Proposed Agency Information Collection Activities; Comment Request, 61294-61300 [2017-27942]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 82, Number 247 (Wednesday, December 27, 2017)]
[Notices]
[Pages 61294-61300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27942]


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FEDERAL RESERVE SYSTEM


Proposed Agency Information Collection Activities; Comment 
Request

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Notice and request for comment.

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SUMMARY: In accordance with the requirements of the Paperwork Reduction 
Act (PRA) of 1995, the Board, the Federal Deposit Insurance Corporation 
(FDIC), and the Office of the Comptroller of the Currency (OCC) 
(collectively, 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 
Board's publication for public comment of a proposal to extend, with 
revision, the Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks (FFIEC 002) and the Report of Assets and 
Liabilities of a Non-U.S. Branch that is Managed or Controlled by a 
U.S. Branch or Agency of a Foreign (Non-U.S.) Bank (FFIEC 002S), which 
are currently approved collections of information. The Board is 
publishing this proposal on behalf of the agencies.
    The proposed revisions to these reports would align with 
corresponding

[[Page 61295]]

changes made to the Consolidated Reports of Condition and Income (FFIEC 
031, FFIEC 041, and FFIEC 051). The Consolidated Reports of Condition 
and Income are commonly referred to as the Call Report. The proposed 
revisions to the FFIEC 002 and the FFIEC 002S would delete or 
consolidate certain items, establish certain reporting thresholds, 
account for changes in the accounting for equity investments, and make 
instructional clarifications consistent with those previously made to 
or currently proposed for the Call Report instructions. The proposed 
revisions would result in an overall reduction in burden and would take 
effect as of the June 30, 2018, report date. In determining whether to 
approve the proposed collection of information, the agencies will 
consider all comments received. As required by the PRA, the Board would 
then publish a second Federal Register notice for a 30-day comment 
period and submit the final FFIEC 002 and FFIEC 002S to OMB for review 
and approval.

DATES: Comments must be submitted on or before February 26, 2018.

ADDRESSES: Interested parties are invited to submit written comments to 
the agency listed below. All comments, which should refer to the OMB 
control number, will be shared among the agencies.
    You may submit comments, which should refer to ``FFIEC 002 and 
FFIEC 002S,'' by any of the following methods:
     Agency website: 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: [email protected]. Include the 
reporting form numbers in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, 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 website at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
unless modified for technical reasons. Accordingly, your comments will 
not be edited to remove any identifying or contact information. Public 
comments may also be viewed electronically or in paper form in Room 
3515, 1801 K Street NW, (between 18th and 19th Streets NW), Washington, 
DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.
    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; by fax to (202) 395-6974; or by email to 
[email protected].

FOR FURTHER INFORMATION CONTACT: For further information about the 
proposed revisions to the FFIEC 002 and FFIEC 002S discussed in this 
notice, please contact the agency staff member whose name appears 
below. In addition, copies of the FFIEC 002 and FFIEC 002S forms can be 
obtained at the FFIEC's website (https://www.ffiec.gov/ffiec_report_forms.htm).
    Nuha Elmaghrabi, Federal Reserve Board Clearance Officer, (202) 
452-3884, Office of the Chief Data Officer, 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.

SUPPLEMENTARY INFORMATION: The Board is proposing to extend for three 
years, with revision, the FFIEC 002 and FFIEC 002S.
    Report Titles: Report of Assets and Liabilities of U.S. Branches 
and Agencies of Foreign Banks; Report of Assets and Liabilities of a 
Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or 
Agency of a Foreign (Non-U.S.) Bank.
    Form Numbers: FFIEC 002; FFIEC 002S.
    OMB Control Number: 7100-0032.
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
    Respondents: All state-chartered or federally-licensed U.S. 
branches and agencies of foreign banking organizations, and all non-
U.S. branches managed or controlled by a U.S. branch or agency of a 
foreign banking organization.
    Estimated Number of Respondents: FFIEC 002--209; FFIEC 002S--38.
    Estimated Average Burden per Response: FFIEC 002--23.87 hours; 
FFIEC 002S--6.0 hours.
    Estimated Total Annual Burden: FFEIC 002--19,955 hours; FFIEC 
002S--912 hours.
    Type of Review: Revision of currently approved collections.

General Description of Reports

    These information collections are mandatory (12 U.S.C. 3105(c)(2), 
1817(a)(1) and (3), and 3102(b)). Except for select sensitive items, 
the FFIEC 002 is not given confidential treatment; the FFIEC 002S is 
given confidential treatment (5 U.S.C. 552(b)(4) and (8)).

Abstract

    On a quarterly basis, all U.S. branches and agencies of foreign 
banks are required to file the FFIEC 002, which is a detailed report of 
condition with a variety of supporting schedules. This information is 
used to fulfill the supervisory and regulatory requirements of the 
International Banking Act of 1978. The data are also used to augment 
the bank credit, loan, and deposit information needed for monetary 
policy and other public policy purposes. The FFIEC 002S is a supplement 
to the FFIEC 002 that collects information on assets and liabilities of 
any non-U.S. branch that is managed or controlled by a U.S. branch or 
agency of the foreign bank. A non-U.S. branch is managed or controlled 
by a U.S. branch or agency if a majority of the responsibility for 
business decisions, including but not limited to decisions with regard 
to lending or asset management or funding or liability management, or 
the responsibility for recordkeeping in respect of assets or 
liabilities for that foreign branch resides at the U.S. branch or 
agency. A separate FFIEC 002S must be completed for each managed or 
controlled non-U.S. branch. The FFIEC 002S must be filed quarterly 
along with the U.S. branch or agency's FFIEC 002. The data from both 
reports are used for (1) monitoring deposit and credit transactions of 
U.S. residents; (2) monitoring the impact of policy changes; (3) 
analyzing structural issues concerning foreign bank activity in U.S. 
markets; (4) understanding flows of banking funds and indebtedness of 
developing countries in connection with data collected by the 
International Monetary Fund and the Bank for International Settlements 
that are used in economic analysis; and (5) assisting in the 
supervision of U.S. offices of foreign banks. The Federal Reserve 
System collects and processes these reports on behalf of all three 
agencies.

Current Actions

I. Introduction

    The proposed revisions partially stem from a formal initiative 
launched by the FFIEC in December 2014 to identify potential 
opportunities to reduce burden associated with Call Report requirements 
for community banks. The FFIEC's formal initiative included surveys of 
agency Call Report data users, which have served as the

[[Page 61296]]

foundation for the proposed burden-reducing revisions.\1\ As part of 
these surveys, users were asked to fully explain the need for each Call 
Report data item they deemed essential, how the data item is used, the 
frequency with which it is needed, and the population of institutions 
from which it is needed. Based on the results of the surveys, the 
agencies identified Call Report data items that are no longer needed, 
are needed on a less frequent basis, or are needed only above certain 
reporting thresholds, and have proposed or finalized the elimination, 
less frequent collection, or creation of new or upwardly revised 
reporting thresholds for these data items in the Call Report. In an 
effort to maintain consistency between the FFIEC 002, the FFIEC 002S, 
and the Call Report, the burden-reducing changes identified for the 
Call Report have been incorporated into this proposal where applicable. 
In addition, the proposed revisions ensure the reporting of data on 
equity investments in several FFIEC 002 schedules is consistent with 
changes in the accounting standards applicable to such investments. All 
of the revisions in this proposal have been implemented or proposed to 
be implemented in the Call Report.
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    \1\ See 80 FR 56539 (September 18, 2015), 81 FR 45357 (July 13, 
2016), 81 FR 54190 (August 15, 2016), 82 FR 2444 (January 9, 2017), 
82 FR 29147 (June 27, 2017), and 82 FR 51908 (November 8, 2017) for 
information on other actions taken under this initiative.
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II. General Discussion and Detail of Specific Proposed Revisions

    The proposed revisions are meant to align with revisions either 
implemented or proposed to be implemented in the Call Report. Below is 
a list of the specific proposed revisions to the FFIEC 002 and FFIEC 
002S. The proposed revisions are segmented by schedule except for the 
revisions relating to the accounting for equity securities, which can 
be found following the section regarding proposed revisions to FFIEC 
002 Schedule S, Servicing, Securitization, and Asset Sale Activities. 
Other than proposed revisions to the Report of Assets and Liabilities 
in the next paragraph, which pertain to both the FFIEC 002 and the 
FFIEC 002S, all other proposed revisions pertain only to the FFIEC 002.

Schedule RAL (FFIEC 002) and Report of Assets and Liabilities (FFIEC 
002S)

    In an effort to improve clarity, conformity with current accounting 
terminology, and internal consistency across schedules, the agencies 
propose to revise the caption in the FFIEC 002 and FFIEC 002S forms and 
instructions from ``loans and leases, net of unearned income'' to 
``loans and leases held for investment and held for sale.'' These two 
captions are intended to represent the same reported amounts. 
Accordingly, the agencies will replace the former caption with the 
latter caption in affected data items and related instructions across 
all applicable schedules.
    Each year in the March FFIEC 002, each institution indicates in 
Schedule RAL, Assets and Liabilities, Memorandum item 17, the most 
comprehensive level of auditing work performed for the branch or agency 
by, or on behalf of, the parent organization during the preceding 
calendar year. In completing Memorandum item 17, each institution 
selects from seven statements describing a range of levels of auditing 
work the one statement that best describes the level of auditing work 
performed for it. Certain statements from which an institution must 
choose do not reflect current auditing practices performed in 
accordance with applicable standards and procedures promulgated by the 
U.S. auditing standard setters, namely the Public Company Accounting 
Oversight Board (PCAOB) and the Auditing Standards Board (ASB) of the 
American Institute of Certified Public Accountants. The PCAOB 
establishes auditing and related professional practice standards used 
in the performance and reporting of audits of the financial statements 
and the internal control over financial reporting (ICFR) of public 
companies. The ASB establishes auditing and quality control standards 
applicable to the performance and issuance of audit reports for 
entities that are not public companies, e.g. private companies.
    The PCAOB's Auditing Standard No. 5 (AS 5), An Audit of Internal 
Control Over Financial Reporting That Is Integrated with An Audit of 
Financial Statements, became effective for fiscal years ending on or 
after November 15, 2007, and provides guidance regarding the 
integration of audits of ICFR with audits of financial statements for 
public companies. Those public companies not required to undergo an 
integrated audit must have an audit of their financial statements.
    The ASB has separately provided similar guidance in Statement on 
Auditing Standards Number 130 (SAS 130), An Audit of Internal Control 
Over Financial Reporting That Is Integrated With an Audit of Financial 
Statements, which became effective for integrated audits for periods 
ending on or after December 15, 2016. Consistent with the PCAOB, the 
ASB states in SAS 130 that ``[a]n audit of ICFR is required to be 
integrated with an audit of financial statements.'' Unless a private 
company is required to or elects to have an integrated audit of its 
financial statements and ICFR, the private company may be required to 
or can choose to have an external auditor perform an audit of its 
financial statements.
    The existing wording of statements 1 and 2 of Schedule RAL, 
Memorandum item 17, reads as follows:

1 = ``Independent annual audit of the branch or agency conducted in 
accordance with U.S. generally accepted auditing standards by a 
certified public accounting firm''
2 = ``Independent annual audit of the branch or agency conducted in 
accordance with home-country auditing standards by an independent 
accounting firm.''

    Because these statements no longer fully and properly describe the 
types of external auditing services performed for institutions under 
current professional standards and to enhance the information 
institutions provide the agencies annually about the level of auditing 
external work performed for them, the agencies are proposing to replace 
existing statements 1 and 2 with new statements 1a and 1b and revised 
statement 2. These statements would read as follows:
    1a = ``An integrated audit of the branch or agency and its internal 
control over financial reporting conducted in accordance with the 
auditing standards of the American Institute of Certified Public 
Accountants (AICPA) or the Public Company Accounting Oversight Board 
(PCAOB) by an independent public accountant.''
    1b = ``An audit of the branch or agency conducted in accordance 
with the auditing standards of the AICPA or the PCAOB by an independent 
public accountant.''
    2 = ``An audit of the branch or agency conducted in accordance with 
home-country auditing standards by an independent public accountant.''

    Further, the agencies also propose to revise the caption to 
Memorandum item 17 to explicitly state that the work is performed by 
independent external auditors and to remove the reference to work 
performed on behalf of the parent organization.
    The agencies also propose to consolidate the detail on the fair 
value and the unpaid principal balance of loans held for trading 
collected in Schedule RAL. For loans secured by 1-4 family residential 
properties, breakouts for revolving, open-end loans

[[Page 61297]]

secured by 1-4 family residential properties and extended under lines 
of credit, as well as closed-end loans secured by 1-4 family 
residential properties, would be consolidated into a single item. In 
addition, construction, land development, and other land loans; loans 
secured by farmland; loans secured by multifamily (5 or more) 
residential properties; and loans secured by nonfarm nonresidential 
properties would be consolidated into a single item. Specifically, 
existing Memorandum items 5.a.(3)(a) and 5.a.(3)(b) would be 
consolidated into new Memorandum item 5.a.(1), while existing 
Memorandum items 5.a.(1), 5.a.(2), 5.a.(4), and 5.a.(5) would be 
consolidated into new Memorandum item 5.a.(2). Existing Memorandum 
items 6.a.(3)(a) and 6.a.(3)(b) would be consolidated into new 
Memorandum item 6.a.(1), while existing Memorandum items 6.a.(1), 
6.a.(2), 6.a.(4), and 6.a.(5) would be consolidated into new Memorandum 
item 6.a.(2). The agencies no longer need this current level of detail 
on loans held for trading in the FFIEC 002.

Schedule A

    On Schedule A, Cash and Balances Due from Depository Institutions, 
the agencies propose to consolidate the reporting of an institution's 
balances due from depository institutions in the U.S., which are 
currently reported in items 3.a for balances due from U.S. branches and 
agencies of foreign banks (including their international banking 
facilities (IBFs)) and 3.b for balances due from other depository 
institutions in the U.S. (including their IBFs), into a single item 3. 
In addition, the agencies propose to consolidate the reporting of an 
institution's balances due from foreign branches of U.S. banks (item 
4.a), balances due from banks in the reporting institution's home 
country and its home country central bank (item 4.b), and balances due 
from all other banks in foreign countries and foreign central banks 
(item 4.c), into a single item 4, Balances due from banks in foreign 
countries and foreign central banks. The agencies no longer need this 
current level of detail for these balances in the FFIEC 002.

Schedule C--Part I

    At present, institutions that have elected to measure loans held 
for investment or held for sale 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 5 and 6, respectively, of Schedule C, 
Part I, Loans and Leases. Because Schedule C, Part I, must be completed 
by all institutions, Memorandum items 5 and 6 also must be completed by 
all institutions although only a nominal number of institutions have 
disclosed reportable amounts for any of the categories of fair value 
option loans reported in the subitems of these two Memorandum items. 
Accordingly, the agencies are proposing to move Memorandum items 5 and 
6 on the fair value and unpaid principal balance of fair value option 
loans from Schedule C, Part I, to Schedule Q, Financial Assets and 
Liabilities Measured at Fair Value on a Recurring Basis, and to 
designate them as Memorandum items 3 and 4, respectively.
    The agencies also propose to consolidate the detail on loans held 
for investment or held for sale measured at fair value and the unpaid 
principal balance of such loans that would be moved to Schedule Q. 
Breakouts for revolving, open-end loans secured by 1-4 family 
residential properties and extended under lines of credit, as well as 
closed-end loans secured by 1-4 family residential properties, would be 
consolidated into a single item for loans secured by 1-4 family 
residential properties. In addition, construction, land development, 
and other land loans; loans secured by farmland; loans secured by 
multifamily (5 or more) residential properties; and loans secured by 
nonfarm nonresidential properties would be consolidated into a single 
item for loans secured by real estate other than 1-4 family residential 
properties. Specifically, existing Memorandum items 5.a.(3)(a) and 
5.a.(3)(b) would be consolidated into new Memorandum item 5.a.(1), 
while existing Memorandum items 5.a.(1), 5.a.(2), 5.a.(4), and 5.a.(5) 
would be consolidated into new Memorandum item 5.a.(2). Existing 
Memorandum items 6.a.(3)(a) and 6.a.(3)(b) would be consolidated into 
new Memorandum item 6.a.(1), while existing Memorandum items 6.a.(1), 
6.a.(2), 6.a.(4), and 6.a.(5) would be consolidated into new Memorandum 
item 6.a.(2). The agencies no longer need this current level of detail 
in the FFIEC 002.

Schedule C--Part II

    The agencies propose to remove items 1.a and 1.b on Schedule C, 
Part II, Loans to Small Businesses and Small Farms. Item 1.a requires 
FDIC-insured branches to indicate on an annual basis whether all or 
substantially all of the institution's dollar volume of reported 
``Commercial and industrial loans to U.S. addressees'' consist of loans 
with original amounts of $100,000 or less. If a branch reports ``Yes'' 
in item 1.a, then it must provide the number of ``Commercial and 
industrial loans to U.S. addressees'' outstanding in item 1.b. This 
change aligns this schedule with revisions made to the corresponding 
schedule in the FFIEC 031 Call Report.

Schedule Q

    The agencies propose to modify the reporting criteria for Schedule 
Q, Financial Assets and Liabilities Measured at Fair Value on a 
Recurring Basis, by applying only an activity threshold and not an 
asset-size threshold, which currently is $500 million. As proposed, 
Schedule Q is to be completed by branches and agencies that (1) have 
elected to report financial instruments or servicing assets and 
liabilities at fair value under a fair value option with changes in 
fair value recognized in earnings, or (2) reported total trading assets 
of $10 million or more in any of the four preceding calendar quarters. 
Institutions that do not meet either of these criteria would no longer 
need to complete this schedule, regardless of asset size. The agencies 
believe the activity thresholds are more appropriate than the existing 
simple asset-size threshold for determining which institutions must 
complete this schedule.
    The agencies also propose to raise the dollar portion of the 
threshold from $25,000 to $100,000 for itemizing and describing the 
components of ``All other assets'' and ``All other liabilities,'' which 
are reported in Memorandum items 1 and 2, respectively. The percentage 
portion of the existing thresholds would not be changed. Based on a 
preliminary evaluation of the existing reporting thresholds, the 
agencies have concluded that the dollar portion of the thresholds that 
currently apply to these items can 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.

Schedule S

    The agencies propose the following revisions to Schedule S, 
Servicing, Securitization, and Asset Sale Activities, as they no longer 
need the current level of detail on securitization and asset sale 
activities in the FFIEC 002:
    (1) Consolidate the maximum amount of credit exposures arising from 
recourse or other seller-provided credit enhancements in the forms of 
retained interest-only strips, subordinated securities and other 
residual interests, and standby letters of credit and other

[[Page 61298]]

enhancements reported in items 2.a, 2.b, and 2.c, respectively, into a 
single new item 2.
    (2) Create a reporting threshold of $100 billion or more in total 
assets for reporting in item 3, which is for reporting unused 
commitments to provide liquidity to structures reported in item 1 
involving assets sold and securitized by the reporting institution with 
servicing retained or with recourse or other seller-provided credit 
enhancements.
    (3) Consolidate ownership (or seller's) interests carried as 
securities and loans, which are reported in items 6.a and 6.b, 
respectively, into a single new item 6. The agencies also propose to 
create a reporting threshold of $10 billion or more in total assets for 
reporting this new combined item 6.
    (4) Remove items 7.a and 7.b, which contain loan amounts included 
in ownership (or seller's) interests carried as securities that are 30-
89 days past due and 90 days or more past due, respectively.
    (5) Consolidate columns B and C of item 9, which contain the 
maximum amount of credit exposure arising from credit enhancements 
provided by the reporting institution to other institutions' 
securitization structures, into existing column G. The activities 
covered in columns B and C pertain to home equity lines and credit card 
receivables, respectively. The amounts previously reported in columns B 
and C would be reported in column G, ``All other loans, all leases, and 
all other assets.''
    (6) Create a reporting threshold of $10 billion or more in total 
assets for reporting unused commitments to provide liquidity to other 
institutions' securitization structures in item 10. The agencies also 
propose to consolidate columns B and C of item 10 into existing column 
G. The activities covered in columns B and C pertain to home equity 
lines and credit card receivables, respectively. The amounts previously 
reported in columns B and C by institutions with $10 billion or more in 
total assets would be included in column G, ``All other loans, all 
leases, and all other assets.''
    (7) Consolidate columns B through F of item 11, which contain 
assets sold with recourse or other seller-provided credit enhancements 
and not securitized, into existing column G. The activities covered in 
columns B through F pertain to home equity lines, credit card 
receivables, auto loans, other consumer loans, and commercial and 
industrial loans, respectively. The amounts previously reported in 
columns B through F would be included in column G, ``All other loans, 
all leases, and all other assets.''
    (8) Consolidate columns B through F of item 12, which contain the 
maximum amount of credit exposure arising from recourse or other 
seller-provided credit enhancements on assets sold with recourse or 
other seller-provided credit enhancements and not securitized, into 
existing column G. The activities covered in columns B through F 
pertain to home equity lines, credit card receivables, auto loans, 
other consumer loans, and commercial and industrial loans, 
respectively. The amounts previously reported in columns B through F 
would be included in column G, ``All other loans, all leases, and all 
other assets.''
    (9) Create a reporting threshold of $10 billion or more in total 
assets for reporting detail on asset-backed commercial paper conduits 
in Memorandum item 1. Institutions report the maximum amount of credit 
exposure arising from credit enhancements provided to asset-backed 
commercial paper conduits sponsored by the reporting institution or 
related institutions, and by unrelated institutions, in Memorandum 
items 1.a.(1) and 1.a.(2), respectively. Institutions report unused 
commitments to provide liquidity to asset-backed commercial paper 
conduits sponsored by the reporting institution or related 
institutions, and by unrelated institutions, in Memorandum items 
1.b.(1) and M.1.b.(2), respectively.

Proposed Revisions to Address Changes in Accounting for Equity 
Investments

    In January 2016, the Financial Accounting Standards Board (FASB) 
issued Accounting Standards Update (ASU) No. 2016-01, ``Recognition and 
Measurement of Financial Assets and Financial Liabilities.'' In its 
summary of this ASU, the FASB described how one of the main provisions 
of the ASU differs from current U.S. generally accepted accounting 
principles (GAAP) as follows:

    The amendments in this Update supersede the guidance to classify 
equity securities with readily determinable fair values into 
different categories (that is, trading or available-for-sale) and 
require equity securities (including other ownership interests, such 
as partnerships, unincorporated joint ventures, and limited 
liability companies) to be measured at fair value with changes in 
the fair value recognized through net income. An entity's equity 
investments that are accounted for under the equity method of 
accounting or result in consolidation of an investee are not 
included within the scope of this Update.

    The FASB further stated in the summary that ``an entity may choose 
to measure equity investments that do not have readily determinable 
fair values at cost minus impairment, if any, plus or minus changes 
resulting from observable price changes in orderly transactions for the 
identical or a similar investment of the same issuer.''
    The instructions to the FFIEC 002 require that respondents must 
utilize U.S. GAAP when filing the report. The agencies propose to 
revise the FFIEC 002 report form and instructions to account for the 
changes to U.S. GAAP set forth in ASU 2016-01.\2\ These proposed 
revised reporting requirements would become effective for different 
sets of respondents as those respondents become subject to the ASU. 
Institutions that are public business entities, as defined in U.S. 
GAAP, are subject to ASU 2016-01 for fiscal years beginning after 
December 15, 2017, including interim periods within those fiscal years. 
Therefore, for an institution with a calendar year fiscal year that is 
a public business entity, the proposed revised reporting requirements 
would become effective for its FFIEC 002 for June 30, 2018. As 
discussed below, interim guidance would be provided for purposes of 
reporting by such an institution in accordance with the ASU in its 
FFIEC 002 for March 31, 2018. All other institutions become subject to 
the ASU for fiscal years beginning after December 15, 2018, and interim 
periods within fiscal years beginning after December 15, 2019. 
Therefore, for an institution with a calendar year fiscal year that is 
not a public business entity, the proposed revised reporting 
requirements would become effective for its FFIEC 002 for December 31, 
2019. The period over which institutions will be implementing this ASU 
ranges from the first quarter of 2018 through the fourth quarter of 
2020. December 31, 2020, will be the first quarter-end FFIEC 002 report 
date as of which all institutions would be required to prepare their 
FFIEC 002 in accordance with ASU 2016-01 and the proposed revised 
reporting requirements.
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    \2\ No revisions to the FFIEC 002S regarding equity securities 
are being proposed.
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    The changes to the accounting for equity investments under ASU 
2016-01 will affect several existing data items in the FFIEC 002. One 
outcome of these accounting changes is the elimination of the concept 
of available-for-sale (AFS) equity securities, which are measured at 
fair value on the balance sheet with changes in fair value recognized 
through other comprehensive income. At present, the historical cost and 
fair value of AFS equity securities, i.e., investments in mutual funds 
and other

[[Page 61299]]

equity securities with readily determinable fair values that are not 
held for trading, are reported in Schedule RAL, item 1.c.(4), ``All 
other'' bonds, notes, debentures, and corporate stock, and Memorandum 
item 3, ``Fair value of available-for-sale securities.'' The total fair 
value of AFS securities reported in Schedule RAL, Memorandum item 3, 
also is reported in item 1, column A, of Schedule Q. Institutions then 
report in columns C, D, and E of item 1 of Schedule Q a breakdown of 
their AFS securities by the level in the fair value hierarchy within 
which the fair value amounts of these securities fall (Level 1, 2, or 
3). Any balance sheet netting adjustments to these fair value amounts 
are reported in column B of item 1 of Schedule Q.
    Another outcome of the changes in the accounting for equity 
investments under ASU 2016-01 is that equity securities and other 
equity investments without readily determinable fair values that are 
within the scope of ASU 2016-01 and are not held for trading must be 
measured at fair value through net income, rather than at cost (less 
impairment, if any), unless the measurement election described above is 
applied to individual equity investments. In general, institutions 
currently report their holdings of such equity securities without 
readily determinable fair values as a component of other assets in 
Schedule RAL, item 1.h.
    At present, AFS equity securities and equity investments without 
readily determinable fair values are included in the quarterly averages 
reported in Schedule K, Quarterly Averages. Institutions report the 
quarterly average for ``Total claims on nonrelated parties'' in item 5 
of this schedule. This average reflects all equity securities not held 
for trading on a cost basis. In addition, for branches whose deposits 
are insured by the FDIC, AFS equity securities and equity investments 
without readily determinable fair values are included in the quarterly 
averages reported in Schedule O, Other Data for Deposit Insurance 
Assessments. Institutions report the quarterly average for ``Average 
consolidated total assets for the calendar quarter'' in item 4 of this 
schedule. This average reflects AFS equity securities with readily 
determinable fair values at the lower of cost or fair value, and equity 
securities without readily determinable fair values at historical cost.
    The agencies have considered the changes to the accounting for 
equity investments under ASU 2016-01 and the effect of these changes on 
the manner in which data on equity securities and other equity 
investments are currently reported in the FFIEC 002, which has been 
described above. Accordingly, the proposed revisions to the FFIEC 002 
report form and instructions to address the equity securities 
accounting changes are as follows:
    (1) In Schedule RAL, Assets and Liabilities, a new Memorandum item 
4, ``Fair value of equity securities with readily determinable fair 
values not held for trading,'' would be added effective June 30, 2018. 
From June 30, 2018, through September 30, 2020, the instructions for 
Memorandum item 4 and the reporting form for Schedule RAL would include 
guidance stating that Memorandum item 4 is to be completed only by 
institutions that have adopted ASU 2016-01. Institutions that have not 
adopted ASU 2016-01 would leave Memorandum item 4 blank. Existing 
Memorandum items 3, ``Fair value of available-for-sale securities,'' 
and 4, ``Amortized cost of available-for-sale securities,'' would be 
renumbered as Memorandum items 3.a and 3.b, respectively, effective 
June 30, 2018. During the period from June 30, 2018, through September 
30, 2020, the instructions for Schedule RAL, Memorandum items 3.a and 
3.b, would explain that institutions that have adopted ASU 2016-01 
should include only debt securities in Memorandum items 3.a and 3.b. 
Effective December 31, 2020, the caption for Memorandum items 3.a and 
3.b would be revised to ``Fair value of available-for-sale debt 
securities'' and ``Amortized cost of available-for-sale debt 
securities,'' respectively, and all institutions would report their 
holdings of equity securities with readily determinable fair values not 
held for trading in Memorandum item 4.
    (2) In Schedule RAL, equity securities and other equity investments 
without readily determinable fair values not held for trading, which 
are currently reported in item 1.h, would continue to be reported in 
this item. However, the instructions would be revised as of June 30, 
2018, to state that, after the effective date of ASU 2016-01 for an 
institution, the equity securities and other equity investments the 
institution reports in item 1.h would be measured in accordance with 
the ASU.
    (3) In Schedule K, Quarterly Averages, the instructions for item 5, 
``Total claims on nonrelated parties,'' would include guidance from 
June 30, 2018, through September 30, 2020, stating that, for purposes 
of reporting the quarterly average for total claims:
     Institutions that have adopted ASU 2016-01 should reflect 
the quarterly average of all debt securities not held for trading on an 
amortized cost basis, and
     Institutions that have not adopted ASU 2016-01 should 
reflect the quarterly average for all securities not held for trading 
on an amortized cost basis.
    Then, effective December 31, 2020, the instructions for item 5 
would indicate that, for debt securities not held for trading, the 
quarterly average for total claims should reflect such securities on an 
amortized cost basis.
    (4) In Schedule O, Other Data for Deposit Insurance Assessments, 
the instructions for item 4, ``Average consolidated total assets for 
the calendar quarter,'' would include guidance from June 30, 2018, 
through September 30, 2020, stating that, for purposes of reporting the 
quarterly average for total assets:
     Institutions that have adopted ASU 2016-01 should reflect 
the quarterly average for debt securities not held for trading at 
amortized cost, and
     Institutions that have not adopted ASU 2016-01 should 
reflect the quarterly average for all debt securities not held for 
trading at amortized cost, available-for-sale equity securities with 
readily determinable fair values at the lower of cost or fair value, 
and equity securities without readily determinable fair values at 
historical cost.
    Then, effective December 31, 2020, the instructions for item 4 
would indicate that, for debt securities not held for trading, the 
quarterly average for total assets should reflect such securities at 
amortized cost.
    (5) In Schedule Q, the caption for item 1, ``Available-for-sale 
securities,'' would be changed to ``Available-for-sale debt securities 
and equity securities with readily determinable fair values not held 
for trading'' effective June 30, 2018. From June 30, 2018, through 
September 30, 2020, the instructions for item 1 and the reporting form 
for Schedule Q would include guidance stating that, for institutions 
that have adopted ASU 2016-01, the amount reported in item 1, column A, 
must equal the sum of Schedule RAL, Memorandum items 3.a and 4, and for 
institutions that have not adopted ASU 2016-01, the amount reported in 
item 1, column A, must equal Schedule RAL, Memorandum item 3.a. 
Effective December 31, 2020, this guidance would indicate that the 
amount reported in item 1, column A, must equal the sum of Schedule 
RAL, Memorandum items 3.a and 4.
    Institutions that apply ASU 2016-01 in the first quarter of 2018 
will need to report their holdings of equity securities and other 
equity investments in accordance with this accounting

[[Page 61300]]

standard within the existing structure of the FFIEC 002 for March 31, 
2018. Interim guidance accompanying the Board's transmittal letter to 
institutions for the March 31, 2018, report date will advise 
institutions that have adopted ASU 2016-01 to (a) continue to report 
the fair value and historical cost of their holdings of equity 
securities with readily determinable fair values not held for trading 
(which were reportable as available-for-sale equity securities prior to 
the adoption of ASU 2016-01) in existing Memorandum items 3 and 4 of 
Schedule RAL; (b) measure their holdings of equity securities and other 
equity investments without readily determinable fair values not held 
for trading in accordance with the ASU and continue to report them in 
Schedule RAL, item 1.h; (c) report Schedule K, item 5, consistent with 
the measurement of Schedule RAL, item 1.i, except that all debt 
securities not held for trading should be measured on an amortized cost 
basis; (d) report Schedule O, item 4, consistent with the measurement 
of Schedule RAL, item 3, except that all debt securities not held for 
trading should be measured at amortized cost; and (e) continue to 
report the amount from Memorandum item 3 of Schedule RAL in Schedule Q, 
item 1, column A.

III. Timing

    The proposed changes to the report forms and instructions described 
in this notice would be implemented as of the June 30, 2018, report 
date. However, as discussed above, the proposed revised reporting 
requirements for equity investments would have varying effective dates 
for individual respondents and would begin with the June 30, 2018, 
report date. The agencies invite comment on any difficulties that 
institutions would expect to encounter in implementing the systems and 
process changes necessary to accommodate the proposed revisions to the 
FFIEC 002 and FFIEC 002S as of this proposed effective date.
    The specific wording of the captions for the new or revised data 
items discussed in this proposal and the numbering of these data items 
may be modified to provide clarity.

IV. Request for Comment

    Public comment is requested on all aspects of this notice. Comment 
is specifically invited on:
    a. Whether the information collections are necessary for the proper 
performance of the agencies' functions, including whether the 
information has practical utility;
    b. The accuracy of the agencies' estimate of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments submitted in response to this notice will be shared among 
the agencies. All comments will become a matter of public record.

    Board of Governors of the Federal Reserve System, December 21, 
2017.
Margaret Shanks,
Deputy Secretary of the Board.
[FR Doc. 2017-27942 Filed 12-26-17; 8:45 am]
 BILLING CODE 6210-01-P