporate strategies. In addition, BHCs 
typically provide similar information in public financial statements 
filed with the Securities and Exchange Commission (SEC). However, such 
information provided by BHCs in their SEC filings is not standardized 
across filers, is not necessarily provided by all BHCs involved in 
acquisitions and divestitures, and is not available from non-public 
BHCs.
    Based on industry comment on ways to reduce reporting burden, the 
Federal Reserve also proposes to combine the reporting of two data 
items on Schedule PI-A, Part III, Cash Flows from Financing Activities. 
Data item 1, Proceeds from purchased funds and other short-term 
borrowings, and data item 2, Repayments of purchased funds and other 
short-term borrowings, would be combined into a single data item for 
Net change in purchased funds and other short-term borrowings. The 
Federal Reserve has determined that collection of these data items on a 
gross basis is no longer needed.

FR Y-9SP

    The Federal Reserve proposes to make the following revisions to the 
FR Y-9SP effective as of June 30, 2008. These proposed revisions are 
not related to the revisions proposed to the Call Report.

Reporting on Fair Value Measurements and the Use of the Fair Value 
Option

    The Federal Reserve proposes to add two new memoranda items to 
Schedule SC, Balance Sheet, and one new memorandum item to Schedule SI, 
Income Statement, that would be completed by BHCs that have adopted FAS 
157 and have elected to account for financial instruments or servicing 
assets and liabilities on the books of the parent BHC at fair value 
under a fair value option. The Federal Reserve proposes to add to 
Schedule SC, Memorandum item 3, Financial assets and liabilities 
measured at fair value, collecting data in Memoranda items 3.a, Total 
assets, and 3.b, Total liabilities. The Federal Reserve proposes to add 
to Schedule SI, Memorandum item 4, Net change in fair values of 
financial instruments accounted for under a fair value option.
    2. Report title: Financial Statements for Nonbank Subsidiaries of 
U.S. Bank Holding Companies.
    Agency form number: FR Y-11 and FR Y-11S
    OMB control number: 7100-0244
    Frequency: Quarterly and annually.
    Reporters: Bank holding companies.
    Annual reporting hours: FR Y-11 (quarterly): 10,752; FR Y-11 
(annual): 1,402; FR Y-11S (annual): 471.
    Estimated average hours per response: FR Y-11 (quarterly): 6.40; FR 
Y-11 (annual): 6.40; FR Y-11S (annual): 1.0.
    Number of respondents: FR Y-11 (quarterly): 420; FR Y-11 (annual): 
219; FR Y-11S (annual): 471.

[[Page 63587]]

    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)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-11 reports collect financial information for 
individual non-functionally regulated U.S. nonbank subsidiaries of 
domestic bank holding companies (BHCs). BHCs file the FR Y-11 on a 
quarterly or annual basis according to filing criteria or file the FR 
Y-11S annually. The FR Y-11 data are used with other BHC data to assess 
the condition of BHCs that are heavily engaged in nonbanking activities 
and to monitor the volume, nature, and condition of their nonbanking 
operations.
    Current Actions: The Federal Reserve proposes to eliminate 
reporting by subsidiaries that were created for the purposes of issuing 
trust preferred securities (trust preferred securities subsidiaries) to 
substantially reduce burden on the industry and, in this regard, make 
the report consistent with the proposed revision to the other nonbank 
subsidiary reports, the Financial and Abbreviated Financial Statements 
of Foreign Subsidiaries of U.S. Banking Organizations (FR 2314/S; OMB 
No. 7100-0073) and the Financial and Abbreviated Financial Statements 
of U.S. Nonbank Subsidiaries Held by Foreign Banking Organizations (FR 
Y-7N/NS; OMB No. 7100-0125). The Federal Reserve also proposes to 
collect: (1) Certain data on the FR Y-11 from all institutions that 
choose, under generally accepted accounting principles, to apply a fair 
value option to one or more financial instruments and one or more 
classes of servicing assets and liabilities and (2) a new data item on 
the income statement to collect fees and commissions from annuity 
sales. On the FR Y-11S, the Federal Reserve proposes to add a question 
to determine whether the subsidiary has adopted a fair value option. 
The Federal Reserve also requests latitude to modify proposed revisions 
to the FR Y-11/S to be consistent with any proposed revisions and 
instructional changes to the Consolidated Financial Statements for Bank 
Holding Companies (FR Y-9C; OMB No. 7100-0128) for implementation in 
2008. Lastly, the Federal Reserve proposes to add clarifying language 
to the instructions for the reporting of trading revenue and 
noninterest income from related organizations.

Revisions to the Reporting Panel

    The Federal Reserve proposes eliminating reporting by BHCs for 
their trust preferred securities subsidiaries to reduce burden on the 
industry. As of December 2006, BHCs filed approximately 2,100 nonbank 
subsidiary reports for their trust preferred securities subsidiaries 
quarterly and annually with the Federal Reserve, 2,046 of which were FR 
11/S filers.\5\ Of the FR Y-11/S submissions, over half file the 
detailed FR Y-11 on an annual or quarterly basis. If reporting for 
trust preferred securities subsidiaries is eliminated, the number of 
subsidiaries for which BHCs report the FR Y-11/S quarterly and annually 
would be reduced by approximately 65 percent, from 3,156 to 1,110 
subsidiaries. The remaining panel would still represent more than 96 
percent of total nonbank assets currently reported on the FR Y-11/S.
---------------------------------------------------------------------------

    \5\ As of December 2006, foreign banking organizations filed 
fifty-four FR Y-7N/NS reports for their trust preferred securities 
subsidiaries. No parent organizations filed the FR 2314 for their 
trust preferred securities subsidiaries.
---------------------------------------------------------------------------

    Eliminating reporting for trust preferred securities subsidiaries 
will not compromise essential information. The essential information 
for analysts can be obtained from the parent company-only financial 
statements. Information reported for trust preferred securities 
subsidiaries in these nonbank reports pertains primarily to the 
establishment of the trust and the issuance of trust preferred 
securities. As expected, the largest asset reported on the quarterly 
reports was the ``balances due from the parent,'' which represented the 
loan from the nonbank to the parent BHC in the trust preferred 
securities arrangement.
    Minimal information other than information related to the trust 
preferred securities is provided on the nonbank reports filed for trust 
preferred securities subsidiaries. If warranted for supervisory 
purposes, the Federal Reserve could request individual financial 
statements and other information from BHCs for their trust preferred 
securities subsidiaries.

Reporting on Fair Value Measurements and the Use of the Fair Value 
Option

    On September 15, 2006, the Financial Accounting Standards Board 
(FASB) issued Statement No. 157, Fair Value Measurements (FAS 157), 
which is effective for BHCs and other entities for fiscal years 
beginning after November 15, 2007. The fair value measurements standard 
provides guidance on how to measure fair value and describes the type 
of inputs used to measure fair value based on a three-level hierarchy 
for all assets and liabilities that are re-measured at fair value on a 
recurring basis.\6\
---------------------------------------------------------------------------

    \6\ The FASB's three-level fair value hierarchy gives the 
highest priority to quoted prices in active markets for identical 
assets or liabilities (Level 1) and the lowest priority to 
unobservable inputs (Level 3). Level 1 inputs are quoted prices in 
active markets for identical assets or liabilities that the 
reporting subsidiary has the ability to access at the measurement 
date (e.g., the FR Y-11 reporting date). Level 2 inputs are inputs 
other than quoted prices included within Level 1 that are observable 
for the asset or liability, either directly or indirectly. Level 3 
inputs are unobservable inputs for the asset or liability.
---------------------------------------------------------------------------

    The FASB issued Statement No. 159, The Fair Value Option for 
Financial Assets and Financial Liabilities (FAS 159), on February 15, 
2007, which is effective for fiscal years beginning after November 15, 
2007. This standard allows BHCs and other entities to report certain 
financial assets and liabilities at fair value with the changes in fair 
value included in earnings.
    FAS 159 can be applied on a contract by contract basis. Currently 
there is no means to determine to what extent the reporting entity is 
applying this standard and the basis used to value assets and 
liabilities. Therefore, the Federal Reserve proposes to add two new 
memoranda items to Schedule BS, Balance Sheet, and one new memorandum 
item to Schedule IS, Income Statement, that would be completed by BHCs 
that have elected to account for financial instruments or servicing 
assets and liabilities on the books of the subsidiary at fair value 
under a fair value option. The Federal Reserve proposes to add to 
Schedule BS, Memoranda item 1, Financial assets and liabilities 
measured at fair value under a fair value option, collecting data in 
Memoranda items 1.a., Total assets and 1.b, Total liabilities. The 
Federal Reserve proposes to add to Schedule IS, Income Statement, 
Memoranda item 2, Net change in fair values of financial instruments 
accounted for under a fair value option. The Federal Reserve also 
proposes to add to the FR Y-11S the question, ``Has the nonbank 
subsidiary elected to account for certain assets and liabilities under 
a fair value option with changes in fair value recognized in 
earnings?'' to determine whether the subsidiary has adopted a fair 
value option.

Schedule IS-Income Statement

    The Federal Reserve proposes to add a new data item 5.a.(9), Fees 
and commissions from annuity sales.

[[Page 63588]]

Currently, subsidiaries report income from sales of annuities in data 
item 5.a.(4), Investment banking, advisory, brokerage, and underwriting 
fees and commissions. Since fixed annuities are considered insurance 
products and variable annuities may be considered both insurance and 
securities products, a separate data item is deemed warranted to 
specifically capture revenues from annuities. Moreover, the above data 
item commingles income from the sale of annuities with noninterest 
income from a variety of activities and a separate item will assist the 
Federal Reserve in more clearly distinguishing the subsidiaries' 
sources of noninterest income.
    3. Report title: Financial Statements of Foreign Subsidiaries of 
U.S. Banking Organizations.
    Agency form number: FR 2314 and FR 2314S.
    OMB control number: 7100-0073.
    Frequency: Quarterly and annually.
    Reporters: Foreign subsidiaries of U.S. state member banks, bank 
holding companies, and Edge or agreement corporations.
    Annual reporting hours: FR 2314 (quarterly): 5,581; FR 2314 
(annual): 1,075; FR 2314S (annual): 272.
    Estimated average hours per response: FR 2314 (quarterly): 6.40; FR 
2314 (annual): 6.40; FR 2314S (annual): 1.0.
    Number of respondents: FR 2314 (quarterly): 218; FR 2314 (annual): 
168; FR 2314S (annual): 272.
    General description of report: This information collection is 
mandatory (12 U.S.C. 324, 602, 625, and 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) and (b)(8) of the Freedom of 
Information Act [5 U.S.C. 522(b)(4) (b)(6) and (b)(8)].
    Abstract: The FR 2314 reports collect financial information for 
non-functionally regulated direct or indirect foreign subsidiaries of 
U.S. state member banks (SMBs), Edge and agreement corporations, and 
BHCs. Parent organizations (SMBs, Edge and agreement corporations, or 
BHCs) file the FR 2314 on a quarterly or annual basis according to 
filing criteria or file the FR 2314S annually. The FR 2314 data are 
used to identify current and potential problems at the foreign 
subsidiaries of U.S. parent companies, to monitor the activities of 
U.S. banking organizations in specific countries, and to develop a 
better understanding of activities within the industry, in general, and 
of individual institutions, in particular.
    Current actions: The Federal Reserve proposes to eliminate 
reporting by subsidiaries that were created for the purposes of issuing 
trust preferred securities (trust preferred securities subsidiaries) to 
substantially reduce burden on the industry and, in this regard, make 
the report consistent with the proposed revision to the other nonbank 
subsidiary reports, the Financial and Abbreviated Financial Statements 
of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies (FR Y-11/S; 
OMB No. 7100-0244) and the Financial and Abbreviated Financial 
Statements of U.S. Nonbank Subsidiaries Held by Foreign Banking 
Organizations (FR Y-7N/NS; OMB No. 7100-0125). The Federal Reserve also 
proposes to collect: (1) Certain data on the FR 2314 from all 
institutions that choose, under generally accepted accounting 
principles, to apply a fair value option to one or more financial 
instruments and one or more classes of servicing assets and liabilities 
and (2) a new data item on the income statement to collect fees and 
commissions from annuity sales. On the FR 2314S, the Federal Reserve 
proposes to add a question to determine whether the subsidiary has 
adopted a fair value option. The Federal Reserve also requests latitude 
to modify proposed revisions to the FR 2314/S to be consistent with any 
proposed revisions and instructional changes to the Consolidated 
Financial Statements for Bank Holding Companies (FR Y-9C; OMB No. 7100-
0128) for implementation in 2008. Lastly, the Federal Reserve proposes 
to add clarifying language to the instructions for the reporting of 
trading revenue and noninterest income from related organizations.

Revisions to the Reporting Panel

    The Federal Reserve proposes eliminating reporting by BHCs for 
their trust preferred securities subsidiaries to reduce burden on the 
industry. As of December 2006, BHCs filed approximately 2,100 nonbank 
subsidiary reports for their trust preferred securities subsidiaries 
quarterly and annually with the Federal Reserve.\7\ Eliminating 
reporting for trust preferred securities subsidiaries will not 
compromise essential information. The essential information for 
analysts can be obtained from the parent company-only financial 
statements. Information reported for trust preferred securities 
subsidiaries in these nonbank reports pertains primarily to the 
establishment of the trust and the issuance of trust preferred 
securities. As expected, the largest asset reported on the quarterly 
reports was the ``balances due from the parent,'' which represented the 
loan from the nonbank to the parent BHC in the trust preferred 
securities arrangement.
---------------------------------------------------------------------------

    \7\ No parent organizations filed the FR 2314 for their trust 
preferred securities subsidiaries.
---------------------------------------------------------------------------

    Minimal information other than information related to the trust 
preferred securities is provided on the nonbank reports filed for trust 
preferred securities subsidiaries. If warranted for supervisory 
purposes, the Federal Reserve could request individual financial 
statements and other information from BHCs for their trust preferred 
securities subsidiaries.

Reporting on Fair Value Measurements and the Use of the Fair Value 
Option

    On September 15, 2006, the Financial Accounting Standards Board 
(FASB) issued Statement No. 157, Fair Value Measurements (FAS 157), 
which is effective for BHCs and other entities for fiscal years 
beginning after November 15, 2007. The fair value measurements standard 
provides guidance on how to measure fair value and describes the type 
of inputs used to measure fair value based on a three-level hierarchy 
for all assets and liabilities that are re-measured at fair value on a 
recurring basis.\8\
---------------------------------------------------------------------------

    \8\ The FASB's three-level fair value hierarchy gives the 
highest priority to quoted prices in active markets for identical 
assets or liabilities (Level 1) and the lowest priority to 
unobservable inputs (Level 3). Level 1 inputs are quoted prices in 
active markets for identical assets or liabilities that the 
reporting subsidiary has the ability to access at the measurement 
date (e.g., the FR 2314 reporting date). Level 2 inputs are inputs 
other than quoted prices included within Level 1 that are observable 
for the asset or liability, either directly or indirectly. Level 3 
inputs are unobservable inputs for the asset or liability.
---------------------------------------------------------------------------

    The FASB issued Statement No. 159, The Fair Value Option for 
Financial Assets and Financial Liabilities (FAS 159), on February 15, 
2007, which is effective for fiscal years beginning after November 15, 
2007. This standard allows BHCs and other entities to report certain 
financial assets and liabilities at fair value with the changes in fair 
value included in earnings.
    FAS 159 can be applied on a contract by contract basis. Currently 
there is no means to determine to what extent the reporting entity is 
applying this standard and the basis used to value assets and 
liabilities. Therefore, the Federal Reserve proposes to add two new 
memoranda items to Schedule BS, Balance Sheet, and one new memorandum 
item to Schedule IS,

[[Page 63589]]

Income Statement, that would be completed by BHCs that have elected to 
account for financial instruments or servicing assets and liabilities 
on the books of the subsidiary at fair value under a fair value option. 
The Federal Reserve proposes to add to Schedule BS, Memoranda item 1, 
Financial assets and liabilities measured at fair value under a fair 
value option, collecting data in Memoranda items 1.a., Total assets and 
1.b, Total liabilities. The Federal Reserve proposes to add to Schedule 
IS, Income Statement, Memoranda item 2, Net change in fair values of 
financial instruments accounted for under a fair value option. The 
Federal Reserve also proposes to add to the FR 2314S the question, 
``Has the nonbank subsidiary elected to account for certain assets and 
liabilities under a fair value option with changes in fair value 
recognized in earnings?'' to determine whether the subsidiary has 
adopted a fair value option.

Schedule IS-Income Statement

    The Federal Reserve proposes to add a new data item 5.a.(9), Fees 
and commissions from ann