Proposed Agency Information Collection Activities; Comment Request, 72035-72045 [2011-29951]

Agencies

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

[Federal Register Volume 76, Number 224 (Monday, November 21, 2011)]
[Notices]
[Pages 72035-72045]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29951]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


Proposed Agency Information Collection Activities; Comment 
Request

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); and Federal 
Deposit Insurance Corporation (FDIC).

ACTION: Joint notice and request for comment.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act (PRA) 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. The proposed new 
data items would be added to the Call Report as of the June 30, 2012, 
report date, except for two proposed revisions that would take effect 
March 31, 2012, in connection with the initial filing of Call Reports 
by savings associations. In addition, proposed instructional changes 
would take effect March 31, 2012. 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 January 20, 2012.

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

[[Page 72036]]

the Currency, Mailstop 2-3, Attention: 1557-0081, 250 E Street SW., 
Washington, DC 20219. In addition, comments may be sent by fax to (202) 
874-5274, or by electronic mail to regs.comments@occ.treas.gov. You may 
personally inspect and photocopy comments at the OCC, 250 E Street SW., 
Washington, DC 20219. For security reasons, the OCC requires that 
visitors make an appointment to inspect comments. You may do so by 
calling (202) 874-4700. Upon arrival, visitors will be required to 
present valid government-issued photo identification and to 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 (FFIEC 031 and 041),'' 
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.
     Email: regs.comments@federalreserve.gov. Include reporting 
form 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.
     Email: comments@FDIC.gov. Include ``Consolidated Reports 
of Condition and Income, 3064-0052'' in the subject line of the 
message.
     Mail: Gary A. Kuiper, (202) 898-3877, Counsel, Attn: 
Comments, Room F-1086, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7 a.m. and 5 p.m.
    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/regulations/laws/federal/propose.html 
including any personal information provided. Comments may be inspected 
at the FDIC Public Information Center, Room E-1002, 3501 Fairfax Drive, 
Arlington, VA 22226, between 9 a.m. and 5 p.m. on business days.
    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: Cynthia Ayouch, 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: Gary A. Kuiper, Counsel, (202) 898-3877, 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 is currently an approved 
collection of information for each agency.
    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: 2,035 (1,399 national banks and 
636 federal savings associations).
    Estimated Time per Response: National banks: 53.96 burden hours per 
quarter to file.
Federal savings associations: 54.48 burden hours per quarter to file 
and 188 burden hours for the first year to convert systems and conduct 
training.

    Estimated Total Annual Burden: National banks: 301,960 burden hours 
to file.
Federal savings associations: 138,597 burden hours to file plus 119,568 
burden hours for the first year to convert systems and conduct 
training.
Total: 560,125 burden hours.

    Board:
    OMB Number: 7100-0036.
    Estimated Number of Respondents: 827 state member banks.
    Estimated Time per Response: 56.06 burden hours per quarter to 
file.
    Estimated Total Annual Burden: 185,446 burden hours.

    FDIC:
    OMB Number: 3064-0052.
    Estimated Number of Respondents: 4,630 (4,570 insured state 
nonmember banks and 60 state savings associations).

    Estimated Time per Response:
State nonmember banks: 40.85 burden hours per quarter to file.
State savings associations: 40.88 burden hours per quarter to file and 
188 burden hours for the first year to convert systems and conduct 
training.

    Estimated Total Annual Burden:
State nonmember banks: 746,738 burden hours to file.

State savings associations: 9811 burden hours to file plus 11,280 
burden hours for the first year to convert systems and conduct 
training.
Total: 767,829 burden hours.

    The estimated time per response for the quarterly filings of the 
Call Report is an average that varies by agency because of differences 
in the composition of the institutions under each agency's supervision 
(e.g., size distribution of institutions, types of activities in which 
they are engaged, and existence of foreign offices). The average 
reporting burden for the filing of the Call Report is estimated to 
range from 17 to 715 hours per quarter,

[[Page 72037]]

depending on an individual institution's circumstances. The initial 
burden arising from implementing any recordkeeping and systems changes 
necessary to enable institutions to report the new Call Report data 
that are the subject of this proposal will also vary across 
institutions depending on their circumstances. Given the reporting 
thresholds that apply to certain proposed revisions and the specialized 
nature of other proposed revisions, the smallest institutions are not 
likely to be affected by the proposed reporting changes. Based on the 
size distribution of the more than 7,600 institutions that will be 
filing Call Reports in 2012, the average initial burden of the proposed 
revisions per institution is expected to be limited. The agencies 
invite institutions to comment on the initial burden of implementing 
the revisions discussed below in this proposal.
    As approved by OMB, savings associations will convert from filing 
the Thrift Financial Report (TFR) (OMB Number: 1550-0023) to filing the 
Call Report effective as of the March 31, 2012, report date (unless an 
institution elects to begin filing the Call Report before that report 
date).\1\ Thus, savings associations will incur an initial burden of 
converting systems and training staff to prepare and file the Call 
Report in place of the TFR. Accordingly, the burden estimates above in 
this notice for savings associations also include the time to convert 
to filing the Call Report, including necessary systems changes and 
training staff on Call Report preparation and filing, which is 
estimated to average 188 hours per savings association.
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    \1\ See 76 FR 39981, July 7, 2011, at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_20110707_ffr.pdf and the Office of 
Thrift Supervision's CEO Letter 391 dated July 7, 2011, at 
https://www.ots.treas.gov/_files/25391.pdf.
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    As a general statement, larger savings associations and those with 
more complex operations would expend a greater number of hours than 
smaller savings associations and those with less complex operations. A 
savings association's use of service providers for the information and 
accounting support of key functions, such as credit processing, 
transaction processing, deposit and customer information, general 
ledger, and reporting should result in lower burden hours for 
converting to the Call Report. Savings associations with staff having 
experience in preparing and filing the Call Report should incur lower 
initial burden hours for converting to the Call Report from the TFR. 
For further information about the estimated initial burden hours for 
savings associations' conversion to the Call Report from the TFR, see 
76 FR 39986, July 7, 2011.
    Type of Review: Revision and extension of currently approved 
collections.

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), 12 U.S.C. 1817 
(for insured state nonmember commercial and savings banks), and 12 
U.S.C. 1464 (for federal and state savings associations). 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' and federal 
savings associations' semiannual assessment fees.

Current Actions

I. Overview

    The agencies are proposing to implement a limited number of 
revisions to the Call Report requirements in 2012. These changes, which 
are discussed in detail in Sections II.A through II.G of this notice, 
are intended to provide data needed for reasons of safety and soundness 
or other public purposes. The proposed new data items would be added to 
the Call Report as of the June 30, 2012, report date, except for two 
proposed revisions that would take effect March 31, 2012, in connection 
with the initial filing of Call Reports by savings associations. These 
proposed new data items, which are focused primarily on institutions 
with $1 billion or more in total assets, would assist the agencies in 
gaining a better understanding of institutions' lending activities and 
credit risk exposures, primarily through enhanced data on the 
composition of the allowance for loan and lease losses (ALLL), quarter-
end loan amounts originated during the quarter, past due and nonaccrual 
purchased credit-impaired loans, and representation and warranty 
reserves associated with mortgage loan sales. In addition, beginning 
with the March 31, 2012, report date, savings associations and certain 
state savings and cooperative banks would report on their Qualified 
Thrift Lender compliance in two new Call Report items and certain 
existing items used in the measurement of the leverage ratio 
denominator would be modified to accommodate calculations by both banks 
and savings associations. The banking agencies are also proposing 
certain revisions to the Call Report instructions that would take 
effect March 31, 2012.
    The proposed changes include:
     A new Schedule RI-C, Disaggregated Data on the Allowance 
for Loan and Lease Losses, in which institutions with total assets of 
$1 billion or more would report a breakdown by key loan category of the 
end-of-period allowance for loan and lease losses (ALLL) disaggregated 
on the basis of impairment method and the end-of-period recorded 
investment in held-for-investment loans and leases related to each ALLL 
balance;
     A new Schedule RC-U, Loan Origination Activity, in which 
institutions with total assets of $300 million or more would report, 
separately for several loan categories, the quarter-end amount of loans 
reported in Schedule RC-C, Loans and Lease Financing Receivables, that 
was originated during the quarter, and institutions with total assets 
of $1 billion or more would also report for these loan categories the 
portions of the quarter-end amount of loans originated during the 
quarter that were (a) originated under a newly established loan 
commitment and (b) not originated under a loan commitment;
     New Memorandum items in Schedule RC-N, Past Due and 
Nonaccrual Loans, Leases, and Other Assets, for the total outstanding 
balance and related carrying amount of purchased credit-impaired loans 
accounted for under ASC 310-30 that are past due 30 through 89 days and 
still accruing, past due 90 days or more and still accruing, and in 
nonaccrual status;
     New items in Schedule RC-P, 1-4 Family Residential 
Mortgage Banking Activities, in which institutions with $1 billion or 
more in total assets and smaller institutions with significant mortgage 
banking activities would

[[Page 72038]]

report the amount of representation and warranty reserves for 1-4 
family residential mortgage loans sold (in domestic offices), with 
separate disclosure of reserves for representations and warranties made 
to U.S. government and government-sponsored agencies and to other 
parties;
     New items in Schedule RC-M, Memoranda, in which savings 
associations and certain state savings and cooperative banks would 
report on the test they use to determine their compliance with the 
Qualified Thrift Lender requirement and whether they have remained in 
compliance with this requirement.
     Revisions to two existing items in Schedule RC-R, 
Regulatory Capital, used in the calculation of the leverage ratio 
denominator to accommodate certain differences between the regulatory 
capital standards that apply to the leverage capital ratios of banks 
versus savings associations.
     Instructional revisions addressing the discontinued use of 
specific valuation allowances by savings associations when they begin 
to file the Call Report instead of the TFR beginning in March 2012; the 
reporting of the number of deposit accounts of $250,000 or less in 
Schedule RC-O, Other Data for Deposit Insurance and FICO Assessments, 
by institutions that have issued certain brokered deposits; and the 
accounting and reporting treatment for capital contributions in the 
form of cash or notes receivable.
    For the March 31, 2012, and June 30, 2012, report dates, as 
applicable, institutions 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.

II. Discussion of Proposed Call Report Revisions

A. Allowance for Loan and Leases Losses by Loan Category

    In July 2010, the Financial Accounting Standards Board (FASB) 
published Accounting Standards Update No. 2010-20, Disclosures about 
the Credit Quality of Financing Receivables and the Allowance for 
Credit Losses (ASU 2010-20), which amended Accounting Standards 
Codification (ASC) Topic 310, Receivables. The main objective of the 
update was to provide financial statement users with greater 
transparency about an entity's allowance for credit losses and the 
credit quality of its financing receivables. Examples of financing 
receivables include loans, credit cards, notes receivable, and leases 
(other than an operating lease). The update was intended to provide 
additional information to assist financial statement users in assessing 
an entity's credit risk exposures and evaluating the adequacy of its 
allowance for credit losses.
    To achieve its main objective, ASU 2010-20 requires, in part, that 
an entity disclose by portfolio segment ``[t]he balance in the 
allowance for credit losses at the end of each period disaggregated on 
the basis of the entity's impairment method'' and ``[t]he recorded 
investment in financing receivables at the end of each period related 
to each balance in the allowance for credit losses, disaggregated * * * 
in the same manner.''\2\ As defined in the ASC Master Glossary, a 
portfolio segment is ``[t]he level at which an entity develops and 
documents a systematic methodology to determine its allowance for 
credit losses.'' For each portfolio segment, the disaggregation based 
on impairment method requires separate disclosure of the allowance and 
the related recorded investment amounts for financing receivables 
collectively evaluated for impairment, individually evaluated for 
impairment, and acquired with deteriorated credit quality.\3\ This 
disaggregated disclosure requirement is effective for public entities 
for the first interim or annual reporting period ending on or after 
December 15, 2010, and for nonpublic entities for annual reporting 
periods ending on or after December 15, 2011.
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    \2\ ASC paragraphs 310-10-51-11B(g) and (h).
    \3\ ASC paragraph 310-10-51-11C. Allowances for amounts 
collectively evaluated for impairment are determined under ASC 
Subtopic 450-20, Contingencies-Loss Contingencies (formerly FASB 
Statement No. 5, ``Accounting for Contingencies''), allowances for 
amounts individually evaluated for impairment are determined under 
ASC Section 310-10-35, Receivables-Overall-Subsequent Measurement 
(formerly FASB Statement No. 114, ``Accounting by Creditors for 
Impairment of a Loan''), and allowances for loans acquired with 
deteriorated credit quality are determined under ASC Subtopic 310-
30, Receivables-Loans and Debt Securities Acquired with Deteriorated 
Credit Quality (formerly AICPA Statement of Position 03-3, 
``Accounting for Certain Loans or Debt Securities Acquired in a 
Transfer'').
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    Consistent with the ASU 2010-20 disclosure requirements described 
above, the agencies are proposing revisions to the June 2012 Call 
Report to capture disaggregated detail of institutions' allowances for 
loan and lease losses (ALLL) and related recorded investments for loans 
and leases from institutions with $1 billion or more in total assets. 
Disaggregated data would be reported for key loan categories for which 
the recorded investments are reported in Schedule RC-C, Part I, Loans 
and Leases. The agencies also propose to collect this information on 
the basis of impairment method for each loan category. The agencies 
believe that the use of key loan categories reported on Schedule RC-C 
for the proposed new Call Report disaggregated disclosures is 
consistent with the meaning of the term portfolio segment in ASU 2010-
20 and with the agencies' supervisory guidance on ALLL 
methodologies.\4\ More specifically, the agencies propose to collect 
from institutions with $1 billion or more in total assets disaggregated 
allowance and recorded investment data on the basis of impairment 
method (collectively evaluated for impairment,\5\ individually 
evaluated for impairment, and acquired with deteriorated credit 
quality) for the following loan categories:
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    \4\ See the agencies' July 2001 ``Policy Statement on Allowance 
for Loan and Lease Losses Methodologies and Documentation for Banks 
and Savings Institutions'' at https://www.federalreserve.gov/boarddocs/srletters/2001/SR0117a1.pdf and their December 2006 
``Interagency Policy Statement on the Allowance for Loan and Lease 
Losses'' at https://www.fdic.gov/news/news/financial/2006/fil06105a.pdf.
    \5\ For loans collectively evaluated for impairment, an 
institution would also report the amount of any unallocated portion 
of its ALLL.
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     Construction, land development, and other land loans;
     Revolving, open-end loans secured by 1-4 family 
residential properties and extended under lines of credit;
     Closed-end loans secured by 1-4 family residential 
properties;
     Loans secured by multifamily (5 or more) residential 
properties;
     Loans secured by nonfarm nonresidential properties;\6\
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    \6\ The first five loan categories would be reported on a 
domestic office only basis.
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     Commercial and industrial loans;
     Credit card loans to individuals for household, family, 
and other personal expenditures;
     All other loans to individuals for household, family, and 
other personal expenditures; and
     All other loans and all lease financing receivables.
    Currently, the Call Report does not provide detail on the 
components of the ALLL disaggregated by loan category in the manner 
prescribed by ASU 2010-20. Rather, only the amount of the overall ALLL 
is reported with separate disclosure of the total amount of the 
allowance for loans acquired with deteriorated credit quality.\7\ 
Therefore,

[[Page 72039]]

when conducting off-site evaluations of the level of an individual 
institution's overall ALLL and changes therein, examiners and agency 
analysts cannot determine whether the institution is releasing loan 
loss allowances in some loan categories and building allowances in 
others. Collecting more detailed ALLL information would allow the 
agencies to more finely focus efforts related to the ALLL and credit 
risk management and, in conjunction with past due and nonaccrual data 
currently reported by loan category that are used in a general 
assessment of an institution's credit risk exposures, to better 
evaluate the appropriateness of its ALLL. As an example, it is 
currently not possible to differentiate the ALLL allocated to 
commercial real estate (CRE) loans from the remainder of the ALLL at 
institutions with CRE concentrations. By collecting more detailed ALLL 
information, examiners and analysts would then better understand how 
institutions with such concentrations are building or releasing 
allowances, the extent of ALLL coverage in relation to their CRE 
portfolios, and how this might differ among institutions.
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    \7\ Credit card specialty banks and other institutions with a 
significant volume of credit card receivables also disclose the 
amount, if any, of ALLL attributable to retail credit card fees and 
finance charges.
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    The proposed additional detail on the composition of the ALLL by 
loan category would also be useful for analysis of the depository 
institution system. As of June 30, 2011, institutions with $1 billion 
or more in total assets, which would report the additional detail under 
this proposal, held nearly 92 percent of the ALLL balances held by all 
institutions. More granular ALLL information would assist the agencies 
in understanding industry trends related to the build-up or release of 
allowances for specific loan categories. The information would also 
support comparisons of ALLL levels by loan category, including the 
identification of differences in ALLL allocations by institution size. 
Understanding how institutions'ALLL practices and allocations differ 
over time for particular loan categories as economic conditions change 
may also provide insights that can be used to more finely tune 
supervisory procedures and policies.
    The agencies request comment on the degree to which the proposed 
disaggregated detail of institutions' allowance balances corresponds to 
institutions' current allowance methodologies, both with respect to the 
key loan categories included in the proposal and the separate reporting 
of allowance amounts on the basis of impairment method for each loan 
category. In addition, comment is invited on the appropriateness of 
including an item in the Call Report in which institutions would report 
the amount of any unallocated portion of the ALLL for loans 
collectively evaluated for impairment.\8\ To the extent that the 
proposed Call Report information is not captured in institutions' 
automated data collection systems, the agencies request comment on 
institutions' ability to begin to capture this ALLL and related 
recorded investment information associated with outstanding loans.
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    \8\ The agencies note that the table in ASC paragraph 310-10-55-
7 illustrating the required disclosure by portfolio segment of the 
end-of-period balance of the ALLL disaggregated on the basis of 
impairment method and the end-of-period recorded investment in 
financing receivables related to each ALLL balance includes an 
unallocated portion of the ALLL.
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B. Loan Origination Data

    As highlighted by the recent financial crisis and its aftermath, 
the ability to assess credit availability is a key consideration for 
monetary policy, financial stability, and the supervision and 
regulation of the banking system. However, the information currently 
available to policymakers both within and outside the agencies is 
insufficient to accurately monitor the extent to which depository 
institutions are providing credit to households and businesses. In its 
current form, the Call Report collects data on the amount of loans to 
both households and businesses that are outstanding on institutions' 
books at the end of each quarter. However, the underlying flow of loan 
originations cannot be deduced from these quarter-end data owing to the 
myriad of factors and banking activities (other than charge-offs for 
which data are reported) that routinely affect the amount of 
outstanding loans held by institutions, including activities such as 
loan paydowns, extensions, purchases and sales, securitizations, and 
repurchases. Direct reporting of loan originations would allow the 
agencies to isolate the flow of credit creation from the effects of 
these other banking activities.
    Economic research points to a crucial link between the availability 
of credit and macroeconomic outcomes.\9\ For example, the rapid 
contraction in both total loans held on institutions' balance sheets 
and in credit lines held off their balance sheets in the volatile 
period following the collapse of Lehman Brothers in the fall of 2008 
likely contributed to the depth of the economic recession as well as to 
the subsequent weakness in the recovery in economic activity. As a 
result, encouraging the expansion of banking organization loan supply 
was a primary goal of most of the emergency liquidity facilities 
established during the height of the crisis and of the Troubled Asset 
Relief Program (TARP).\10\ Likewise, numerous authors have shown a 
relationship between bank lending and changes in bank capital.\11\ For 
example, during the early 1990s, lending was also significantly 
depressed while banks' capital cushions were being rebuilt, leading 
some analysts to describe the period as a ``credit crunch'' that 
resulted in a materially slower recovery in economic activity.
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    \9\ See, for example, A.K. Kashyap and J.C. Stein (2000), ``What 
Do a Million Observations on Banks Say About the Transmission of 
Monetary Policy,'' The American Economic Review, Vol. 90, No. 3, 
pages 407-428. See also Michael Woodford, ``Financial Intermediation 
and Macroeconomic Analysis,'' Journal of Economic Perspectives, Fall 
2010, volume 24, issue 4, pages 21-44.
    \10\ Chairman Ben S. Bernanke, ``Troubled Asset Relief Program 
and the Federal Reserve's liquidity facilities,'' Testimony before 
the Committee on Financial Services, U.S. House of Representatives, 
November 18, 2008, at https://www.federalreserve.gov/newsevents/testimony/bernanke20081118a.htm.
    \11\ See, for example, Joe Peek and Eric Rosengren (1995), ``The 
Capital Crunch: Neither a Borrower nor a Lender Be,'' Journal of 
Money, Credit and Banking, volume 27(3), pages 625-638, August. See 
also Ben Bernanke and Cara Lown (1991), ``The Credit Crunch,'' 
Brookings Papers on Economic Activity, 2:1991, pages 205-239.
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    However, the lack of data on loan originations made it very 
difficult for policymakers to assess the sources of the steep declines 
in outstanding loans and credit lines during the recent crisis and 
during the early 1990s ``credit crunch.'' In fact, a fall in 
outstanding loans could be driven by reduced demand for credit, reduced 
supply of credit by banking organizations, or both. Looking only at 
changes in outstanding loan balances can give misleading signals and 
mask important shifts in the supply of, and demand for, credit. Policy 
makers may react differently in each of these cases.
    The sources of loan growth--such as whether loans were made under 
commitment or not under commitment--also contain important insights for 
those monitoring financial stability or developing macroprudential 
regulatory policies.\12\ As observed in the fall of 2008, strong loan 
growth that is driven primarily by customers drawing down funds from 
preexisting lending commitments can be a sign of stresses

[[Page 72040]]

in financial markets, and therefore a signal that the economy could be 
slowing down. In contrast, strong growth in credit that includes robust 
extensions to new customers could signal a broad pickup in demand for 
financing and hence renewed economic growth, or it could suggest that 
institutions have eased their lending standards. Accordingly, rapid 
loan growth can be an important indicator of the safety and soundness 
of individual institutions.\13\ Loan origination data, if collected 
from depository institutions, would better identify when such 
developments warrant greater supervisory scrutiny.
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    \12\ Moritz Schularick and Alan M. Taylor, ``Credit Booms Gone 
Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-
2008,'' 2009, National Bureau of Economic Research, Inc., NBER 
Working Papers: 15512.
    \13\ William R. Keeton, ``Does Faster Loan Growth Lead to Higher 
Loan Losses?'' Federal Reserve Bank of Kansas City Economic Review, 
2nd Quarter 1999, volume 84, issue 2, pages 57-75, and Deniz Igan 
and Marcelo Pinheiro, ``Exposure to Real Estate in Bank 
Portfolios,'' Journal of Real Estate Research, January-March 2010, 
volume 32, issue 1, pages 47-74.
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    Credit availability to small businesses is widely considered an 
important driver of economic growth. As a result, the significant 
contraction in business loans on institutions' books over the past 
several years has generated calls from policymakers (and the public) to 
better understand the credit flows of small businesses.\14\ The 
collection of data on originations of loans to businesses by the size 
of the original loan would provide a window into the functioning of the 
important small business market.\15\
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    \14\ See Federal Reserve Board, Report to Congress on the 
Availability of Credit to Small Business, 2007, at https://www.federalreserve.gov/boarddocs/rptcongress/smallbusinesscredit/sbfreport2007.pdf. See also testimony before the House Financial 
Services Committee (May 18, 2010) at https://cybercemetery.unt.edu/archive/cop/20110401231854/https://cop.senate.gov/documents/testimony-051810-atkins.pdf and Congressional Oversight Panel 
Oversight Report, The Small Business Credit Crunch and the Impact of 
the TARP (May 13, 2010), at https://cybercemetery.unt.edu/archive/cop/20110402035902/https://cop.senate.gov/documents/cop-051310-report.pdf.
    \15\ The Call Report and TFR currently collect the outstanding 
amount of small dollar loans to businesses and farms where, for 
loans to businesses, ``small dollar'' is defined as loans (not made 
under commitments) that have original amounts of $1 million or less 
and draws on commitments where the total commitment amount is $1 
million or less.
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    In addition, if loan origination information were available, it 
would also be valuable in designing, and assessing the effectiveness 
of, government policies for depository institutions and other financial 
markets. For instance, policymakers would be keenly attuned to whether, 
and if so, to what extent, the changes to the capital and liquidity 
requirements for large institutions that will be contained in 
regulations implementing the Dodd-Frank Act and the international Basel 
III agreement affect depository institution loan supply. Although these 
new regulations would only directly affect a few dozen large banking 
organizations, smaller banking organizations also may adjust their 
lending policies in response to the changes at large banking 
organizations.
    Loan data currently available to the agencies provide insufficient 
detail to accurately monitor credit creation by depository 
institutions. The Call Report currently collects data on the recorded 
amounts of a wide variety of loan categories in Schedule RC-C, Loans 
and Lease Financing Receivables. Schedule RI-B, Part I, Charge-Offs and 
Recoveries on Loans and Leases, collects the flow of gross charge-offs 
and recoveries in many of the loan categories for which recorded 
amounts are reported in Schedule RC-C, Part I, Loans and Leases. On 
Schedule RC-P, 1-4 Family Residential Mortgage Banking Activities (in 
Domestic Offices), which was added to the Call Report in 2006, certain 
banks report originations and purchases of residential mortgage loans 
held for sale, but not originations of loans held for investment. On 
Schedule RC-S, Servicing, Securitization, and Asset Sale Activities, 
banks report the outstanding principal balance of seven categories of 
loans sold and securitized for which the institution has retained 
servicing or has provided recourse or other credit enhancements.\16\ 
For these same seven loan categories, banks also report the unpaid 
principal balance of loans they have sold (not in securitizations) with 
recourse or other seller-provided credit enhancements. No data exist 
for those loans banks have sold without recourse or seller-provided 
credit enhancements when servicing has not been retained.
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    \16\ The seven categories are (1) 1-4 family residential 
mortgages, (2) home equity loans, (3) credit card loans, (4) auto 
loans, (5) other consumer loans, (6) commercial and industrial 
loans, and (7) all other loans, all leases, and all other assets 
(commercial real estate loans, for example, are subsumed in this 
category).
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    In contrast, savings associations currently report data on loan 
originations, sales, and purchases in the Thrift Financial Report 
(TFR). On TFR Schedule CF, Consolidated Cash Flow Information, savings 
associations report by major loan category the dollar amount of loans 
that were closed or disbursed, loans and participations purchased, and 
loan sales during the quarter. In addition, on TFR Schedule LD, Loan 
Data, savings associations report the amount of net charge-offs, 
purchases, originations, and sales of certain 1-4 family and 
multifamily residential mortgages with high loan-to-value ratios.\17\
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    \17\ As previously noted, savings associations will discontinue 
filing the TFR after the December 31, 2011, report date, which means 
that these data, as currently reported in the TFR, will no longer be 
collected going forward.
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    The agencies propose to begin collecting data on loan originations 
from institutions with total assets of $300 million or more because, as 
outlined in detail above, this information would be of substantial 
benefit in light of the fact that the data currently available for 
banking organizations are inadequate for monetary policy and financial 
stability regulators to monitor and analyze credit flows and because 
the proposed data would support the agencies' supervisory efforts.
    More specifically, for depository institutions with $300 million or 
more in total assets, the agencies propose to collect quarterly 
information on loan originations for several important loan categories 
by introducing a new Schedule RC-U, Loan Origination Activity (in 
Domestic Offices).\18\ Under this proposal, all institutions with $300 
million or more in total assets would report in column A of Schedule 
RC-U, for certain loan categories reported in Schedule RC-C, Loans and 
Lease Financing Receivables, the quarter-end balance sheet amount for 
those loans originated during the quarter that ended on the report 
date.\19\ Institutions with $1 billion or more in total assets would 
also report, for relevant loan categories, (1) the portion of this 
quarter-end amount that was originated under a newly established 
commitment \20\ (column B of Schedule RC-U) and (2) the portion that 
was not originated under a commitment (column C of Schedule RC-U). In 
general, the additional data that would be reported in columns B and C 
of Schedule RC-U by institutions with $1 billion or more

[[Page 72041]]

in total assets represent two ways that institutions originate new 
loans, both of which affect the amounts of loans on institutions' 
balance sheets.
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    \18\ Thus, depository institutions with less than $300 million 
in total assets would be exempt from completing proposed Schedule 
RC-U.
    \19\ For example, a loan was originated for $120,000 during the 
quarter. As a result of principal payments received during the 
quarter, the recorded amount of the loan as reported on the 
institution's Call Report balance sheet (Schedule RC) and in the 
Call Report loan schedule (Schedule RC-C) at quarter-end was 
$101,000. The institution would report the $101,000 quarter-end 
recorded amount for this loan in column A of proposed Schedule RC-U. 
In general, in reporting amounts in column A, if a loan origination 
date is unknown, the reporting institution would be instructed to 
use the date that the loan was first booked by the institution.
    \20\ A newly established commitment is one for which the terms 
were finalized and the commitment became available for use during 
the quarter that ended on the report date. A newly established 
commitment also includes a commitment that was renewed during the 
quarter that ended on the report date.
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    In the proposed originations schedule, all institutions with $300 
million or more in total assets would report the amounts reported in 
Schedule RC-C, Part I or Part II, as of the quarter-end report date 
that were originated during the quarter that ended on the report date 
for the following loan categories:
     1-4 family residential construction loans;
     Other construction loans and all land development and 
other land loans;
     Revolving, open-end loans secured by 1-4 family 
residential properties and extended under lines of credit;
     Closed-end loans secured by first liens on 1-4 family 
residential properties;
     Closed-end loans secured by junior liens on 1-4 family 
residential properties;
     Loans secured by multifamily (5 or more) residential 
properties;
     Loans secured by nonfarm nonresidential properties;\21\
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    \21\ The first seven loan categories would be reported on a 
domestic office only basis.
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     Loans to commercial banks and other depository 
institutions in the U.S.;
     Loans to banks in foreign countries;
     Loans to finance agricultural production and other loans 
to farmers;
     Commercial and industrial loans to U.S. addressees with 
original amounts of $1,000,000 or less;
     Commercial and industrial loans to U.S. addressees with 
original amounts of more than $1,000,000;
     Consumer credit card loans;
     Consumer automobile loans;
     Other consumer loans; and
     Loans to nondepository financial institutions.
    In addition, for each of the preceding loan categories, except as 
noted below, institutions with $1 billion or more in total assets would 
separately disclose the portion of the quarter-end amount of loans 
originated during the quarter that was originated under a newly 
established commitment and the portion that was not originated under a 
commitment. Closed-end loans secured by first liens on 1-4 family 
residential properties, closed-end loans secured by junior liens on 1-4 
family residential properties, and consumer automobile loans would be 
excluded from both of these additional disclosures. Consumer credit 
card loans and revolving, open-end loans secured by 1-4 family 
residential properties and extended under lines of credit would be 
excluded from the disclosure of loans not originated under a commitment 
because it is assumed such loans are always extended under commitment.
    Loan originations that were made under a newly established 
commitment or a commitment that was renewed during the quarter are 
likely to more closely reflect the current lending standards and loan 
terms being applied by an institution, so an expansion or contraction 
in this subset of loans is indicative of current supply and demand 
conditions. In this regard, research has shown that loans not made 
under a commitment are more sensitive to changes in monetary policy 
than loans made under a commitment.\22\ In contrast, loans drawn under 
previous commitments reflect lending standards and terms that were in 
place at the time the loan agreements were reached. Hence, changes in 
outstanding balances associated with previously committed lines are 
more indicative of demand for funds from the firms that have these 
lines, as institutions are less able to ration such credit.
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    \22\ Donald P. Morgan, ``The Credit Effects of Monetary Policy: 
Evidence Using Loan Commitments,'' Journal of Money, Credit and 
Banking, Vol. 30, No. 1 (Feb. 1998), pages 102-118.
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    As mentioned above, all savings associations, many of which are 
small, have for many years reported in the TFR the dollar amount of 
loans that were closed or disbursed, loans and participations 
purchased, and loan sales during the quarter by major loan category. 
Thus, the additional reporting burden of proposed Call Report Schedule 
RC-U for institutions with $300 million or more in total assets may be 
manageable for such institutions. Nevertheless, because banks have not 
previously been required to report data pertaining to loan originations 
for Call Report purposes, the agencies recognize that institutions' 
data systems may not at present be designed to identify and capture 
data on loans originated during the quarter that ended on the report 
date. The agencies request comment on the ability of institutions' 
existing loan systems to generate the proposed data for Schedule RC-U. 
If this information is not currently available, the agencies request 
comment on how burdensome it would be to adapt current systems to 
report the proposed origination data for Schedule RC-U. To the extent 
that existing loan systems enable institutions to track data on loans 
originated during the quarter by loan category in a different manner 
than has been proposed, institutions are invited to suggest alternative 
ways in which such origination data could be collected in the Call 
Report and to explain how an alternative would meet the agencies' data 
needs as described above in this section.

C. Past Due and Nonaccrual Purchased Credit-Impaired Loans

    The Call Report currently collects information regarding the past 
due and nonaccrual status of loans, leases, and other assets in 
Schedule RC-N. To determine whether an asset is past due for purposes 
of completing this schedule, an institution must look to the borrower's 
performance in relation to the contractual terms of the asset. Over the 
past few years, there has been a substantial increase in the amount of 
assets reported in Schedule RC-N as past due 90 days or more and still 
accruing. At some institutions, a large portion of this increase is 
related to loans subject to the accounting requirements set forth in 
ASC Subtopic 310-30, Receivables--Loans and Debt Securities Acquired 
with Deteriorated Credit Quality (formerly American Institute of 
Certified Public Accountants Statement of Position 03-3, ``Accounting 
for Certain Loans or Debt Securities Acquired in a Transfer''), i.e., 
purchased credit-impaired loans, that were acquired in business 
combinations, including acquisitions of failed institutions, and other 
transactions. Loans accounted for under ASC Subtopic 310-30 are 
initially recorded at their purchase price (in a business combination, 
fair value). To the extent that the cash flows expected to be collected 
exceed the purchase price of the loans acquired and the acquiring 
institution has sufficient information to reasonably estimate the 
amount and timing of these cash flows, the institution recognizes 
interest income using the interest method. Otherwise, the loans should 
be placed in nonaccrual status.
    Because loans accounted for under ASC Subtopic 310-30 are impaired 
at the time of purchase, it is possible for institutions to hold on-
balance sheet assets purchased at a deep discount that are 
contractually 90 days or more past due, but on which interest is being 
accrued because the amount and timing of the expected cash flows on the 
assets can be reasonably estimated. Currently, insufficient information 
is collected in Schedule RC-N to determine the volume of purchased 
credit-impaired loans included in the loan amounts reported as ``past 
due 90 days or more and still accruing'' (or reported in the other past 
due and nonaccrual categories in the schedule). As the volume of assets 
reported in the three past due and nonaccrual columns in Schedule RC-N 
has increased at many

[[Page 72042]]

institutions that also report holdings of loans accounted for under ASC 
Subtopic 310-30, the agencies cannot determine whether this growth is 
due to purchased credit-impaired loans or whether the source of the 
increase has been deterioration in the credit quality and performance 
among the assets the institution originated (or purchased without 
evidence of credit problems at acquisition). Better understanding the 
source of these increases would assist the agencies in determining the 
need to adjust their supervisory strategies for individual 
institutions.
    Because of the significant number of acquisitions by depository 
institutions of loans accounted for under ASC 310-30 over the past few 
years and the expected number of future acquisitions, the agencies 
propose to collect additional information in Schedule RC-N to segregate 
the amount of purchased credit-impaired loans that are included in the 
past due and nonaccrual loans reported in this schedule. New Memorandum 
items would be added to Schedule RC-N to separately collect from all 
institutions the total outstanding balance of purchased credit-impaired 
loans accounted for under ASC 310-30 that are past due 30 through 89 
days and still accruing, past due 90 days or more and still accruing, 
and in nonaccrual status. The related carrying amount of these loans 
(before any post-acquisition loan loss allowances) would also be 
reported by past due and nonaccrual status. This information would 
mirror the data reported in Memorandum item 7, ``Purchased impaired 
loans held for investment accounted for in accordance with FASB ASC 
310-30,'' in Schedule RC-C, Part I. Based on the information reported 
in Memorandum item 7, there are less than 300 institutions that hold 
purchased credit-impaired loans and would be affected by the proposed 
new Schedule RC-N Memorandum items.

D. Representation and Warranty Reserves

    When institutions sell or securitize mortgage loans, they typically 
make certain representations and warranties to the investors or other 
purchasers of the loans at the time of the sale and to financial 
guarantors of the loans sold. The specific representations and 
warranties may relate to the ownership of the loan, the validity of the 
lien securing the loan, and the loan's compliance with specified 
underwriting standards. Under ASC Subtopic 450-20, Contingencies--Loss 
Contingencies (formerly FASB Statement No. 5, ``Accounting for 
Contingencies''), institutions are required to accrue loss 
contingencies relating to the representations and warranties made in 
connection with their mortgage securitization activities and mortgage 
loan sales when it is probable that a loss has been incurred and the 
amount of the loss can be reasonably estimated. In October 2010, the 
Division of Corporation Finance of the Securities and Exchange 
Commission (SEC) sent a letter to certain public companies reminding 
them of the need to ``provide clear and transparent disclosure 
regarding your obligations relating to the[se] various representations 
and warranties.'' \23\ A review of a sample of disclosures about 
mortgage loan representations and warranties by public banking 
organizations in their SEC filings since October 2010 reveals that 
these disclosures tend to distinguish between obligations to U.S. 
government-sponsored entities and other parties.
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    \23\ The Division of Corporation Finance's ``Sample Letter Sent 
to Public Companies on Accounting and Disclosure Issues Related to 
Potential Risks and Costs Associated with Mortgage and Foreclosure-
Related Activities or Exposures'' can be accessed at https://www.sec.gov/divisions/corpfin/guidance/cfoforeclosure1010.htm.
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    At present, institutions with $1 billion or more in total assets 
and smaller institutions with significant 1-4 family residential 
mortgage banking activities are required to complete Schedule RC-P, 1-4 
Family Residential Mortgage Banking Activities. These institutions 
report the amount of 1-4 family residential mortgage loans previously 
sold subject to an obligation to repurchase or indemnify that have been 
repurchased or indemnified during the quarter. However, the amount of 
representation and warranty reserves attributable to residential 
mortgages as of quarter-end included in other liabilities on these 
institutions' balance sheets is not separately reported in Schedule RC-
P. Accordingly, building on the SEC's guidance concerning transparent 
disclosure in this area, the agencies are proposing to add two items to 
Schedule RC-P in which institutions required to complete this schedule 
would report the quarter-end amount of representation and warranty 
reserves for 1-4 family residential mortgage loans sold (in domestic 
offices), including those mortgage loans transferred in securitizations 
accounted for as sales. The amount of reserves for representations and 
warranties made to U.S. government agencies and government-sponsored 
agencies (the Federal National Mortgage Association or Fannie Mae, the 
Federal Home Loan Mortgage Corporation or Freddie Mac, and the 
Government National Mortgage Association or Ginnie Mae) would be 
reported separately from the amount of reserves for representations and 
warranties made to other parties.

E. Qualified Thrift Lender Compliance by Savings Associations

    The Qualified Thrift Lender (QTL) test has been in place for 
savings associations since it was enacted as part of the Competitive 
Equality Banking Act of 1987. To be a QTL, a savings association must 
either meet the Home Owners' Loan Act (HOLA) QTL test \24\ or the 
Internal Revenue Service (IRS) Domestic Building and Loan Association 
(DBLA) test.\25\ Under the HOLA QTL test, a savings association must 
hold ``Qualified Thrift Investments'' equal to at least 65 percent of 
its portfolio assets. To be a QTL under the IRS DBLA test, a savings 
association must meet a ``business operations test'' and a ``60 percent 
of assets test.'' A savings association may use either test to qualify 
and may switch from one test to the other. However, the association 
must meet the time requirements of the respective test, which is nine 
out of the last 12 months for the HOLA QTL test or the taxable year 
(which may be either a calendar or fiscal year) for the IRS DBLA test. 
A savings association that fails to meet the QTL requirements is 
subject to certain restrictions, including limits on activities, 
branching, and dividends.
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    \24\ 12 U.S.C. 1467a(m).
    \25\ 26 CFR 301.7701-13A.
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    Through year-end 2011, savings associations will report data on 
either the HOLA QTL test or the IRS DBLA test, as appropriate, in TFR 
Schedule SI, Consolidated Supplemental Information. To enable the 
agencies to continue to monitor savings associations' QTL compliance 
after year-end 2011 when these institutions will no longer file the 
TFR, the agencies are proposing to add two new items to Call Report 
Schedule RC-M, Memoranda, effective March 31, 2012, that would be 
completed by savings associations. In the first item, a savings 
association would identify whether it uses the HOLA QTL test or the IRS 
DBLA test to determine its QTL compliance. The second item would be a 
yes/no question that would ask whether the savings association has been 
in compliance with either the HOLA QTL test as of each month end during 
the quarter or the IRS DBLA test for its most recent taxable year.
    Under Section 10(l) of the HOLA, 12 U.S.C. 1467a(l), a state 
savings bank or cooperative bank is permitted, upon application, to be 
deemed a savings

[[Page 72043]]

association for purposes of holding company regulation if it is 
determined that the bank is a QTL. That section also addresses such a 
bank's failure to maintain its status as a QTL. State savings banks and 
cooperative banks that have been deemed savings associations pursuant 
to 12 U.S.C. 1467a(l) have not been required to report on their QTL 
compliance in the Call Report. Nevertheless, the agencies propose that 
state savings banks and cooperative banks that have elected to be 
treated as savings associations also should be required to complete the 
two QTL items proposed to be added to the Call Report effective March 
31, 2012.

F. Leverage Ratio Denominator

    Banks currently calculate the denominator of the leverage ratio in 
items 22 through 27 of Call Report Schedule RC-R, Regulatory Capital. 
Under the regulatory capital standards applicable to banks, this 
denominator uses average total assets (as reported in item 9 of 
Schedule RC-K, Quarterly Averages) as the starting point,\26\ which 
banks report in Schedule RC-R, item 22. Disallowed assets and other 
deductions are then subtracted from average total assets in items 23 
through 26 of Schedule RC-R, resulting in the reporting of the amount 
of average total assets for leverage capital purposes, i.e., the 
leverage ratio denominator, in item 27 of Schedule RC-R.
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    \26\ See, for example, 12 CFR 325.2(x).
---------------------------------------------------------------------------

    However, savings associations use quarter-end total assets as the 
starting point for the leverage ratio denominator under the regulatory 
capital standards applicable to such institutions.\27\ The quarter-end 
total assets are then adjusted by subtracting disallowed assets and 
other deductions and adding the prorated assets of certain ``includable 
subsidiaries'' to arrive at the amount of adjusted total assets for 
leverage capital purposes, i.e., the leverage ratio denominator.
---------------------------------------------------------------------------

    \27\ 12 CFR 167.1.
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    To accommodate the calculation of the leverage ratio denominator by 
savings associations in Schedule RC-R, items 22 through 27, when such 
institutions begin filing the Call Report, the agencies are proposing 
to modify items 22 and 26 of Schedule RC-R effective as of the March 
31, 2012, report date. The instructions for Schedule RC-R, item 22, 
would continue to advise banks to report their average total assets 
from Schedule RC-K, item 9, but would be revised to further state that 
savings associations should report their total assets from the Call 
Report balance sheet, Schedule RC, item 12. The caption for Schedule 
RC-R, item 22, would be revised to read ``Total assets (for banks, 
average total assets from Schedule RC-K, item 9; for savings 
associations, total assets from Schedule RC, item 12).'' Because 
savings associations may have additions to and deductions from their 
total assets when calculating the leverage ratio denominator that are 
not captured by existing items 23 through 25 of Schedule RC-R, item 26 
of the schedule would be changed from ``LESS: Other deductions from 
assets for leverage capital purposes'' to ``Other additions to 
(deductions from) assets for leverage capital purposes.'' The existing 
instructions for item 26 would be revised to cover adjustments that 
savings associations need to make to total assets but are not reported 
in items 23 through 25 of Schedule RC-R, such as the deduction of 
assets of ``nonincludable'' subsidiaries and the addition of the 
prorated assets of unconsolidated ``includable'' subsidiaries.

G. Call Report Instructional Revisions

1. Specific Valuation Allowances at Savings Associations
    Savings associations that currently file a TFR may create a 
``specific valuation allowance'' (SVA) in lieu of taking a charge-off 
to record the loss associated with a loan when the institution 
determines that it is likely that the amount of the loss classification 
will change due to market conditions. The use of an SVA allows a 
savings association to reduce or increase the amount of the SVA as 
market conditions change. When a charge-off is taken, however, the only 
way an institution ca