Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB, 62129-62135 [2016-21524]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 81, Number 174 (Thursday, September 8, 2016)]
[Notices]
[Pages 62129-62135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21524]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: The Board of Governors of the Federal Reserve System (Board or 
Federal Reserve) is adopting a proposal to revise, with extension, the 
mandatory Consolidated Financial Statements for Holding Companies (FR 
Y-9C). The Board also proposes to extend, without revision, the other 
forms that make up the family of FR Y-9 reporting forms. These are: The 
Parent Company Only Financial Statements for Large Holding Companies 
(FR Y-9LP) The Parent Company Only Financial Statements for Small 
Holding Companies (FR Y-9SP) The Financial Statements for Employee 
Stock Ownership Plan Holding Companies (FR Y-9ES) The Supplement to the 
Consolidated Financial Statements for Holding Companies (FR Y-9CS). The 
revisions to this mandatory information collection become effective on 
September 30, 2016, and March 31, 2017. The Board is also adopting a 
proposal to extend, without revision, the other reports that are part 
of this information collection.
    On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board authority under the Paperwork Reduction Act 
(PRA) to approve of and assign OMB control numbers to collection of 
information requests and requirements conducted or sponsored by the 
Board. In exercising this delegated authority, the Board is directed to 
take every reasonable step to solicit comment. In determining whether 
to approve a collection of information, the Board will consider all 
comments received from the public and other agencies.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3829. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.

[[Page 62130]]


SUPPLEMENTARY INFORMATION: 
    Final approval under OMB delegated authority of the extension for 
three years, with revision, of the following report:
    Report title: Consolidated Financial Statements for Holding 
Companies, Parent Company Only Financial Statements for Large Holding 
Companies, Parent Company Only Financial Statements for Small Holding 
Companies, Financial Statement for Employee Stock Ownership Plan 
Holding Companies, and the Supplemental to the Consolidated Financial 
Statements for Holding Companies.
    OMB control number: 7100-0128.
    Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR 
Y-9CS.
    Frequency: Quarterly, semiannually, and annually.
    Reporters: Bank holding companies (BHCs), savings and loan holding 
companies (SLHCs), securities holding companies (SHCs) and Intermediate 
Holding Companies (IHCs) (collectively, holding companies).
    Estimated annual reporting hours: FR Y-9C (non-Advanced Approaches 
holding companies): 131,245 hours; FR Y-9C (Advanced Approaches holding 
companies): 2,674 hours; FR Y-9LP: 16,632 hours; FR Y-9SP: 44,518 
hours; FR Y-9ES: 44 hours; FR Y-CS: 472 hours.
    Estimated average hours per response: FR Y-9C (non-Advanced 
Approaches holding companies): 50.17 hours; FR Y-9C (Advanced 
Approaches holding companies): 51.42 hours; FR Y-9LP: 5.25 hours; FR Y-
9SP: 5.40 hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
    Number of respondents: FR Y-9C (non-Advanced Approaches holding 
companies): 654; FR Y-9C (Advanced Approaches holding companies): 13; 
FR Y-9LP: 792; FR Y-9SP: 4,122; FR Y-9ES: 88; FR Y-9CS: 236.
    General description of report: This information collection is 
mandatory for BHCs (12 U.S.C. 1844(c)(1)(A)). Additionally, 12 U.S.C. 
1467a (b)(2)(A) and 1850a(c)(1)(A), respectively, authorize the Federal 
Reserve to require that SLHCs and supervised SHCs file with the Federal 
Reserve. Lastly, 12 U.S.C. 5365 authorizes the Federal Reserve to 
require that U.S. IHCs file with the Federal Reserve. Confidential 
treatment is not routinely given to the financial data in this report. 
However, confidential treatment for the reporting information, in whole 
or in part, can be requested in accordance with the instructions to the 
form, pursuant to sections (b)(4), (b)(6), or (b)(8) of FOIA (5 U.S.C. 
522(b)(4), (b)(6), and (b)(8)). The applicability of these exemptions 
would need to be reviewed on a case by case basis.
    Abstract: The FR Y-9C is a standardized financial statement for the 
consolidated holding company. The FR Y-9LP and the FR Y 9SP serve as 
standardized financial statements for parent holding companies; the FR 
Y-9ES is a financial statement for holding companies that are Employee 
Stock Ownership Plans (ESOPs). The Federal Reserve also has the 
authority to use the FR Y-9CS (a free-form supplement) to collect 
additional information deemed to be (1) critical and (2) needed in an 
expedited manner. The FR Y-9 family of reporting forms continues to be 
the primary source of holding company financial data that examiners 
rely on in the intervals between on-site inspections. Financial data 
from these reporting forms are used to detect emerging financial 
problems, to review performance and conduct pre-inspection analysis, to 
monitor and evaluate capital adequacy, to evaluate holding company 
mergers and acquisitions, and to analyze a holding company's overall 
financial condition to ensure the safety and soundness of its 
operations.
    Current Actions: On December 2, 2015, the Federal Reserve published 
a notice in the Federal Register requesting public comment for 60 days 
on the proposed revisions to the FR Y-9C.\1\ As proposed, the revisions 
would have become effective in March 2016. Based on comments received 
on the proposal and other factors, the Federal Reserve notified 
institutions that the revisions would be deferred until no earlier than 
September 2016. Most of the proposed revisions were reporting burden 
reductions consistent with proposed changes to the Federal Financial 
Institutions Examination Council (FFIEC) Consolidated Reports of 
Condition and Income (Call Reports) (FFIEC 031 & 041; OMB No. 7100-
0036). The proposed revisions included deletions of existing data 
items, increases in existing thresholds for certain data items, a 
number of instructional revisions and the addition of new and revised 
data items.
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    \1\ Notice of the proposed action was published in the Federal 
Register; the comment period expired on February 1, 2016. See FR 80 
75457.
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    The Federal Reserve received one comment letter from a bankers' 
association regarding proposed revisions to the FR Y-9C. The Federal 
Reserve also considered the comments on the Call Reports in developing 
the draft final notice for consistency. The Board, Federal Deposit 
Insurance Corporation (FDIC), and Office of the Comptroller of the 
Currency (OCC) (the agencies) collectively received comment letters 
from seven banking organizations, four bankers' associations and two 
consulting firms on similar proposed revisions to the Call Reports.
    The commenters generally supported the proposal, but suggested 
delayed implementation of the revisions. The Federal Reserve has 
delayed the effective dates for these changes consistent with the 
timing suggested by commenters. The Federal Reserve adopted most of the 
revisions as proposed, except for a few instructional changes due to 
comments received.
    The following is a detailed discussion of the comments received and 
the Federal Reserve's responses to the comments.

Detailed Discussion of Public Comment

A. Deletions of Existing Data Items

    The Federal Reserve proposed that the continued collection of the 
following items was no longer necessary and proposed to eliminate them 
effective March 2016:
    (1) Schedule HI, Memorandum items 17(a) and 17(b), on other-than-
temporary impairments; \2\
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    \2\ Institutions would continue to complete Schedule HI, 
Memorandum item 17(c), on net impairment losses recognized in 
earnings.
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    (2) Schedule HC-C, Memorandum items 1(f)(2), 1(f)(5), and 1(f)(6) 
on troubled debt restructurings in certain loan categories that are in 
compliance with their modified terms;
    (3) Schedule HC-N, Memorandum items 1(f)(2), 1(f)(5), and 1(f)(6) 
on troubled debt restructurings in certain loan categories that are 30 
days or more past due or on nonaccrual;
    (4) Schedule HC-M, items 6(a)(5)(a) through (d) on loans in certain 
loan categories that are covered by FDIC loss-sharing agreements; and
    (5) Schedule HC-N, items 12(e)(1) through (4) on loans in certain 
loan categories that are covered by FDIC loss-sharing agreements and 
are 30 days or more past due or on nonaccrual.
    In addition, when Schedule HC-R, Part II, is completed properly, 
item 18(b) on unused commitments to asset-backed commercial paper 
conduits with an original maturity of one year or less is not needed 
because such commitments should already have been reported in item 10 
as off-balance sheet securitization exposures. The instructions for 
item 18(b) explain that these unused commitments should be reported in 
item 10 and that amounts should not be reported in item 18(b).

[[Page 62131]]

Accordingly, the Federal Reserve proposed to delete existing item 18(b) 
from Schedule HC-R, Part II. Existing item 18(c) of Schedule HC-R, Part 
II, for unused commitments with an original maturity exceeding one year 
would then be renumbered as item 18(b).
    Comments were received from two consulting firms and one banking 
organization regarding those proposed deletions. The banking 
organization stated that these revisions would have no impact on its 
reporting. One consulting firm agreed with all of the proposed 
deletions except the one involving information on other-than-temporary 
impairment (OTTI) losses in Schedule HI, Memorandum items 17(a) and 
17(b). The firm believed the deletion of the two OTTI items would 
eliminate the reporting of important information about the performance 
of institutions' securities portfolios and how they recognize OTTI. 
While the Federal Reserve acknowledges that this proposal would result 
in the loss of information on the total year-to-date amount of OTTI 
losses and the portion of these losses recognized in other 
comprehensive income, institutions would continue to report the portion 
of OTTI losses recognized in earnings. It is this portion of OTTI 
losses that is of greatest interest and concern to the Federal Reserve. 
Because some or all of each OTTI loss must be recognized in earnings, 
when an institution reports a substantial amount of OTTI losses in 
earnings, it is this item that serves as a red flag for further 
supervisory follow-up. Additionally, the portion of OTTI losses that 
passes through other comprehensive income and accumulates in other 
comprehensive income is excluded from regulatory capital for the vast 
majority of institutions.
    One consulting firm expressed concern about the proposed deletion 
of Memorandum items on troubled debt restructurings in certain loan 
categories in Schedules HC-C and HC-N. This firm stated that this 
information is important for understanding the specific nature of 
troubled loans relative to restructured loans and suggested that the 
loan categories being deleted may need to be added back if there is a 
significant economic downturn. The Federal Reserve notes that each of 
the loan categories proposed for deletion is a subset of the larger 
loan category ``All other loans,'' which institutions would continue to 
report. Furthermore, the amount of troubled debt restructurings in each 
of these subset categories is reported only when it exceeds 10 percent 
of the total amount of troubled debt restructurings in compliance with 
their modified terms (Schedule HC-C) or not in compliance with their 
modified terms (Schedule HC-N), as appropriate. Thus, the total amount 
of an institution's troubled debt restructurings, both those in 
compliance with their modified terms and those that are not, would 
continue to be reported.
    After considering these comments, the Federal Reserve will remove 
all of the items proposed for deletion from the FR Y-9C effective 
September 30, 2016, except for the deletion relating to OTTI, which 
would take effect March 31, 2017.

B. New Reporting Threshold and Increases in Existing Reporting 
Thresholds

    In three FR Y-9C schedules, holding companies are currently 
required to itemize and describe each component of an existing item 
when the component exceeds both a specified percentage of the item and 
a specified dollar amount. Based on a preliminary evaluation of the 
existing reporting thresholds, the Federal Reserve proposed that the 
dollar portion of the thresholds that currently apply to these items 
could be increased to provide a reduction in reporting burden without a 
loss of data that would be necessary for supervisory or other public 
policy purposes. The percentage portion of the existing thresholds 
would not be changed. Accordingly, the Federal Reserve proposed to 
raise from $25,000 to $100,000 the dollar portion of the threshold for 
itemizing and describing components of:
    (1) Schedule HI, memo item 6, ``Other noninterest income;''
    (2) Schedule HI, memo item 7, ``Other noninterest expense;''
    (3) Schedule HC-Q, Memorandum item 1, ``All other assets;'' and
    (4) Schedule HC-Q, Memorandum item 2, ``All other liabilities.''
    To reduce burden, the Federal Reserve also proposed to raise from 
$25,000 to $1,000,000 the dollar portion of the threshold for itemizing 
and describing components of ``Other trading assets'' and ``Other 
trading liabilities'' in Schedule HC-D, Memorandum items 9(b) and 10.
    Based on the Federal Reserve's review of items reported on Schedule 
HC-I, Insurance-Related Underwriting Activities (Including 
Reinsurance), the Federal Reserve proposed to add a $10,000,000 
threshold to provide a reduction in reporting burden for reinsurance 
recoverables reported on Schedule HC-I, Part I line item 1 and HC-I, 
Part II line item 1, due to the limited activity and immateriality on 
these line items. Reporting of these data items would be determined as 
of the end of each quarter.
    Two bankers' associations, two consulting firms, and two banking 
organizations commented on the proposed changes involving reporting 
thresholds. One banking organization supported the higher thresholds, 
stating that raising the thresholds would reduce reporting burden, but 
the other said that this change would not have an impact on its 
reporting. The two bankers' associations expressed support for the 
targeted approach to increasing the reporting thresholds, but observed 
that an increase from $25,000 to $100,000 would do little to reduce 
reporting burden for most institutions. The associations recommended 
increasing the percentage portion of the reporting threshold for which 
components must be itemized and described. At present, the percentage 
portion of the reporting threshold applicable to reporting components 
of ``Other noninterest income'' and ``Other noninterest expense'' in 
Schedule HI is three percent.\3\ The associations recommended 
increasing this percentage to a range of 5 to 7 percent.
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    \3\ For the other items for which Federal Reserve proposed an 
increase in the dollar portion of the existing reporting threshold, 
the percentage portion of the threshold is 25 percent of the total 
amount of the item.
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    Because of the interaction between the dollar and percentage 
portions of the reporting thresholds on the total amount of an item 
that is subject to component itemization and description, the Federal 
Reserve acknowledges that the proposed increase in the dollar portion 
of the reporting threshold from $25,000 to $100,000 may not benefit all 
holding companies, particularly larger holding companies. One 
consulting firm supported the increase in the dollar portion of the 
reporting threshold for Schedule HC-Q, but recommended retaining the 
$25,000 threshold for the ``Other noninterest income'' and ``Other 
noninterest expense'' in Schedule HI. The consulting firm commented 
that, for smaller institutions, information on the components of these 
noninterest items ``is an important indicator of the activity of the 
institution, its style and management ability'' and ``provide[s] 
regulators with a clearer insight into the activities of a bank.'' This 
firm also observed that the component information is or should be 
captured in the internal accounting systems. The Federal Reserve 
recognizes that the proposed increase in the dollar portion of the 
threshold for reporting components of other noninterest income and 
expense would result in a reduced number of their components being 
itemized and described in the FR Y-9C

[[Page 62132]]

Schedule HI, particularly by smaller holding companies. However, in 
carrying out on- and off-site supervision of holding companies, the 
Federal Reserve is able to follow up directly with an individual 
holding company when the level and trend of noninterest income and 
expense, and other elements of net income (or loss), that are reflected 
in its FR Y-9C raise questions about the quality of, and the factors 
affecting, the holding company's reported earnings. The Federal Reserve 
does not believe the proposed increase in the dollar portion of the 
reporting thresholds in Schedule HI will impede the ability to evaluate 
holding companies' earnings.
    Another consulting firm questioned the proposed increase from 
$25,000 to $1,000,000 in the dollar portion of the threshold for 
itemizing and describing components of ``Other trading assets'' and 
``Other trading liabilities'' in Schedule HC-D, Memorandum items 9 and 
10. In addition to meeting the dollar portion of the threshold, a 
component must exceed 25 percent of the total amount of ``Other trading 
assets'' or ``Other trading liabilities'' in order to be itemized and 
described in Memorandum item 9 or 10, respectively. These two 
memorandum items are to be completed only by holding companies that 
report average trading assets of $1 billion or more in any of the four 
preceding calendar quarters. Thus, at $1,000,000, the proposed higher 
dollar threshold for component itemization and description in 
Memorandum items 9 and 10 of Schedule HC-D would represent one tenth of 
one percent of the amount of average trading assets that a holding 
company must have in order to be subject to the requirement to report 
components of its other trading assets and liabilities that exceed the 
reporting threshold. As a result, the Federal Reserve believes that 
raising the dollar portion of the threshold for reporting components of 
Memorandum items 9 and 10 of Schedule HC-D to $1,000,000 will continue 
to provide meaningful data while reducing burden for holding companies 
that must complete these items.
    No comments were received on the proposal to add a $10,000,000 
threshold on HC-I. After considering the comments about the proposed 
new and increased reporting thresholds, the Federal Reserve will 
implement all of these changes effective September 30, 2016.\4\
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    \4\ Although the proposed reporting threshold changes would take 
effect as of September 30, 2016, holding companies may choose, but 
are not required, to continue using $25,000 as the dollar portion of 
the threshold for reporting components of the specified items in the 
three previously identified schedules rather than the higher dollar 
thresholds.
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C. Instructional Revisions

    1. Reporting Home Equity Lines of Credit that Convert from 
Revolving to Non Revolving Status.
    Holding companies report the amount outstanding under revolving, 
open-end lines of credit secured by 1-4 family residential properties 
(commonly known as home equity lines of credit or HELOCs) in item 
1(c)(1) of Schedule HC-C, Loans and Leases. Closed-end loans secured by 
1-4 family residential properties are reported in Schedule HC-C, item 
1(c)(2)(a) or (b), depending on whether the loan is a first or a junior 
lien.\5\
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    \5\ Information also is separately reported for open-end and 
closed-end loans secured by 1-4 family residential properties in 
Schedule HI-B, Part I, Charge-offs and Recoveries on Loans and 
Leases; Memorandum items in Schedule HC-C; Schedule HC-D; Schedule 
HC-M; and Schedule HC-N.
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    A HELOC is a line of credit secured by a lien on a 1-4 family 
residential property that generally provides a draw period followed by 
a repayment period. During the draw period, a borrower has revolving 
access to unused amounts under a specified line of credit. During the 
repayment period, the borrower can no longer draw on the line of 
credit, and the outstanding principal is either due immediately in a 
balloon payment or is repaid over the remaining loan term through 
monthly payments. The FR Y-9C instructions do not address the reporting 
treatment for a home equity line of credit when it reaches its end-of-
draw period and converts from revolving to nonrevolving status. Such a 
loan no longer has the characteristics of a revolving, open-end line of 
credit and, instead, becomes a closed-end loan. In the absence of 
instructional guidance that specifically addresses this situation, the 
Federal Reserve has found diversity in how these credits are reported 
in Schedule HC-C. Some holding companies continue to report home equity 
lines of credit that have converted to non-revolving closed-end status 
in item 1(c)(1) of Schedule HC-C, as if they were still revolving open-
end lines of credit, while other holding companies recategorize such 
loans and report them as closed-end loans in item 1(c)(2)(a) or (b), as 
appropriate.
    Therefore, to address this absence of instructional guidance and 
promote consistency in reporting, the Federal Reserve proposed to 
clarify the instructions for reporting loans secured by 1-4 family 
residential properties to specify that after a revolving open-end line 
of credit has converted to non-revolving closed-end status, the loan 
should be reported in Schedule HC-C, item 1(c)(2)(a) or (b), as 
appropriate.
    Two bankers' associations, one consulting firm, and one banking 
organization commented on the proposed instructional clarification for 
HELOCs. The consulting firm agreed with this clarification because of 
the consistency in reporting that it would provide. The two bankers' 
associations stated that they appreciated the proposed clarification, 
but noted that ``material definitional changes would require a whole 
recoding of these credits.'' The associations observed that the 
proposed clarification would likely have implications for other 
regulatory requirements such as the Comprehensive Capital Analysis and 
Review, which evaluates the capital planning processes and capital 
adequacy of the largest U.S.-based bank holding companies. They also 
described two situations involving HELOCs for which further guidance 
would be needed if the proposed instructional change were to be 
implemented and recommended that examples be provided with the 
instructions for reporting HELOCs.
    The banking organization opposed the proposed instructional 
clarification for HELOCs and requested that it be withdrawn, citing 
several difficulties it would encounter if the clarification were made. 
These difficulties include identifying when a HELOC has begun the 
repayment period and the lien position of a HELOC at that time because 
the bank's loan system for HELOCs has not been set up to generate this 
information. The bank requested time for systems reprogramming if the 
proposed instructional clarification were to be adopted.
    Based on the issues raised in the comments received on the proposed 
HELOC instructional clarification, the Federal Reserve will give 
further consideration to this proposal, including its effect on and 
relationship to other regulatory reporting requirements. Accordingly, 
the Federal Reserve will not proceed with this proposed instructional 
clarification at this time and the existing instructions for reporting 
HELOCs in item 1.c(1) of Schedule HC-C, will remain in effect. Once the 
Federal Reserve completes its consideration of this instructional 
matter and determines whether and how the FR Y-9C instructions should 
be clarified with respect to the reporting of revolving open-end lines 
of credit that have converted to non-revolving closed-end status, any 
proposed instructional

[[Page 62133]]

clarification will be published in the Federal Register for comment.
2. Reporting Treatment for Securities for Which a Fair Value Option Is 
Elected
    The FR Y-9C Glossary entry for ``Trading Account'' currently states 
that ``all securities within the scope of the Financial Accounting 
Standards Board's (FASB) Accounting Standards Codification (ASC) Topic 
320, Investments-Debt and Equity Securities (formerly FASB Statement 
No. 115, ``Accounting for Certain Investments in Debt and Equity 
Securities''), that a holding company has elected to report at fair 
value under a fair value option with changes in fair value reported in 
current earnings should be classified as trading securities.'' This 
reporting treatment was based on language contained in former FASB 
Statement No. 159, ``The Fair Value Option for Financial Assets and 
Financial Liabilities,'' but that language was not codified when 
Statement No. 159 was superseded by current ASC Topic 825, Financial 
Instruments. Thus, under U.S. GAAP as currently in effect, the 
classification of all securities within the scope of ASC Topic 320 that 
are accounted for under a fair value option as trading securities is no 
longer required. Accordingly, to bring the ``Trading Account'' Glossary 
entry into conformity with current U.S. GAAP, the Federal Reserve 
proposed to revise the statement from the Glossary entry quoted above 
by replacing ``should be classified'' with ``may be classified.''
    This revision to the ``Trading Account'' Glossary entry would have 
meant that a holding company that elects the fair value option for 
securities within the scope of ASC Topic 320 would have been able to 
classify such securities as held-to-maturity or available-for-sale in 
accordance with this topic based on the holding company's intent and 
ability with respect to the securities. In addition, a holding company 
could have chosen to classify securities for which a fair value option 
is elected as trading securities.
    Holding companies that have been required to classify all 
securities within the scope of ASC Topic 320 that are accounted for 
under a fair value option as trading securities also should consider 
the related proposed changes to Schedule HC-Q, Assets and Liabilities 
Measured at Fair Value on a Recurring Basis, which are discussed below.
    Comments from two bankers' associations and one consulting firm 
were received regarding the proposed instructional revision for the 
classification of securities for which the fair value option is 
elected. The consulting firm welcomed the proposal. The two bankers' 
associations stated that they understood the purpose of the proposed 
instructional revision, but they requested further clarification of the 
reporting treatment for ``securities for which an institution has 
elected to use the trading measurement classification,'' i.e., fair 
value through earnings.
    The Federal Reserve has reconsidered this proposed instructional 
revision in light of the comments received, including the requested 
further clarification. Based on this reconsideration, the Federal 
Reserve has decided not to implement the proposed instructional 
revision and to retain the existing FR Y-9C instructions directing 
institutions to classify securities reported at fair value under a fair 
value option as trading securities.
3. Net Gains (Losses) on Sales of, and Other-Than-Temporary Impairments 
on, Equity Securities That Do Not Have Readily Determinable Fair Values
    Holding companies report investments in equity securities that do 
not have readily determinable fair values and are not held for trading 
(and to which the equity method of accounting does not apply) in 
Schedule HC-F, item 4, and on the FR Y-9C balance sheet in Schedule HC, 
item 11, ``Other assets.'' If such equity securities are held for 
trading, they are reported in Schedule HC, item 5, and in Schedule HC-
D, item 9 and Memorandum item 7.b, if applicable. In contrast, 
investments in equity securities with readily determinable fair values 
that are not held for trading are reported as available-for-sale 
securities in Schedule HC, item 2(b), and in Schedule HC-B, item 7, 
whereas those held for trading are reported in Schedule HC, item 5, and 
in Schedule HC-D, item 9 and Memorandum item 7(a), if applicable.
    In general, investments in equity securities that do not have 
readily determinable fair values are accounted for in accordance with 
ASC Subtopic 325-20, Investments--Other--Cost Method Investments 
(formerly Accounting Principles Board Opinion No. 18, ``The Equity 
Method of Accounting for Investments in Common Stock''), but are 
subject to the impairment guidance in ASC Topic 320, Investments-Debt 
and Equity Securities (formerly FASB Staff Position No. FAS 115-2 and 
FAS 124-2, ``Recognition and Presentation of Other-Than-Temporary 
Impairments'').
    The FR Y-9C instructions for Schedule HI, Income Statement, address 
the reporting of realized gains (losses), including other-than-
temporary impairments, on held to-maturity and available-for-sale 
securities as well as the reporting of realized and unrealized gains 
(losses) on trading securities and other assets held for trading. 
However, the Schedule HI instructions do not specifically explain where 
to report realized gains (losses) on sales or other disposals of, and 
other-than-temporary impairments on, equity securities that do not have 
readily determinable fair values and are not held for trading (and to 
which the equity method of accounting does not apply).
    The instructions for Schedule HI, item 5.k, ``Net gains (losses) on 
sales of other assets (excluding securities),'' direct holding 
companies to ``report the amount of net gains (losses) on sales and 
other disposals of assets not required to be reported elsewhere in the 
income statement (Schedule HI).'' The instructions for item 5(k) 
further advise holding companies to exclude net gains (losses) on sales 
and other disposals of securities and trading assets. The intent of 
this wording was to cover securities designated as held-to-maturity, 
available-for-sale, and trading securities because there are separate 
specific items elsewhere in Schedule HI for the reporting of realized 
gains (losses) on such securities (items 6(a), 6(b), and 5(c), 
respectively).
    Thus, the Federal Reserve proposed to revise the instructions for 
Schedule HI, item 5(k), by clarifying that the exclusions from this 
item of net gains (losses) on securities and trading assets apply to 
held-to-maturity, available-for-sale, and trading securities and other 
assets held for trading. At the same time, the Federal Reserve proposed 
to add language to the instructions for Schedule HI, item 5(k), that 
explains that net gains (losses) on sales and other disposals of equity 
securities that do not have readily determinable fair values and are 
not held for trading (and to which the equity method of accounting does 
not apply), as well as other-than-temporary impairments on such 
securities, should be reported in item 5(k). In addition, the Federal 
Reserve proposed to remove the parenthetic ``(excluding securities)'' 
from the caption for item 5(k) and add in its place a footnote to this 
item advising holding companies to exclude net gains (losses) on sales 
of trading assets and held-to-maturity and available-for-sale 
securities.
    No comments were received on these proposed changes to the 
instructions and report form caption for Schedule HI, item 5(k). 
Accordingly, the changes would take effect March 31, 2017.

[[Page 62134]]

D. New and Revised Data Items

1. Increase in the Time Deposit Size Threshold
    The Federal Reserve proposed to increase the time deposit size 
threshold from $100,000 to $250,000 in Schedule HC-E, memorandum item 
3, Time Deposits of $100,000 or more with a remaining maturity of one 
year or less. The comparable line item on the Call Report is being 
revised to reflect the permanent $250,000 deposit insurance limit. 
Therefore, the Federal Reserve proposed this change to maintain 
consistency between the two reports.
    The agencies received comments on the proposed increases in time 
deposit thresholds from four banking organizations, one consulting firm 
and two bankers' associations. Three banking organizations and two 
bankers' associations supported the proposed increase and further 
recommended increasing the deposit size threshold on brokered deposit 
items and time deposits of less than $100,000.
    In response to these comments, the Federal Reserve reviewed the 
collection and use of brokered deposit information reported in HC-E 
Memorandum items and has determined that HC-E Memorandum item 1, 
Brokered Deposits less than $100,000 with a remaining maturity of one 
year or less and HC-E Memorandum 2, Brokered deposits less than 
$100,000 with a remaining maturity of more than one year can be revised 
to reflect the $250,000 deposit size threshold. The Federal Reserve 
also reviewed the use of deposit information reported in HC-E 1(d) and 
1(e) and HC-E 2(d) and (2e), time deposits of less than $100,000 and 
time deposits greater than $100,000 in domestic offices of commercial 
bank subsidiaries of the reporting holding company, and time deposits 
held in domestic offices of other depository institutions that are 
subsidiaries of the reporting holding company, and determined that 
these items can be revised to reflect the $250,000 threshold.
    One commenter questioned why the FR Y-9C proposal did not modify 
Schedule HI to reflect the increased deposit threshold similar to the 
Call Report. The commenter stated that by not aligning the reports may 
create confusion and delays as banks would have to maintain separate 
reporting systems. The Federal Reserve has reviewed the data collection 
and use of the deposit information reported in Schedule HI line item 
2(a)1(a), Interest on Time Deposits of $100,000 or more and HI 2(a)1(b) 
Interest on Time Deposits of less than $100,000 and determined that 
these items can also be revised to reflect the $250,000 threshold.
    The proposed changes to Schedule HC-E as well as the proposed 
change to HI would take effect March 31, 2017.
2. Changes to Schedule RC-Q, Assets and Liabilities Measured at Fair 
Value on a Recurring Basis
    Holding companies reporting on Schedule HC-Q are currently required 
to treat securities they have elected to report at fair value under a 
fair value option as part of their trading securities. As a 
consequence, institutions must include fair value information for their 
fair value option securities, if any, in Schedule HC-Q two times: 
First, as part of the fair value information they report for their 
``Other trading assets'' in item 5(b) of the schedule, and then on a 
standalone basis in item 5(b)(1), ``Nontrading securities at fair value 
with changes in fair value reported in current earnings.'' This 
reporting treatment flows from the existing provision of the Glossary 
entry for ``Trading Account'' that, as discussed above, requires an 
institution that has elected to report securities at fair value under a 
fair value option to classify the securities as trading securities. 
However, as discussed above, the Federal Reserve proposed to remove 
this requirement, which would have permitted an institution to classify 
fair value option securities as held-to-maturity, available-for-sale, 
or trading securities.
    In its current form, Schedule HC-Q contains an item for available-
for-sale securities along with the items identified above for ``Other 
trading assets,'' which includes securities designated as trading 
securities, and ``Nontrading securities at fair value with changes in 
fair value reported in current earnings.'' However, given the existing 
instructional requirements for fair value option securities, Schedule 
HC-Q does not include an item for reporting held-to-maturity securities 
because only securities reported at amortized cost are included in this 
category of securities. Along with proposing to remove the requirement 
to report fair value option securities as trading securities, as 
discussed earlier in this notice, the Federal Reserve also proposed to 
replace item 5(b)(1) of Schedule HC-Q for nontrading securities 
accounted for under a fair value option with a new item for any ``Held-
to-Maturity securities'' to which a fair value option is applied.
    In addition, at present, holding companies that have elected to 
measure loans (not held for trading) at fair value under a fair value 
option are required to report the fair value and unpaid principal 
balance of such loans in Memorandum items 10 and 11 of Schedule HC-C, 
Loans and Lease Financing Receivables. This information is also 
collected on the Call Report Schedule RC-C Loans and Leases. The FDIC 
and the OCC (the agencies) have proposed to move this information in 
the Call Report from Schedule RC-C to Schedule RC-Q, Assets and 
Liabilities Measured at Fair Value on a Recurring Basis. Holding 
companies have commented in the past that retaining a consistent format 
between the Call Report and the FR Y-9C on the reporting of comparable 
information reduces reporting burden to the holding companies. 
Accordingly, the Federal Reserve proposed to move Memorandum items 10 
and 11 on the fair value and unpaid principal balance of fair value 
option loans from Schedule HC-C, to Schedule HC-Q effective March 31, 
2017, and to designate them as Memorandum items 3 and 4.
    Two bankers' association requested clarification on the proposed 
reporting of held-to-maturity securities, available-for-sale securities 
and securities for which a trading measurement classification has been 
elected in Schedule HC-Q. As stated above, the Federal Reserve 
reconsidered, and decided not to implement, the proposed instructional 
revision that would no longer have required an institution to classify 
fair value option securities as trading securities. Based on this 
decision, the Federal Reserve also will not implement the proposed 
elimination of the existing Schedule HC-Q item for nontrading 
securities accounted for under a fair value option and their proposed 
addition to the schedule of a new item for held-to-maturity securities.
    No comments were received on the proposal to move the Memorandum 
items in Schedule HC-C, on the fair value and unpaid principal balance 
of fair value option loans to Schedule HC-Q, where they would be 
designated as Memorandum items 3 and 4. Therefore, the Federal Reserve 
will proceed with this change effective March 31, 2017.
3. Extraordinary Items
    In January 2015, the FASB issued ASU No. 2015-01, ``Simplifying 
Income Statement Presentation by Eliminating the Concept of 
Extraordinary Items.'' This ASU eliminates the concept of extraordinary 
items from U.S. GAAP. At present, ASC Subtopic 225-20, Income 
Statement--Extraordinary and Unusual Items (formerly Accounting 
Principles Board Opinion No. 30, ``Reporting the Results of 
Operations''), requires an entity to separately classify, present,

[[Page 62135]]

and disclose extraordinary events and transactions. An event or 
transaction is presumed to be an ordinary and usual activity of the 
reporting entity unless evidence clearly supports its classification as 
an extraordinary item.
    ASU 2015-01 is effective for fiscal years, and interim periods 
within those fiscal years, beginning after December 15, 2015. Thus, for 
example, holding companies with a calendar year fiscal year must begin 
to apply the ASU in their FR Y-9C for March 31, 2016.\6\ After a 
holding company adopts ASU 2015-01, any event or transaction that would 
have met the criteria for extraordinary classification before the 
adoption of the ASU should be reported in Schedule HI, item 5(l), 
``Other noninterest income,'' or item 7(d), ``Other noninterest 
expense,'' as appropriate, unless the event or transaction would 
otherwise be reportable in another item of Schedule HI.
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    \6\ Early adoption of ASU 2015-01 is permitted provided that the 
guidance is applied from the beginning of the fiscal year of 
adoption.
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    Consistent with the elimination of the concept of extraordinary 
items in ASU 2015-01, the Federal Reserve proposed to revise the 
instructions for Schedule HI, item 11, and remove the term 
``extraordinary items'' and revise the captions for Schedule HI, item 
8, ``Income (loss) before income taxes and extraordinary items and 
other adjustments,'' item 10, ``Income (loss) before extraordinary 
items and other adjustments'' and item 11, ``Extraordinary items and 
other adjustment, net of income taxes effective March 31, 2016. After 
the concept of extraordinary items has been eliminated and such items 
would no longer be reportable in Schedule HI, item 11, only the results 
of discontinued operations would be reportable in item 11. Accordingly, 
effective March 31, 2016, the revised captions for Schedule HI, items 
8, 10 and 11 would become ``Income (loss) before income taxes and 
discontinued operations,'' ``Income (loss) before discontinued 
operations,'' and ``discontinued operations, net of applicable income 
taxes'' respectively. The captions for Schedule HI, memorandum items 2 
and 8, and items 8 and 11 on the Predecessor Financial Items and 
applicable Glossary references would also be revised to eliminate the 
concept of extraordinary items.
    No comments were received on the planned changes related to 
extraordinary items. Accordingly, effective September 30, 2016, the 
captions for Schedule HI, items 8, 10, and 11, would be revised to say 
``Income (loss) before income taxes and discontinued operations,'' 
``Income (loss) before discontinued operations,'' and ``Discontinued 
operations, net of applicable income taxes,'' respectively. Similarly, 
the captions for Schedule HI, memorandum items 2 and 8, and items 8 and 
11 on the Predecessor Financial Items and applicable Glossary 
references would also be revised to eliminate the concept of 
extraordinary items.
Additional Comments
    One commenter requested clarification on why the proposed change to 
the Call Report regarding trading revenues due to changes in credit and 
debit valuation adjustments was not proposed on the FR Y-9C report. The 
Federal Reserve reviewed this information and determined that the 
proposed changes are not necessary for the FR Y-9C and that the current 
information is adequate to meet the Federal Reserve's supervisory 
needs.

    Board of Governors of the Federal Reserve System, September 1, 
2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-21524 Filed 9-7-16; 8:45 am]
 BILLING CODE 6210-01-P