Proposed Agency Information Collection Activities; Comment Request, 54807-54822 [E8-22258]

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 73, Number 185 (Tuesday, September 23, 2008)]
[Notices]
[Pages 54807-54822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22258]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


Proposed Agency Information Collection Activities; Comment 
Request

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: Joint notice and request for comment.

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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. The Federal Financial Institutions Examination Council 
(FFIEC), of which the agencies are members, has approved the agencies' 
publication for public comment of a proposal to extend, with revision, 
the Consolidated Reports of Condition and Income (Call Report), which 
are currently approved collections of information. At the end of the 
comment period, the comments and recommendations received will be 
analyzed to determine the extent to which the FFIEC and the agencies 
should modify the proposed revisions prior to giving final approval. 
The agencies will then submit the revisions to OMB for review and 
approval.

DATES: Comments must be submitted on or before November 24, 2008.

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 should direct all written comments to: Communications 
Division, Office of the Comptroller of the Currency, Public Information 
Room, Mailstop 1-5, Attention: 1557-0081, 250 E Street, SW., 
Washington, DC 20219. In addition, comments may be sent by fax to (202) 
874-4448, or by electronic mail to regs.comments@occ.treas.gov. For 
security reasons, the OCC requires that visitors make an appointment to 
inspect comments. You may do so by calling (202) 874-5043. Upon 
arrival, visitors will be required to present valid government-issued 
photo identification and submit to security screening in order to 
inspect and photocopy comments.
    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/propose.html. Follow the instructions for submitting comments 
on the FDIC Web site.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: comments@FDIC.gov. Include ``Consolidated Reports 
of Condition and Income, 3064-0052'' in the subject line of the 
message.
     Mail: Herbert J. Messite (202-898-6834), Counsel, Attn: 
Comments, Room F-1052, 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.

[[Page 54808]]

    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/regulations/laws/federal/propose.html 
including any personal information provided.
    Additionally, commenters may 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 the 
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, (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. Shore, Federal Reserve Board 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: Herbert J. Messite, Counsel, (202) 898-6834, Legal Division, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.

SUPPLEMENTARY INFORMATION: The agencies are proposing to revise and 
extend for three years the Call Report, which are currently approved 
collections of information.
    Report Title: Consolidated Reports of Condition and Income (Call 
Report).
    Form Number: Call Report: 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: 1,650 national banks.
    Estimated Time per Response: 46.24 burden hours.
    Estimated Total Annual Burden: 305,237 burden hours.

Board

    OMB Number: 7100-0036.
    Estimated Number of Respondents: 874 state member banks.
    Estimated Time per Response: 52.82 burden hours.
    Estimated Total Annual Burden: 184,653 burden hours.

FDIC

    OMB Number: 3064-0052.
    Estimated Number of Respondents: 5,162 insured state nonmember 
banks.
    Estimated Time per Response: 36.88 burden hours.
    Estimated Total Annual Burden: 761,498 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 650 hours per quarter, 
depending on an individual institution's circumstances.

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). At 
present, except for selected data items, these information collections 
are not given confidential treatment.

Abstract

    Institutions submit Call Report data to the agencies each quarter 
for the agencies' use in monitoring the condition, performance, and 
risk profile of individual institutions and the industry as a whole. 
Call Report data provide the most current statistical data available 
for evaluating institutions' corporate applications, for identifying 
areas of focus for both on-site and off-site examinations, and for 
monetary and other public policy purposes. The agencies use Call Report 
data in evaluating interstate merger and acquisition applications to 
determine, as required by law, whether the resulting institution would 
control more than ten percent of the total amount of deposits of 
insured depository institutions in the United States. Call Report data 
are also used to calculate institutions' deposit insurance and 
Financing Corporation assessments and national banks' semiannual 
assessment fees.

Current Actions

I. Overview

    The agencies are proposing to implement several changes to the Call 
Report requirements on a phased-in basis during 2009 to better support 
their surveillance and supervision of individual banks and enhance 
their monitoring of the industry's condition and performance. The 
proposed revisions reflect a thorough and careful review of the 
agencies' data needs in a variety of areas as banks encounter the most 
turbulent environment in more than a decade. Thus, the revisions 
include new items that focus on areas in which the banking industry is 
facing heightened risk as a result of market turmoil and illiquidity 
and weakening economic and credit conditions. Where possible, the 
agencies have sought to establish reporting thresholds for proposed new 
items. Other proposed new items will be relevant to only a small 
percentage of banks. The proposed revisions are discussed in detail in 
sections II.A through IV.F of this notice.
    In their review of data needs in the current environment, the 
agencies concluded that additional information on banks' securitization 
and structured finance activities would assist the agencies in 
evaluating the nature and scope of banks' involvement with the 
traditionally off-balance sheet entities that issue these products. 
However, the Financial Accounting Standards Board (FASB) is proposing 
to amend the accounting standards governing the accounting for 
financial asset transfers and the consolidation of variable interest 
entities in a manner that may cause a substantial volume of assets in 
bank-sponsored entities to be brought onto bank balance sheets. 
Therefore, the agencies have decided to wait until the outcome of the 
FASB's amendment projects is clearer and the effect of the accounting 
changes on banks' securitization and structured finance activities can 
be evaluated before proposing to revise the information currently 
collected on these activities in Schedule RC-S, Servicing, 
Securitization, and Asset Sale Activities. Depending on the outcome of 
the amendments (including their effective date) and their impact on 
banks, the agencies may decide that they are confronted with an 
immediate and critical need for specific information pertaining to the 
securitization and structured finance activities significantly affected 
by the amended accounting standards. If that were the case, the 
agencies would consider using the previously approved supplement to the 
Call Report to collect the necessary data for a limited time period in 
accordance with the policy established for the use of the 
supplement.\1\ The agencies' ongoing

[[Page 54809]]

Call Report data needs in this area in response to the amended 
accounting standards would then be incorporated into a formal proposal 
that the agencies would publish with a request for comment in 
accordance with the requirements of the Paperwork Reduction Act of 
1995.
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    \1\ See 67 Federal Register 3995, January 27, 2004.
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    The agencies' review also identified a need for data on higher risk 
1-4 family residential mortgage loans, often referred to as subprime 
mortgages, that are either held by banks or serviced for others and on 
residential mortgage-backed securities for which a significant portion 
of the underlying mortgage loans are higher risk. The agencies will be 
developing a separate reporting proposal that would request industry 
comment on the collection of information in the Call Report on these 
higher risk residential mortgages and residential mortgage-backed 
securities, including proposed definitions for such mortgages and 
securities. The proposal would be published in the Federal Register and 
the comments received would assist the agencies in determining whether 
and how to proceed with the collection of data on these mortgages and 
securities in the Call Report.
    With respect to the proposed Call Report changes that are the 
subject of this proposal, the revisions that would take effect as of 
March 31, 2009, include:
     The addition of new items in response to a revised 
accounting standard that will provide information on held-for-
investment loans and leases acquired in business combinations;
     Revisions to several Call Report schedules in response to 
accounting changes applicable to noncontrolling (minority) interests in 
consolidated subsidiaries;
     Clarifications of the definition of the term ``loan 
secured by real estate'' and of the instructions for reporting unused 
commitments;
     The addition of a new item to be reported annually on the 
bank's fiscal year-end date;
     Exemptions from reporting certain existing Call Report 
items for banks with less than $1 billion in total assets;
     Instructional guidance on quantifying misstatements in the 
Call Report; and
     The elimination of confidential treatment for data 
collected on fiduciary income, expenses, and losses.
    The proposed Call Report revisions to be implemented as of June 30, 
2009, include new or revised items for:
     Real estate construction and development loans outstanding 
with capitalized interest and the amount of such interest included in 
income for the quarter (for banks with construction and development 
loan concentrations);
     Holdings of collateralized debt obligations and other 
structured financial products by type of product and underlying 
collateral;
     Holdings of commercial mortgage-backed securities;
     Unused commitments with an original maturity of one year 
or less to asset-backed commercial paper conduits;
     Fair value measurements by level for asset and liability 
categories reported at fair value on a recurring basis (for banks that 
have $500 million or more in total assets, apply a fair value option, 
or are required to complete the Call Report trading schedule);
     Pledged loans and pledged trading assets;
     Collateral held against over-the-counter (OTC) derivative 
exposures by type of collateral and type of counterparty as well as the 
current credit exposure on OTC derivatives by type of counterparty (for 
banks with $10 billion or more in total assets);
     Remaining maturities of unsecured other borrowings and 
subordinated notes and debentures;
     Investments in real estate ventures;
     Held-to-maturity and available-for-sale securities in 
domestic offices (for banks that have both domestic and foreign 
offices);
     Past due and nonaccrual trading assets;
     Credit derivatives by credit quality and remaining 
maturity and by regulatory capital treatment; and
     Whether the bank is a trustee or custodian for certain 
types of accounts or provides certain services in connection with 
orders for securities transactions regardless of whether the bank 
exercises trust powers, which will take the form of yes/no questions.
    The proposed Call Report revisions that would take effect December 
31, 2009, apply only to Schedule RC-T, Fiduciary and Related Services. 
These revisions include:
     Breaking out foundations and endowments as well as 
investment advisory agency accounts as separate types of fiduciary 
accounts in the schedule's sections for reporting fiduciary and related 
assets and income;
     Adding items for Individual Retirement Accounts and 
similar accounts included in fiduciary and related assets;
     Expanding the breakdown of managed assets by type of asset 
to cover all types of fiduciary accounts;
     Adding new asset types in the breakdown of managed assets 
by type of asset;
     Revising the manner in which discretionary investments in 
common trust funds and collective investment funds are reported in the 
breakdown of managed assets by type of asset;
     Adding items for the market value of discretionary 
investments in proprietary mutual funds and the number of managed 
accounts holding such investments; and
     Adding items for the number and principal amount 
outstanding of debt issues in substantive default for which the 
institution serves as indenture trustee.
    For the March 31, June 30, and December 31, 2009, report dates, 
banks may provide reasonable estimates for any new or revised Call 
Report item initially required to be reported as of that date for which 
the requested information is not readily available. The specific 
wording of the captions for the new or revised Call Report data items 
discussed in this proposal and the numbering of these data items should 
be regarded as preliminary.
    Type of Review: Revision and extension of currently approved 
collections.

II. Discussion of Revisions Proposed for March 2009

A. Loans and Leases Acquired in Business Combinations
    Banks must apply Statement of Financial Accounting Standards No. 
141 (Revised), Business Combinations (FAS 141(R)), which was issued in 
December 2007, prospectively to business combinations for which the 
acquisition date is on or after the beginning of their first annual 
reporting period beginning on or after December 15, 2008. Thus, for 
banks with calendar year fiscal years, FAS 141(R) will apply to 
business combinations with acquisition dates on or after January 1, 
2009. Under FAS 141(R), all business combinations are to be accounted 
for by applying the acquisition method.
    Under current generally accepted accounting principles, loans to be 
held for investment that are acquired in a business combination 
accounted for using the purchase method generally are recorded at 
``present values of amounts to be received determined at appropriate 
current interest rates, less allowances'' for loan and lease losses 
(ALLL).\2\ Thus,

[[Page 54810]]

in practice, an acquired bank's ALLL generally is carried over to the 
acquiring bank's (consolidated) balance sheet. In contrast, under FAS 
141(R), a bank acquiring loans to be held for investment in a business 
combination accounted for using the acquisition method must record 
these loans at fair value. The fair value of these loans incorporates 
assumptions regarding credit risk. As a result, FAS 141(R) does not 
permit an acquiring bank to carry over the acquired bank's ALLL. This 
same prohibition on carrying over the ALLL would apply in those 
situations when a bank must apply push down accounting, which is the 
establishment of a new accounting basis for a bank in its separate 
financial statements and its Call Report as a result of the bank 
becoming substantially wholly owned via a purchase transaction or a 
series of purchase transactions.
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    \2\ See Statement of Financial Accounting Standards No. 141, 
Business Combinations (FAS 141), paragraph 57(b). This accounting 
treatment does not apply to those acquired loans within the scope of 
American Institute of Certified Public Accountants Statement of 
Position 03-3, Accounting for Certain Loans or Debt Securities 
Acquired in a Transfer (SOP 03-03).
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    Because of this significant change in the accounting for acquired 
loans, paragraph 68(h) of FAS 141(R) requires the following disclosures 
about the loans (not subject to SOP 03-3) and leases that were acquired 
in each business combination that occurred during the reporting period:
     The fair value of the loans and leases;
     The gross contractual amounts receivable; and
     The best estimate at the acquisition date of the 
contractual cash flows not expected to be collected.
    These disclosures are intended to assist users of financial 
statements in understanding the credit quality and collectibility of 
the acquired loans and leases at the time of their acquisition. 
Accordingly, and in recognition of this significant change in 
accounting practice for business combinations, the agencies are 
proposing to add new items to the Call Report that would encompass the 
three acquisition date disclosures required by FAS 141(R) cited above 
for the following categories of acquired held-for-investment loans (not 
subject to SOP 03-3) and leases:
     Loans secured by real estate;
     Commercial and industrial loans;
     Loans to individuals for household, family, and other 
personal expenditures; and
     All other loans and all leases.
    These new items would be completed by banks that have engaged in 
business combinations that must be accounted for in accordance with FAS 
141(R) or that have been involved in push down accounting transactions 
to which the measurement principles in FAS 141(R) apply, i.e., in 
general, transactions for which the acquisition date is on or after 
January 1, 2009. A bank that has completed one or more business 
combinations or has applied push down accounting during the current 
calendar year would report these acquisition date data (as aggregate 
totals if multiple business combinations have occurred) in each Call 
Report submission after the acquisition date during that year.
    The agencies are also considering whether banks that have engaged 
in FAS 141(R) business combinations should provide additional 
information in the Call Report about the acquired held-for-investment 
loans (not subject to SOP 03-3) and leases and the loss allowances 
established for them in periods after their acquisition. The agencies 
are considering requiring banks to report the outstanding balance of 
these acquired loans and leases, their carrying amount, and the amount 
of the allowance for post-acquisition losses on these loans and leases, 
which is consistent with the information that banks currently report in 
the Call Report about ``purchased impaired loans'' accounted for in 
accordance with SOP 03-3. Since these purchased loans will be recorded 
at fair value at acquisition, this information would help the agencies 
and other users of the Call Report to track management's judgments 
regarding the collectibility of the acquired loans and leases in 
periods after the acquisition date and evaluate fluctuations in the 
level of the overall ALLL as a percentage of the held-for-investment 
loan and lease portfolio in periods after a business combination. 
However, the agencies recognize that information about acquired loans 
and leases and related allowances will become less useful from an 
analytical standpoint with the passage of time after a business 
combination.
    The agencies request comment on the merits and availability of the 
post-acquisition loan and lease data described above that are being 
considered for possible addition to the Call Report and the period of 
time after a business combination this information should be reported 
(e.g., through the end of the calendar year of the acquisition, through 
the end of the calendar year after the year of the acquisition, for a 
longer period, or for some other period such as the first four calendar 
quarters after the acquisition).
B. Noncontrolling Interests in Consolidated Financial Statements
    In December 2007, the FASB issued Statement No. 160, Noncontrolling 
Interests in Consolidated Financial Statements (FAS 160). FAS 160 
requires a bank to clearly present in its consolidated financial 
statements the equity ownership interest in and the financial statement 
results of its subsidiaries that are attributable to the noncontrolling 
ownership interests in these subsidiaries. FAS 160 defines a 
noncontrolling interest, also called a minority interest, as the 
portion of equity in a bank's subsidiary not attributable, directly or 
indirectly, to the parent bank. Under FAS 160, the ownership interests 
in subsidiaries held by the noncontrolling interests must be clearly 
identified, labeled, and presented in the consolidated balance sheet 
within equity capital, but separate from the parent bank's equity 
capital. FAS 160 also requires that the amount of consolidated net 
income attributable to the bank and to the noncontrolling interests in 
the bank's subsidiaries be clearly identified and presented on the face 
of the consolidated income statement. In this regard, the consolidated 
income statement will reflect the amount of the bank's consolidated net 
income, with separate line items then indicating the portions of the 
consolidated net income attributable to the noncontrolling interests 
and to the parent bank.
    The agencies are proposing to make several changes to conform the 
Call Report to the presentation requirements of FAS 160. The agencies 
propose to amend Schedule RC, Balance Sheet, by replacing item 22, 
``Minority interest in consolidated subsidiaries,'' which is currently 
reported outside the Equity Capital section, with a new item 27.b in 
the Equity Capital section for ``Noncontrolling (minority) interests in 
consolidated subsidiaries.'' The agencies also propose to renumber and 
rename Schedule RC, items 26 through 29 in the following manner:
     Item 26.a, ``Retained earnings;''
     Item 26.b, ``Accumulated other comprehensive income;''
     Item 26.c, ``Other equity capital components;''
     Item 27.a, ``Total bank equity capital (sum of items 23 
through 26.c);''
     Item 27.b, ``Noncontrolling (minority) interests in 
consolidated subsidiaries;''
     Item 28, ``Total equity capital (sum of items 27.a and 
27.b);'' and
     Item 29, ``Total liabilities and equity capital (sum of 
items 21 and 28).''
    The agencies also propose to adjust certain captions in Schedule 
RC-R, Regulatory Capital, to reflect these changes to the Equity 
Capital section of the Call Report balance sheet and to conform to FAS 
160. Schedule RC-R, item 1, ``Total equity capital (from Schedule RC, 
item 28),'' will be renamed ``Total bank equity capital (from Schedule 
RC, item 27.a).''

[[Page 54811]]

Schedule RC-R, item 6, ``Qualifying minority interest in consolidated 
subsidiaries,'' will be renamed to ``Qualifying noncontrolling 
(minority) interest in consolidated subsidiaries.''
    Further, the agencies propose to amend Schedule RI, Income 
Statement, and Schedule RI-A, Changes in Equity Capital, to add or 
revise items to conform to FAS 160. In Schedule RI, new items 12, ``Net 
income (loss) attributable to bank and noncontrolling (minority) 
interests (sum of items 10 and 11),'' and 13, ``Less: Net income (loss) 
attributable to noncontrolling (minority) interests,'' will be added to 
identify the entity's consolidated net income and segregate net income 
attributable to noncontrolling interests. Current Schedule RI, item 12, 
``Net income (loss) (sum of items 10 and 11),'' will be renumbered as 
item 14 and renamed ``Net income (loss) attributable to bank (item 12 
minus item 13).'' The instructions to Schedule RI, item 7.d, ``Other 
noninterest expense,'' will be amended to remove net income (or loss) 
attributable to noncontrolling (minority) interests from the current 
list of components of ``Other noninterest expense.''
    Schedule RI-A will be retitled Changes in Bank Equity Capital. In 
Schedule RI-A, the following changes will be made:
     Current item 1, ``Total equity capital most recently 
reported for the December 31, 20xx, [previous calendar year-end] 
Reports of Condition and Income (i.e., after adjustments from amended 
Reports of Income),'' will be renamed ``Total bank equity capital most 
recently reported for the December 31, 20xx, Reports of Condition and 
Income (i.e., after adjustments from amended Reports of Income);''
     Current item 4, ``Net income (loss) (must equal Schedule 
RI, item 12),'' will be renamed ``Net income (loss) attributable to 
bank (must equal Schedule RI, item 14);'' and
     Current item 12, ``Total equity capital end of current 
period (sum of items 3 through 11) (must equal Schedule RC, item 28),'' 
will be renamed ``Total bank equity capital end of current period (sum 
of items 3 through 11) (must equal Schedule RC, item 27.a).''

The instructions to Schedule RI-A, item 5, ``Sale, conversion, 
acquisition, or retirement of capital stock, net,'' will be amended to 
state that increases and decreases in bank equity capital resulting 
from changes in a bank's ownership interest in a subsidiary while it 
retains its controlling financial interest in the subsidiary should be 
reported in item 5.
C. Clarification of the Definition of Loan Secured by Real Estate
    The agencies have found that the definition of a ``loan secured by 
real estate'' in the Glossary section of the Call Report instructions 
has been interpreted differently by Call Report preparers and users. 
This has led to inconsistent reporting of loans collateralized by real 
estate in the loan schedule (Schedule RC-C) and other schedules of the 
Call Report that collect loan data. As a result, the agencies are 
proposing to clarify the definition by explaining that the estimated 
value of the real estate collateral must be greater than 50 percent of 
the principal amount of the loan at origination in order for the loan 
to be considered secured by real estate. Banks should apply this 
clarified definition prospectively and they need not reevaluate and, if 
appropriate, recategorize loans that they currently report as loans 
secured by real estate into other loan categories on the Call Report 
loan schedule.
    The revised definition of a ``loan secured by real estate'' would 
read as follows:

    For purposes of these reports, a loan secured by real estate is 
a loan secured wholly or substantially by a lien or liens on real 
property for which the lien or liens are central to the extension of 
the credit--that is, the borrower would not have been extended 
credit in the same amount or on terms as favorable without the lien 
or liens on real property. To be considered wholly or substantially 
secured by a lien or liens on real property, the estimated value of 
the real estate collateral (after deducting any more senior liens) 
must be greater than 50 percent of the principal amount of the loan 
at origination. A loan satisfying the criteria above, except a loan 
to a state or political subdivisions in the U.S., is to be reported 
as a loan secured by real estate in the Reports of Condition and 
Income, (1) regardless of whether the loan is secured by a first or 
a junior lien; (2) regardless of the department within the bank or 
bank subsidiary that made the loan; (3) regardless of how the loan 
is categorized in the bank's records; (4) and regardless of the 
purpose of the financing. Only in a transaction where a lien or 
liens on real property (with an estimated collateral value greater 
than 50 percent of the loan's principal amount at origination) have 
been taken as collateral solely through an abundance of caution and 
where the loan terms as a consequence have not been made more 
favorable than they would have been in the absence of the lien or 
liens, would the loan not be considered a loan secured by real 
estate for purposes of the Reports of Condition and Income. In 
addition, when a loan is partially secured by a lien or liens on 
real property, but the estimated value of the real estate collateral 
(after deducting any more senior liens) is 50 percent or less of the 
principal amount of the loan at origination, the loan should not be 
categorized as a loan secured by real estate. Instead, the loan 
should be reported in one of the other loan categories used in these 
reports based on the purpose of the loan.
D. Clarification of Instructions for Unused Commitments
    Banks report unused commitments in Schedule RC-L, item 1. The 
instructions for this item identify various arrangements that should be 
reported as unused commitments, including but not limited to 
commitments for which the bank has charged a commitment fee or other 
consideration, commitments that are legally binding, loan proceeds that 
the bank is obligated to advance, commitments to issue a commitment, 
and revolving underwriting facilities. However, the agencies have found 
that some banks have not reported commitments that they have entered 
into until they have signed the loan agreement for the financing that 
they have committed to provide. Although the agencies consider these 
arrangements to be within the scope of the existing instructions for 
reporting commitments in Schedule RC-L, they believe that these 
instructions may not be sufficiently clear. Therefore, the agencies are 
proposing to revise the instructions for Schedule RC-L, item 1, 
``Unused commitments,'' to read as follows:

    Report in the appropriate subitem the unused portions of 
commitments. Unused commitments are to be reported gross, i.e., 
include in the appropriate subitem the amounts of commitments 
acquired from and conveyed to others.

    For purposes of this item, commitments include:
    (1) Commitments to make or purchase extensions of credit in the 
form of loans or participations in loans, lease financing receivables, 
or similar transactions.
    (2) Commitments for which the bank has charged a commitment fee or 
other consideration.
    (3) Commitments that are legally binding.
    (4) Loan proceeds that the bank is obligated to advance, such as:
    (a) Loan draws;
    (b) Construction progress payments; and
    (c) Seasonal or living advances to farmers under prearranged lines 
of credit.
    (5) Rotating, revolving, and open-end credit arrangements, 
including, but not limited to, retail credit card lines and home equity 
lines of credit.
    (6) Commitments to issue a commitment at some point in the future, 
including commitments that have been entered into even though the 
related loan agreement has not yet been signed.

[[Page 54812]]

    (7) Overdraft protection on depositors' accounts offered under a 
program where the bank advises account holders of the available amount 
of overdraft protection, for example, when accounts are opened or on 
depositors' account statements or ATM receipts.
    (8) The bank's own takedown in securities underwriting 
transactions.
    (9) Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs), and other similar arrangements, which are facilities 
under which a borrower can issue on a revolving basis short-term paper 
in its own name, but for which the underwriting banks have a legally 
binding commitment either to purchase any notes the borrower is unable 
to sell by the rollover date or to advance funds to the borrower.
    Exclude forward contracts and other commitments that meet the 
definition of a derivative and must be accounted for in accordance with 
FASB Statement No. 133, which should be reported in Schedule RC-L, item 
12. Include the amount (not the fair value) of the unused portions of 
loan commitments that do not meet the definition of a derivative that 
the bank has elected to report at fair value under a fair value option. 
Also include forward contracts that do not meet the definition of a 
derivative. The unused portions of commitments are to be reported in 
the appropriate subitem regardless of whether they contain ``material 
adverse change'' clauses or other provisions that are intended to 
relieve the issuer of its funding obligations under certain conditions 
and regardless of whether they are unconditionally cancelable at any 
time.
    In the case of commitments for syndicated loans, report only the 
bank's proportional share of the commitment.
    For purposes of reporting the unused portions of revolving asset-
based lending commitments, the commitment is defined as the amount a 
bank is obligated to fund--as of the report date--based on the 
contractually agreed upon terms. In the case of revolving asset-based 
lending, the unused portions of such commitments should be measured as 
the difference between (a) the lesser of the contractual borrowing base 
(i.e., eligible collateral times the advance rate) or the note 
commitment limit, and (b) the sum of outstanding loans and letters of 
credit under the commitment. The note commitment limit is the overall 
maximum loan amount beyond which the bank will not advance funds 
regardless of the amount of collateral posted. This definition of 
``commitment'' is applicable only to revolving asset-based lending, 
which is a specialized form of secured lending in which a borrower uses 
current assets (e.g., accounts receivable and inventory) as collateral 
for a loan. The loan is structured so that the amount of credit is 
limited by the value of the collateral.
E. Fiscal Year-End Date
    Although most banks have a calendar year fiscal year, many banks do 
not. The agencies currently do not have a systematic means for 
identifying the fiscal year-end dates of banks. In contrast, savings 
associations report their fiscal year-ends to the Office of Thrift 
Supervision in the Thrift Financial Report.
    New accounting standards typically take effect for fiscal years 
beginning on or after a date specified in the standard and banks are 
expected to adopt new standards for Call Report purposes in accordance 
with their effective date. Thus, individual banks must adopt new 
standards in different quarterly Call Reports based on their fiscal 
year-end dates. In addition, the applicability of certain regulations 
is based on a bank's fiscal year. For example, the annual audit and 
reporting requirements of Part 363 of the FDIC's regulations apply to 
insured institutions with $500 million or more in total assets as of 
the beginning of their fiscal year. As another example, banks do not 
have to start complying with Regulation R--Exceptions for Banks from 
the Definition of Broker in the Securities Exchange Act of 1934 (12 CFR 
part 218), which the Board and the Securities and Exchange Commission 
(SEC) jointly adopted in September 2007, and the ``broker'' exceptions 
in section 3(a)(4) of the Securities Exchange Act of 1934 until the 
first day of their fiscal year commencing after September 30, 2008.
    To facilitate the agencies' ability to determine when individual 
banks should be implementing accounting standards and regulations and 
to assess their compliance, the agencies are proposing to add a 
Memorandum item to the Call Report balance sheet in which banks would 
report their fiscal year-end date. This item would be collected 
annually as of each March 31.
F. Exemptions From Reporting for Certain Existing Call Report Items
    The agencies have identified certain Call Report items for which 
the reported data are of lesser usefulness for banks with less than $1 
billion in total assets. Accordingly, the agencies are proposing to 
exempt such banks from completing the following Call Report items 
effective March 31, 2009:
     Schedule RI, Memorandum item 2, ``Income from the sale and 
servicing of mutual funds and annuities (in domestic offices);''
     Schedule RC-B, Memorandum items 5.a through 5.f, ``Asset-
backed securities,'' on the FFIEC 031 report;\3\
---------------------------------------------------------------------------

    \3\ On the FFIEC 041 report, banks with less than $1 billion in 
assets are currently exempt from completing these Memorandum items.
---------------------------------------------------------------------------

     Schedule RC-L, item 2.a, ``Amount of financial standby 
letters of credit conveyed to others;'' and
     Schedule RC-L, item 3.a, ``Amount of performance standby 
letters of credit conveyed to others.''
G. Quantifying Misstatements in the Call Report
    The General Instructions section of the Call Report instructions 
discusses the filing of amended Call Reports. In this regard, the 
instructions state that:
    When dealing with the recognition and measurement of events and 
transactions in the Call Report, amended reports may be required if a 
bank's primary federal bank supervisory authority determines that the 
reports as previously submitted contain errors that are material for 
the reporting bank. Materiality is a qualitative characteristic of 
accounting information which is defined in Financial Accounting 
Standards Board (FASB) Concepts Statement No. 2 as ``the magnitude of 
an omission or misstatement of accounting information that, in the 
light of surrounding circumstances, makes it probable that the judgment 
of a reasonable person relying on the information would have been 
changed or influenced by the omission or misstatement.''
    FASB Statement No. 154, Accounting Changes and Error Corrections 
(FAS 154), provides guidance for reporting the correction of an error 
or misstatement in previously issued financial statements. An error or 
misstatement can result from mathematical mistakes, mistakes in the 
application of generally accepted accounting principles, or oversight 
or misuse of facts that existed at the time the financial statements 
were prepared, and includes a change from an accounting principle that 
is not generally accepted to one that is generally accepted. The 
Glossary entry for ``Accounting Changes'' in the Call Report 
instructions includes a section on ``Corrections of Accounting Errors'' 
that provides guidance on reporting such corrections that is consistent 
with FAS 154. However, neither FAS 154 nor the Glossary entry for 
``Accounting Changes'' specifies the appropriate method to quantify an 
error or

[[Page 54813]]

misstatement for purposes of evaluating materiality.
    In September 2006, the SEC staff noted in Staff Accounting Bulletin 
No. 108, Considering the Effects of Prior Year Misstatements when 
Quantifying Misstatements in Current Year Financial Statements (SAB 
108),\4\ that in describing the concept of materiality, FASB Concepts 
Statement No. 2, Qualitative Characteristics of Accounting Information, 
indicates that materiality determinations are based on whether ``it is 
probable that the judgment of a reasonable person relying upon the 
report would have been changed or influenced by the inclusion or 
correction of the item'' (emphasis added). The staff believes 
registrants must quantify the impact of correcting all misstatements, 
including both the carryover and reversing effects of prior year 
misstatements, on the current year financial statements.
---------------------------------------------------------------------------

    \4\ SAB 108 can be accessed at https://www.sec.gov/interps/
account/sab108.pdf. SAB 108 has been codified as Topic 1.N. in the 
SEC's Codification of Staff Accounting Bulletins.
---------------------------------------------------------------------------

    SAB 108 describes two approaches, generally referred to as 
``rollover'' and ``iron curtain,'' that have been commonly used to 
accumulate and quantify misstatements. The rollover approach 
``quantifies a misstatement based on the amount of the error 
originating in the current year income statement,'' which ``ignores the 
`carryover effects' of prior year misstatements.'' In contrast, the 
``iron curtain approach quantifies a misstatement based on the effects 
of correcting the misstatement existing in the balance sheet at the end 
of the current year, irrespective of the misstatement's year(s) of 
origination.'' Because each of these approaches has its weaknesses, SAB 
108 advises that the impact of correcting all misstatements on current 
year financial statements should be accomplished by quantifying an 
error under both the rollover and iron curtain approaches and by 
evaluating the error measured under each approach. When either approach 
results in a misstatement that is material, after considering all 
relevant quantitative and qualitative factors, an adjustment to the 
financial statements would be required. Guidance on the consideration 
of all relevant factors when assessing the materiality of misstatements 
is provided in the SEC's Staff Accounting Bulletin No. 99, Materiality 
(SAB 99).\5\ SAB 108 observes that when the correction of an error in 
the current year would materially misstate the current year's financial 
statements because the correction includes the effect of the prior year 
misstatements, the prior year financial statements should be corrected.
---------------------------------------------------------------------------

    \5\ SAB 99 can be accessed at https://www.sec.gov/interps/
account/sab99.htm. SAB 99 has been codified as Topic 1.M. in the 
SEC's Codification of Staff Accounting Bulletins.
---------------------------------------------------------------------------

    The agencies have advised banks that, for Call Report purposes, a 
bank that is a public company or a subsidiary of a public company 
should apply the guidance from SAB 108 and SAB 99 when quantifying the 
impact of correcting misstatements, including both the carryover and 
reversing effects of prior year misstatements, on their current year 
Call Reports.\6\ The agencies believe that the guidance in SAB 108 and 
SAB 99 represents sound accounting practices that all banks, including 
those that are not public companies, should follow for purposes of 
quantifying misstatements and considering all relevant factors when 
assessing the materiality of misstatements in their Call Reports. 
Accordingly, the agencies are proposing to incorporate the guidance in 
these two Staff Accounting Bulletins into the section of the 
``Accounting Changes'' Glossary entry on error corrections, thereby 
establishing a single approach for quantifying misstatements in the 
Call Report that would be applicable to all banks. The Glossary entry 
would explain that the impact of correcting all misstatements on 
current year Call Reports should be accomplished by quantifying an 
error under both the rollover and iron curtain approaches and by 
evaluating the error measured under each approach. When either approach 
results in a misstatement that is material, after considering all 
relevant quantitative and qualitative factors, appropriate adjustments 
to Call Reports would be required.
---------------------------------------------------------------------------

    \6\ For example, see the Call Report Supplemental Instructions 
for June 2007 at https://www.ffiec.gov/PDF/FFIEC_forms/FFIEC031_
041_suppinst_200706.pdf.
---------------------------------------------------------------------------

H. Eliminating Confidential Treatment for Fiduciary Income, Expense, 
and Loss Data
    An important public policy issue for the agencies has been how to 
use market discipline to complement supervisory resources. Market 
discipline relies on market participants having sufficient appropriate 
information about the financial condition and risks of banks. The Call 
Report, in particular, is widely used by securities analysts, rating 
agencies, and large institutional investors as sources of bank-specific 
data. Disclosure that increases transparency should lead to more 
accurate market assessments of individual banks' performance and risks. 
This, in turn, should result in more effective market discipline on 
banks.
    Despite this emphasis on market discipline, the FFIEC and the 
agencies currently accord confidential treatment to the information 
that certain institutions report in Call Report Schedule RC-T, 
Fiduciary and Related Services, on fiduciary and related services 
income, expenses, and losses (items 12 through 18, items 19.a through 
23, and Memorandum item 4). Approximately 400 institutions that 
exercise fiduciary powers and have either total fiduciary assets 
greater than $250 million or gross fiduciary and related services 
income greater than 10 percent of revenue report their fiduciary and 
related services income quarterly and expenses and losses annually as 
of year-end. Around 200 institutions that exercise fiduciary powers, 
have total fiduciary assets greater than $100 million but less than or 
equal to $250 million, and do not meet the fiduciary income test 
mentioned above report their fiduciary and related services income, 
expenses, and losses annually as of year-end. An additional 1,000 
institutions that exercise fiduciary powers, have total fiduciary 
assets of $100 million or less, and do not meet the fiduciary income 
test mentioned above are exempt from reporting their fiduciary and 
related services income, expenses, and losses.
    Data on fiduciary and related services income, expenses, and losses 
(except for gross fiduciary and related services income, which is also 
reported in each institution's Call Report income statement) are the 
only financial information currently collected on the Call Report that 
is treated as confidential on an individual institution basis. 
Nevertheless, the agencies publish aggregate data derived from these 
confidential items. The agencies have accorded confidential treatment 
to the fiduciary services income data for individual institutions since 
it began to be collected in 1997 in a separate report, the Annual 
Report of Trust Assets (FFIEC 001). Confidential treatment was retained 
when the reporting of trust data was incorporated into the Call Report 
and the separate trust report was eliminated in 2001. However, the 
agencies do not preclude institutions from publicly disclosing the 
fiduciary and related services income, expense, and loss data that the 
agencies treat as confidential.
    The agencies originally applied this confidential treatment to the 
fiduciary and related services income, expense, and loss information 
because these data

[[Page 54814]]

generally pertain to only a portion of a reporting institution's total 
operations and not to the institution as a whole. However, the agencies 
make publicly available on an individual bank basis the Call Report 
data they collect on income and expenses from foreign offices from 
banks with such offices where foreign activities exceed certain levels 
even though these data pertain to only a portion of these banks' total 
operations.
    In addition, under the Uniform Interagency Trust Rating System, the 
agencies assign a rating to the earnings of an institution's fiduciary 
activities at those institutions with fiduciary assets of more than 
$100 million, which are also the institutions that report their 
fiduciary and related services income, expenses, and losses in Call 
Report Schedule RC-T. The agencies' evaluation of an institution's 
trust earnings considers such factors as the profitability of fiduciary 
activities in relation to the size and scope of those activities and 
the institution's overall business, taking this into account by 
functions and product lines. Although the agencies' ratings for 
individual institutions are not publicly available, the reason for 
rating the trust earnings of institutions with more than $100 million 
in fiduciary assets--its effect on the financial condition of the 
institution--means that fiduciary and related services income, expense, 
and loss information for these institutions is also relevant to market 
participants and others in the public as they seek to evaluate the 
financial condition and performance of individual institutions. 
Increasing the transparency of institutions' fiduciary activities by 
making individual institutions' fiduciary income, expense, and loss 
data available to the public should improve the market's ability to 
assess these institutions' performance and risks and thereby enhance 
market discipline. Accordingly, the agencies are proposing to eliminate 
the confidential treatment for the data on fiduciary and related 
services income, expenses, and losses that are reported in Schedule RC-
T beginning with the amounts reported as of March 31, 2009. Fiduciary 
and related services income, expense, and loss data reported in 
Schedule RC-T for report dates prior to March 31, 2009, would remain 
confidential.

III. Discussion of Revisions Proposed for June 2009

A. Construction and Development Loans With Interest Reserves
    In December 2006, the agencies issued final guidance on commercial 
real estate (CRE) loans, including construction, land development, and 
other land (C&D) loans, entitled Concentrations in Commercial Real 
Estate Lending, Sound Risk Management Practices (CRE Guidance).\7\ This 
guidance was developed to reinforce sound risk management practices for 
institutions with high and increasing concentrations of commercial real 
estate loans on their balance sheets. It provides a framework for 
assessing CRE concentrations; risk management, including board and 
management oversight, portfolio management, management information 
systems, market analysis and stress testing, underwriting and credit 
risk review; and supervisory oversight, including CRE concentration 
management and an assessment of capital adequacy.
---------------------------------------------------------------------------

    \7\ 71 Federal Register 74580, December 12, 2006.
---------------------------------------------------------------------------

    In issuing the CRE Guidance, the agencies noted that CRE 
concentrations had been rising over the past several years and had 
reached levels that could create safety and soundness concerns in the 
event of a significant economic downturn. As a consequence, the CRE 
Guidance explains that, as part of their ongoing supervisory monitoring 
processes, the agencies would use certain criteria to identify 
institutions that are potentially exposed to significant CRE 
concentration risk. Thus, the CRE Guidance states in part that an 
institution whose total reported construction, land development, and 
other land loans is approaching or exceeds 100 percent or more of the 
institution's total risk-based capital may be identified for further 
supervisory analysis of the level and nature of its CRE concentration 
risk. As of March 31, 2008, approximately 28 percent of all banks held 
C&D loans in excess of 100 percent of their total risk-based capital.
    A practice that is common in C&D lending is the establishment of an 
interest reserve as part of the original underwriting of a C&D loan. 
The interest reserve account allows the lender to periodically advance 
loan funds to pay interest charges on the outstanding balance of the 
loan. The interest is capitalized and added to the loan balance. 
Frequently, C&D loan budgets will include an interest reserve to carry 
the project from origination to completion and may cover the project's 
anticipated sell-out or lease-up period. Although potentially 
beneficial to the lender and the borrower, the use of interest reserves 
carries certain risks. Of particular concern is the possibility that an 
interest reserve could disguise problems with a borrower's willingness 
and ability to repay the debt consistent with the terms and conditions 
of the loan agreement. For example, a C&D loan for a project on which 
construction ceases before it has been completed or is not completed in 
a timely manner may appear to be performing if the continued 
capitalization of interest through the use of an interest reserve keeps 
the troubled loan current. This practice can erode collateral 
protection and mask loans that should otherwise be reported as 
delinquent or in nonaccrual status.
    Since the CRE Guidance was issued, market conditions have weakened, 
most notably in the C&D sector. As this weakening has occurred, the 
agencies' examiners are encountering C&D loans on projects that are 
troubled, but where interest has been capitalized inappropriately, 
resulting in overstated income and understated volumes of past due and 
nonaccrual C&D loans. Therefore, to assist the agencies in monitoring 
C&D lending activities at those banks with a concentration of such 
loans, i.e., C&D loans (in domestic offices) that exceeded 100 percent 
of total risk-based capital as of the previous calendar year-end, the 
agencies are proposing to add two new Call Report items. First, banks 
with such a concentration would report the amount of C&D loans (in 
domestic offices) included in the Call Report loan schedule (Schedule 
RC-C) on which the use of interest reserves is provided for in the loan 
agreement. Second, these banks would report the amount of capitalized 
interest included in the interest and fee income on loans during the 
quarter. These data, together with information that banks currently 
report on the amount of past due and nonaccrual C&D loans, will assist 
in identifying banks with C&D loan concentrations that may be engaging 
in questionable interest capitalization practices for supervisory 
follow-up.
B. Structured Financial Products Carried in Securities and Trading 
Portfolios
    Structured financial products such as collateralized debt 
obligations (CDOs) have become increasingly more complex and the volume 
of these financial products has increased substantially in recent 
years. Structured financial products generally convert a large pool of 
assets and other exposures (such as derivatives and third-party 
guarantees) into tradable capital market debt instruments. Some of the 
more complex financial product structures mix asset classes in an 
attempt to create investment products that diversify risk.
    In recent years, increasingly complex structured financial products 
have

[[Page 54815]]

become more widely held as investments and trading assets, allowing 
investors and traders to acquire positions in a pool of assets with 
varying risks and rewards depending on the underlying collateral or 
reference assets. Synthetic structured financial products use credit 
derivatives and a reference pool of assets, which has led to the 
creation of hybrid products, which are a combination of cash and 
synthetic structured financial products. Further, complex products 
known as CDOs ``squared,'' which are CDOs backed primarily by the 
tranches of other CDOs, have contributed to the opacity and inability 
of investors to understand the performance of these highly complex 
products.
    Some holders of structured financial products have sustained 
financial losses due to defaults and losses on the underlying assets 
and other exposures. In addition, reduced market liquidity has 
contributed to significant fair value declines and lack of price 
transparency for other structured financial products. These recent 
market events have demonstrated the need for the agencies to collect 
more comprehensive information on investment products with significant 
market, credit, liquidity, and valuation risks in order to identify and 
monitor banks with exposures to these products and to track such 
exposures for the industry as a whole.
    Currently, banks separately report their holdings of regular 
mortgage-backed securities (MBS) (such as mortgage-backed pass-through 
securities, collateralized mortgage obligations, and real estate 
mortgage investment conduits) in the Call Report securities schedule 
(Schedule RC-B) or trading schedule (Schedule RC-D), as appropriate. 
All banks separately report their holdings of held-to-maturity and 
available-for-sale asset-backed securities (ABS) in the securities 
schedule. Those banks with large trading portfolios separately report 
their held-for-trading ABS in the trading schedule. Banks' holdings of 
all other debt securities not issued by governmental entities in the 
U.S. are reported as ``Other debt securities'' in either the securities 
or trading schedule, as appropriate. However, the more complex 
structured financial products discussed above are not separately 
reported in Schedules RC-B and RC-D, but are currently reported in 
other line items within these two schedules.
    Therefore, the agencies propose to separately collect certain 
structured financial product data in both the securities and trading 
schedules of the Call Report. First, the agencies would add line items 
to collect information on certain structured financial products by type 
of structure (cash, synthetic, and hybrid). Each of these three new 
line items would cover CDOs, collateralized loan obligations (CLOs), 
collateralized bond obligations (CBOs), CDOs squared and cubed, and 
similar structured financial products.\8\ These new line items would be 
added to the body of the securities schedule and the trading schedule. 
In Schedule RC-B, the amortized cost and fair value of these three 
types of structures will be reported using the current four-column 
format that distinguishes between held-to-maturity and available-for-
sale securities. In Schedule RC-D, the fair value of these three types 
of structures would be reported. Since the new items on structured 
financial products would include CDOs, the agencies will delete 
existing Memorandum items 5.a and 5.b from the trading schedule 
(Schedule RC-D).
---------------------------------------------------------------------------

    \8\ These new line items would not include mortgage-backed and 
asset-backed commercial paper, which would continue to be reported 
as MBS and ABS, respectively, in Schedules RC-B and RC-D.
---------------------------------------------------------------------------

    Second, the agencies would collect information on these complex 
structured financial products by the predominant type of collateral 
supporting the structures in new memorandum items in both Schedule RC-B 
and Schedule RC-D. The collateral supporting these products has 
distinct risk characteristics and the new information will provide the 
agencies with greater insight into the risks associated with the 
various collateralized structured financial products. The structured 
financial products would be reported according to the following types 
of collateral:
     Trust preferred securities issued by financial 
institutions;
     Trust preferred securities issued by real estate 
investment trusts;
     Corporate and similar loans; \9\
---------------------------------------------------------------------------

    \9\ Securities backed by commercial and industrial loans that 
are commonly regarded as ABS rather than CLOs in the marketplace 
would continue to be reported as ABS in Schedules RC-B and RC-D.
---------------------------------------------------------------------------

     1-4 family residential MBS issued or guaranteed by U.S. 
government-sponsored enterprises (GSEs);
     1-4 family residential MBS not issued or guaranteed by 
GSEs;
     Diversified (mixed) pools of structured financial products 
such as CDOs squared and cubed (also known as ``pools of pools''); and
     Other collateral.
    In Schedule RC-B, amortized cost and fair value would be reported 
by the predominant type of collateral supporting the structure based on 
whether the products are classified as held-to-maturity or available-
for-sale. In Schedule RC-D, the