Agency Information Collection Activities; Submission for OMB Review; Comment Request, 4780-4796 [2020-01292]

Download as PDF 4780 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices as MARAD–2020–0011 at http:// www.regulations.gov. Interested parties may comment on the effect this action may have on U.S. vessel builders or businesses in the U.S. that use U.S.-flag vessels. If MARAD determines, in accordance with 46 U.S.C. 12121 and MARAD’s regulations at 46 CFR part 388, that the issuance of the waiver will have an unduly adverse effect on a U.S.vessel builder or a business that uses U.S.-flag vessels in that business, a waiver will not be granted. Comments should refer to the vessel name, state the commenter’s interest in the waiver application, and address the waiver criteria given in section 388.4 of MARAD’s regulations at 46 CFR part 388. Public Participation How do I submit comments? Please submit your comments, including the attachments, following the instructions provided under the above heading entitled ADDRESSES. Be advised that it may take a few hours or even days for your comment to be reflected on the docket. In addition, your comments must be written in English. We encourage you to provide concise comments and you may attach additional documents as necessary. There is no limit on the length of the attachments. Where do I go to read public comments, and find supporting information? Go to the docket online at http:// www.regulations.gov, keyword search MARAD–2020–0011 or visit the Docket Management Facility (see ADDRESSES for hours of operation). We recommend that you periodically check the Docket for new submissions and supporting material. Will my comments be made available to the public? Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available. khammond on DSKJM1Z7X2PROD with NOTICES If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR–225, W24–220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, 18:37 Jan 24, 2020 Jkt 250001 Privacy Act In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to www.regulations.gov, as described in the system of records notice, DOT/ALL–14 FDMS, accessible through www.dot.gov/privacy. To facilitate comment tracking and response, we encourage commenters to provide their name, or the name of their organization; however, submission of names is completely optional. Whether or not commenters identify themselves, all timely comments will be fully considered. If you wish to provide comments containing proprietary or confidential information, please contact the agency for alternate submission instructions. Authority: 49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121 * * * Dated: January 22, 2020. By Order of the Maritime Administrator. T. Mitchell Hudson, Jr., Secretary, Maritime Administration. [FR Doc. 2020–01308 Filed 1–24–20; 8:45 am] BILLING CODE 4910–81–P DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency FEDERAL RESERVE SYSTEM FEDERAL DEPOSIT INSURANCE CORPORATION Agency Information Collection Activities; Submission for OMB Review; Comment Request 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. AGENCY: May I submit comments confidentially? VerDate Sep<11>2014 a summary of your submission that can be made available to the public. In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 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. On October 4, 2019, the agencies, under the auspices of the SUMMARY: PO 00000 Frm 00159 Fmt 4703 Sfmt 4703 Federal Financial Institutions Examination Council (FFIEC), requested public comment for 60 days on a proposal to revise and extend the Consolidated Reports of Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, and FFIEC 051) and the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101), which are currently approved collections of information. The comment period for the October 2019 notice ended on December 3, 2019. As described in the SUPPLEMENTARY INFORMATION section, after considering the comments received on the proposal, the agencies are proceeding with the proposed revisions to the reporting forms and instructions for the Call Reports and the FFIEC 101 (except for the reporting changes arising from the proposed total loss absorbing capacity holdings rule that has not yet been finalized), but with certain modifications. In general, the modifications relate to the disclosure of an institution’s election of the community bank leverage ratio framework, a change in the scope of the FFIEC 031 Call Report, and the reporting of home equity lines of credit that convert from revolving to nonrevolving status. The reporting revisions that implement various changes to the agencies’ capital rule would take effect in the same quarters as the effective dates of the capital rule changes, i.e., primarily as of the March 31 and June 30, 2020, report dates. Call Report revisions applicable to operating lease liabilities and home equity lines of credit would take effect in the first quarter of 2020 and 2021, respectively. In addition, the agencies are giving notice they are sending the collections to OMB for review. DATES: Comments must be submitted on or before February 26, 2020. ADDRESSES: Interested parties are invited to submit written comments to any or all of the agencies. All comments, which should refer to the ‘‘Call Report and FFIEC 101 Reporting Revisions,’’ will be shared among the agencies. OCC: You may submit comments, which should refer to ‘‘Call Report and FFIEC 101 Reporting Revisions,’’ by any of the following methods: • Email: prainfo@occ.treas.gov. • Mail: Chief Counsel’s Office, Office of the Comptroller of the Currency, Attention: 1557–0081 and 1557–0239, 400 7th Street SW, Suite 3E–218, Washington, DC 20219. • Hand Delivery/Courier: 400 7th Street SW, Suite 3E–218, Washington, DC 20219. E:\FR\FM\27JAN1.SGM 27JAN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices Instructions: You must include ‘‘OCC’’ as the agency name and ‘‘1557– 0081 and 1557–0239’’ in your comment. In general, the OCC will publish comments on www.reginfo.gov without change, including any business or personal information provided, such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to these information collections following the close of the 30-Day comment period for this notice by any of the following methods: • Viewing Comments Electronically: Go to www.reginfo.gov. Click on the ‘‘Information Collection Review’’ tab. Underneath the ‘‘Currently under Review’’ section heading, from the dropdown menu select ‘‘Department of Treasury’’ and then click ‘‘submit.’’ These information collections can be located by searching by OMB control number ‘‘1557–0081’’ or ‘‘1557–0239.’’ Upon finding the appropriate information collection, click on the related ‘‘ICR Reference Number.’’ On the next screen, select ‘‘View Supporting Statement and Other Documents’’ and then click on the link to any comment listed at the bottom of the screen. • For assistance in navigating www.reginfo.gov, please contact the Regulatory Information Service Center at (202) 482–7340. • Viewing Comments Personally: You may personally inspect comments at the OCC, 400 7th Street SW, Washington, DC. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649–6700 or, for persons who are deaf or hearing impaired, TTY, (202) 649–5597. Upon arrival, visitors will be required to present valid government-issued photo identification and submit to security screening in order to inspect comments. Board: You may submit comments, which should refer to ‘‘Call Report and FFIEC 101 Reporting Revisions,’’ by any of the following methods: • Agency Website: http:// www.federalreserve.gov. Follow the instructions for submitting comments at: http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm. • Email: regs.comments@ federalreserve.gov. Include ‘‘Call Report VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 and FFIEC 101 Reporting Revisions’’ 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 on the Board’s website at https:// www.federalreserve.gov/apps/foia/ proposedregs.aspx 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 146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays. For security reasons, the Board requires that visitors make an appointment to inspect comments. You may do so by calling (202) 452–3684. 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. FDIC: You may submit comments, which should refer to ‘‘Call Report and FFIEC 101 Reporting Revisions,’’ by any of the following methods: • Agency Website: https:// www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the FDIC’s website. • Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. • Email: comments@FDIC.gov. Include ‘‘Call Report and FFIEC 101 Reporting Revisions’’ in the subject line of the message. • Mail: Manuel E. Cabeza, Counsel, Attn: Comments, Room MB–3128, 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 7:00 a.m. and 5:00 p.m. • Public Inspection: All comments received will be posted without change to https://www.fdic.gov/regulations/ laws/federal/ including any personal information provided. Paper copies of public comments may be requested from the FDIC Public Information Center, 3501 North Fairfax Drive, Arlington, VA 22226, or by telephone at (877) 275– 3342 or (703) 562–2200. 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 PO 00000 Frm 00160 Fmt 4703 Sfmt 4703 4781 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 oira_ submission@omb.eop.gov. FOR FURTHER INFORMATION CONTACT: For further information about the proposed revisions to the information collections discussed in this notice, please contact any of the agency staff whose names appear below. In addition, copies of the report forms for the Call Report and the FFIEC 101 can be obtained at the FFIEC’s website (https://www.ffiec.gov/ ffiec_report_forms.htm). OCC: Kevin Korzeniewski, Counsel, Chief Counsel’s Office, (202) 649–5490, or for persons who are deaf or hearing impaired, TTY, (202) 649–5597. Board: 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. FDIC: Manuel E. Cabeza, Counsel, (202) 898–3767, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. SUPPLEMENTARY INFORMATION: Table of Contents I. Affected Reports A. Call Reports B. FFIEC 101 II. Current Actions A. Overview B. Capital Simplifications Rule 1. Background 2. Proposed Revisions to Call Report Schedule RC–R 3. Comments Received and Final Capital Simplifications Rule Reporting Revisions C. Community Bank Leverage Ratio (CBLR) Rule 1. Background 2. Proposed Revisions to Call Report Schedule RC–R 3. Other Proposed Call Report Revisions Related to the CBLR 4. Comments Received and Final CBLR Rule Reporting Revisions D. Tailoring Rule 1. Background 2. Proposed Revisions to Call Report Schedule RC–R, Part I 3. Proposed Revisions to the FFIEC 101 4. Comments Received and Final Tailoring Rule Reporting Revisions a. Call Report Revisions b. FFIEC 101 Revisions E. Revisions to the Supplementary Leverage Ratio for Certain Central Bank Deposits of Custodial Banks 1. Background 2. Proposed Revisions to Call Report Schedule RC–R, Part I 3. Proposed Revisions to FFIEC 101 Schedule A E:\FR\FM\27JAN1.SGM 27JAN1 4782 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices 4. Final Reporting Revisions F. Standardized Approach for Counterparty Credit Risk on Derivative Contracts 1. Background 2. Proposed Revisions to Call Report Schedule RC–R, Part II 3. Proposed Revisions to FFIEC 101 Schedule A, SLR Table 2 4. Comments Received and Instructions for Reporting Derivatives G. High Volatility Commercial Real Estate (HVCRE) Land Development Loans 1. Background 2. Proposed Revisions to Call Report Schedule RC–R, Part II 3. Proposed Revisions to FFIEC 101 Schedule G H. Operating Lease Liabilities I. Reporting Home Equity Lines of Credit That Convert From Revolving to NonRevolving Status 1. Proposed Instructional Clarification 2. Comments Received and Final Reporting Revisions III. Timing IV. Request for Comment I. Affected Reports All of the proposed changes discussed below affect the Call Reports, while a number of the changes also affect the FFIEC 101. On December 27, 2019, the Board separately proposed to make revisions to the Consolidated Financial Statements for Holding Companies (FR Y–9C) 1 corresponding to those initially proposed by the agencies on October 4, 2019.2 khammond on DSKJM1Z7X2PROD with NOTICES A. Call Reports The agencies propose to extend for three years, with revision, the FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports. Report Title: Consolidated Reports of Condition and Income (Call Report). Form Number: FFIEC 031 (Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices), FFIEC 041 (Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only), and FFIEC 051 (Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less Than $5 Billion). Frequency of Response: Quarterly. Affected Public: Business or other forprofit. Type of Review: Revision and extension of currently approved collections. OCC OMB Control No.: 1557–0081. Estimated Number of Respondents: 1,143 national banks and federal savings associations. 1 See 84 FR 71414, December 27, 2019. Consolidated Financial Statements for Holding Companies (FR Y–9C), OMB Number 7100–0128. 2 84 FR 53227, October 4, 2019. VerDate Sep<11>2014 18:21 Jan 24, 2020 Jkt 250001 Estimated Average Burden per Response: 41.24 burden hours per quarter to file. Estimated Total Annual Burden: 188,549 burden hours to file. Board OMB Control No.: 7100–0036. Estimated Number of Respondents: 779 state member banks. Estimated Average Burden per Response: 44.45 burden hours per quarter to file. Estimated Total Annual Burden: 138,506 burden hours to file. FDIC OMB Control No.: 3064–0052. Estimated Number of Respondents: 3,386 insured state nonmember banks and state savings associations. Estimated Average Burden per Response: 39.43 burden hours per quarter to file. Estimated Total Annual Burden: 534,040 burden hours to file. The estimated average burden hours collectively reflect the estimates for the FFIEC 051, the FFIEC 041, and the FFIEC 031 reports for each agency. When the estimates are calculated by type of report across the agencies, the estimated average burden hours per quarter are 36.70 (FFIEC 051), 50.11(FFIEC 041), and 95.42 (FFIEC 031). The estimated burden hours for the currently approved reports are 40.27 (FFIEC 051), 53.72 (FFIEC 041), and 95.60 (FFIEC 031), so the revisions proposed in this notice would represent a reduction in estimated average burden hours per quarter of 3.57 (FFIEC 051), 3.61 (FFIEC 041), and 0.18 (FFIEC 031). The change in burden is predominantly due to changes associated with the community bank leverage ratio final rule. The reduction in average burden hours is significantly less for the FFIEC 031 than for the FFIEC 041 or the FFIEC 051 because greater percentages of institutions that would be eligible to report under the proposed community bank leverage ratio framework currently file the FFIEC 041 or the FFIEC 051 than the FFIEC 031.3 The estimated burden 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). Type of Review: Extension and revision of currently approved collections. 3 For estimating burden hours, the agencies assumed 60 percent of eligible institutions would use the framework. PO 00000 Frm 00161 Fmt 4703 Sfmt 4703 Legal Basis and Need for Collections The Call Report 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 and text, these information collections are not given confidential treatment. Banks and savings associations 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 serve a regulatory or public policy purpose by assisting the agencies in fulfilling their shared missions of ensuring the safety and soundness of financial institutions and the financial system and protecting consumer financial rights, as well as agency-specific missions affecting national and state-chartered institutions, such as conducting monetary policy, ensuring financial stability, and administering federal deposit insurance. Call Reports are the source of the most current statistical data available for identifying areas of focus for on-site and off-site examinations. Among other purposes, the agencies use Call Report data in evaluating institutions’ corporate applications, including interstate merger and acquisition applications for which the agencies are required by law to determine whether the resulting institution would control more than 10 percent of the total amount of deposits of insured depository institutions in the United States. Call Report data also are used to calculate institutions’ deposit insurance assessments and national banks’ and federal savings associations’ semiannual assessment fees. B. FFIEC 101 The agencies propose to extend for three years, with revision, the FFIEC 101 report. Report Title: Risk-Based Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework. Form Number: FFIEC 101. Frequency of Response: Quarterly. Affected Public: Business or other forprofit. OCC: OMB Control No.: 1557–0239. E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices Estimated Number of Respondents: 5 national banks and federal savings associations. Estimated Time per Response: 674 burden hours per quarter to file for banks and federal savings associations. Estimated Total Annual Burden: 13,480 burden hours to file. Board OMB Control No.: 7100–0319. Estimated Number of Respondents: 4 state member banks; 4 bank holding companies and savings and loan holding companies that complete Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 9 other bank holding companies and savings and loan holding companies; and 6 intermediate holding companies. Estimated Time per Response: 674 burden hours per quarter to file for state member banks; 3 burden hours per quarter to file for bank holding companies and savings and loan holding companies that complete Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 677 burden hours per quarter to file for other bank holding companies and savings and loan holding companies; and 3 burden hours per quarter to file for intermediate holding companies. Estimated Total Annual Burden: 10,784 burden hours for state member banks to file; 48 burden hours for bank holding companies and savings and loan holding companies that complete Supplementary Leverage Ratio (SLR) Tables 1 and 2 only to file; 24,372 burden hours for other bank holding companies and savings and loan holding companies to file; and 72 burden hours for intermediate holding companies to file. khammond on DSKJM1Z7X2PROD with NOTICES FDIC OMB Control No.: 3064–0159. Estimated Number of Respondents: 1 insured state nonmember bank and state savings association. Estimated Time per Response: 674 burden hours per quarter to file. Estimated Total Annual Burden: 2,696 burden hours to file. Type of Review: Extension and revision of currently approved collections. Legal Basis and Need for Collections Each advanced approaches institution 4 is required to report quarterly regulatory capital data on the FFIEC 101. Each Category III institution 5 is required to report 4 See 12 CFR 3.100(b) (OCC); 12 CFR 217.100(b) (Board); 12 CFR 324.100(b) (FDIC). 5 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC). VerDate Sep<11>2014 18:21 Jan 24, 2020 Jkt 250001 supplementary leverage ratio information on the FFIEC 101. The FFIEC 101 information collections are mandatory for advanced approaches and Category III institutions: 12 U.S.C. 161 (national banks), 12 U.S.C. 324 (state member banks), 12 U.S.C. 1844(c) (bank holding companies), 12 U.S.C. 1467a(b) (savings and loan holding companies), 12 U.S.C. 1817 (insured state nonmember commercial and savings banks), 12 U.S.C. 1464 (savings associations), and 12 U.S.C. 1844(c), 3106, and 3108 (intermediate holding companies). Certain data items in this information collection are given confidential treatment under 5 U.S.C. 552(b)(4) and (8). The agencies use data reported in the FFIEC 101 to assess and monitor the levels and components of each reporting entity’s applicable capital requirements and the adequacy of the entity’s capital under the Advanced Capital Adequacy Framework 6 and the supplementary leverage ratio,7 as applicable; to evaluate the impact of the Advanced Capital Adequacy Framework and the supplementary leverage ratio, as applicable, on individual reporting entities and on an industry-wide basis and its competitive implications; and to supplement on-site examination processes. The reporting schedules also assist advanced approaches institutions and Category III institutions in understanding expectations relating to the system development necessary for implementation and validation of the Advanced Capital Adequacy Framework and the supplementary leverage ratio, as applicable. Submitted data that are released publicly will also provide other interested parties with information about advanced approaches institutions’ and Category III institutions’ regulatory capital. II. Current Actions A. Overview On October 4, 2019, the agencies proposed revisions to the Call Reports and the FFIEC 101 that would implement various changes to the agencies’ regulatory capital rule 8 that, as of that date, the agencies had finalized or were considering 6 12 CFR part 3, subpart E (OCC); 12 CFR part 217, subpart E (Board); 12 CFR part 324, subpart E (FDIC). 7 12 CFR 3.10(c)(4) (OCC); 12 CFR 217.10(c)(4) (Board); 12 CFR 324.10(c)(4) (FDIC). 8 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR part 324 (FDIC). While the agencies have codified the capital rule in different parts of title 12 of the Code of Federal Regulations, the internal structure of the sections within each agency’s rule is substantially similar. PO 00000 Frm 00162 Fmt 4703 Sfmt 4703 4783 finalizing.9 The changes to the agencies’ regulatory capital rule included in their October 2019 notice were the capital simplifications rule, the community bank leverage ratio (CBLR) rule, the proposed tailoring rule, the proposed total loss absorbing capacity (TLAC) holdings rule, the proposed rule for supplementary leverage ratio (SLR) revisions for certain central bank deposits of custodial banks, the proposed rule for the standardized approach for counterparty credit risk (SA–CCR) on derivative contracts, and the high volatility commercial real estate (HVCRE) land development proposal. The agencies also proposed a change in the scope of the FFIEC 031 Call Report; a change in the reporting of construction, land development, and other land loans with interest reserves in the Call Report; and Call Report instructional revisions for the reporting of operating lease liabilities and home equity lines of credit (HELOCs) that convert from revolving to non-revolving status. The comment period for the October 2019 notice ended on December 3, 2019. The agencies received comments on the proposed reporting changes covered in the notice from four entities: Three bankers’ associations and one savings association. These comments are addressed in the following sections of this notice. Except for the proposed TLAC holdings rule, final rules have been adopted for all of the regulatory capital rulemakings addressed in the October 2019 notice. The capital-related reporting changes discussed in the October 2019 notice will be effective in the same quarters as the effective dates of the various capital rules that have been finalized (see Section III below). However, because the proposed TLAC holdings rule has not been finalized, at this time the agencies are not proceeding with the implementation of the TLAC-related reporting changes proposed in the October 2019 notice. Once the proposed TLAC holdings rule is finalized, the agencies plan to issue a 30-day Federal Register notice pursuant to the PRA to implement the associated reporting changes, which would address any comments received on the proposed changes. After carefully considering the comments received on the October 2019 notice, the agencies are adopting the reporting changes proposed in that notice (other than for TLAC) with modifications discussed in the following sections of this notice. 9 84 E:\FR\FM\27JAN1.SGM FR 53227, October 4, 2019. 27JAN1 4784 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices B. Capital Simplifications Rule khammond on DSKJM1Z7X2PROD with NOTICES 1. Background On July 22, 2019, the agencies published a final rule amending their regulatory capital rule to make a number of burden-reducing changes to the capital rule (capital simplifications rule).10 The capital simplifications rule had an effective date of April 1, 2020. However, the agencies subsequently approved a final rule that permits nonadvanced approaches banking organizations 11 to implement the capital simplifications rule on January 1, 2020.12 As a result, non-advanced approaches banking organizations have the option to implement the capital simplifications rule on the revised effective date of January 1, 2020, or in the quarter beginning April 1, 2020. The agencies proposed revisions to Call Report Schedule RC–R, Regulatory Capital, in all three versions of the Call Report to implement the associated changes to the agencies’ regulatory capital rule effective as of the March 31, 2020, report date, consistent with the final rule that effectively permits early adoption of the capital simplifications rule. 2. Proposed Revisions to Call Report Schedule RC–R The revisions in the capital simplifications rule would make a number of changes to the calculation of common equity tier 1 (CET1) capital, additional tier 1 capital, and tier 2 capital for non-advanced approaches institutions that do not apply to advanced approaches institutions. Thus, the capital simplifications rule results in different sets of calculations for these tiers of regulatory capital for nonadvanced approaches institutions and advanced approaches institutions. At present, the FFIEC 031 and the FFIEC 041 Call Reports are completed by both non-advanced approaches institutions and advanced approaches institutions while only non-advanced approaches institutions are eligible to file the FFIEC 051 Call Report. To mitigate the complexity of revising existing Schedule RC–R, Part I, Regulatory Capital Components and Ratios, to incorporate the different sets of regulatory capital calculations for nonadvanced approaches institutions and advanced approaches institutions, and to reflect the effects of the capital simplifications rule in both the FFIEC FR 35234 (July 22, 2019). approaches banking organizations are institutions that do not meet the criteria in 12 CFR 3.100(b) (OCC); 12 CFR 217.100(b) (Board); or 12 CFR 324.100(b) (FDIC). 12 84 FR 61804 (November 13, 2019). 031 and FFIEC 041 Call Reports, the agencies proposed in the October 2019 notice to require all advanced approaches institutions to file the FFIEC 031 Call Report effective as of the March 31, 2020, report date.13 As a result, the agencies proposed to adjust the existing regulatory capital calculations reported on Schedule RC–R, Part I, for the FFIEC 041 Call Report, and also for the FFIEC 051 Call Report, to reflect the effects of the capital simplifications rule for nonadvanced approaches institutions. For the FFIEC 031 Call Report, which is filed by the fewest number of institutions, the agencies proposed to incorporate the two different sets of regulatory capital calculations (one for non-advanced approaches institutions and the other for advanced approaches institutions) in Schedule RC–R, Part I, and, as mentioned above, require all advanced approaches institutions to file this version of the Call Report. In the October 2019 notice, the agencies proposed a number of revisions that would simplify the capital calculations on each version of Schedule RC–R, Part I, effective March 31, 2020, and thereby reduce reporting burden. Because both non-advanced approaches institutions and advanced approaches institutions file the FFIEC 031 Call Report, the FFIEC 031 Call Report would include two different sets of calculations (one that incorporates the effects of the capital simplifications rule and another that does not) in adjacent columns in the affected portion of Schedule RC–R, Part I. An institution would complete only the column for the set of calculations applicable to that institution. For the March 31, 2020, report date, non-advanced approaches institutions that file the FFIEC 031 Call Report and elect to adopt the capital simplifications rule on January 1, 2020, would complete the column for the set of calculations that incorporates the effects of the capital simplifications rule. Non-advanced approaches institutions that elect to wait to adopt the capital simplifications rule on April 1, 2020, and all advanced approaches institutions would complete the column for the set of calculations that does not reflect the effects of the capital simplifications rule (i.e., that reflects the capital calculation in effect for all institutions before this revision). Beginning with the June 30, 2020, report date, all non-advanced approaches institutions that file the FFIEC 031 Call 10 84 11 Non-advanced VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 13 As discussed in Sections II.B.3. and II.D.1., below, the agencies also proposed in their October 2019 notice to require all Category III institutions to file the FFIEC 031 Call Report effective as of the March 31, 2020, report date. PO 00000 Frm 00163 Fmt 4703 Sfmt 4703 Report would complete the column for the set of calculations that incorporates the effects of the capital simplifications rule; all advanced approaches institutions that file this Call Report would complete the column that does not reflect the effects of the capital simplifications rule. Because advanced approaches institutions currently are not permitted to file the FFIEC 051 Call Report and, as proposed in the October 2019 notice, would not be permitted to file the FFIEC 041 Call Report, the FFIEC 041 and FFIEC 051 Call Reports would include a single column for the capital calculation in Schedule RC–R, Part I, that would be revised effective March 31, 2020, to incorporate the effects of the capital simplifications rule. For the March 31, 2020, report date, nonadvanced approaches institutions that file the FFIEC 041 or FFIEC 051 Call Report and elect to adopt the capital simplifications rule on January 1, 2020, would complete the capital calculation column in Schedule RC–R, Part I, as revised for the capital simplifications rule. The agencies would provide instructions for non-advanced approaches institutions that file the FFIEC 041 or FFIEC 051 Call Report that elect to wait to adopt the capital simplifications rule on April 1, 2020, on how to complete Schedule RC–R, including the capital calculation column, for the March 31, 2020, report date in accordance with the capital rule in effect before the capital simplifications rule’s revised effective date of January 1, 2020. Such nonadvanced approaches institutions would use these instructions on a one-time basis for the March 31, 2020, report date only. Beginning with the June 30, 2020, report date, all non-advanced approaches institutions that file the FFIEC 041 or FFIEC 051 Call Report would complete Schedule RC–R as revised for the capital simplifications rule. In connection with proposing that all advanced approaches institutions file the FFIEC 031 Call Report in the October 2019 notice, the agencies proposed to remove certain items from the FFIEC 041 Call Report that apply only to advanced approaches institutions. Thus, for Schedule RC–R, Part I, in the FFIEC 041 Call Report, the agencies proposed to remove items 30.b, 32.b, 34.b, 35.b, 40.b, 41 through 43 (Column B only), 45.a, 45.b, and 46.b. The agencies proposed to renumber items 30.a, 32.a, 34.a, 35.a, 40.a, and 46.a as items 30, 32, 34, 35, 40, and 46, respectively. In the capital simplifications rule, the agencies increased the thresholds for E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES including mortgage servicing assets (MSAs), temporary difference deferred tax assets that could not be realized through net operating loss carrybacks (temporary difference DTAs),14 and investments in the capital of unconsolidated financial institutions for non-advanced approaches institutions. In addition, the agencies revised the capital calculation for minority interests included in the various capital categories for non-advanced approaches institutions and to the calculation of the capital conservation buffer. The current regulatory capital calculations in Call Report Schedule RC–R, which do not yet reflect the revisions contained in the capital simplifications rule, require that an institution’s capital cannot include MSAs, certain temporary difference DTAs, and significant investments in the common stock of unconsolidated financial institutions in an amount greater than 10 percent of CET1 capital, on an individual basis, and those three data items combined cannot comprise more than 15 percent of CET1 capital. When the reporting of regulatory capital calculations by non-advanced approaches institutions in accordance with the capital simplifications rule takes effect, this calculation would be revised in Schedule RC–R, Part I, to require that only MSAs or temporary difference DTAs in an amount greater than 25 percent of CET1 capital, on an individual basis, could not be included in a non-advanced approaches institution’s regulatory capital. The 15 percent aggregate limit would be removed. In addition, the capital simplifications rule combines the current three categories of investments in financial institutions (non-significant investments in the capital of unconsolidated financial institutions, significant investments in the capital of unconsolidated financial institutions that are in the form of common stock, and significant investments in the capital of unconsolidated financial institutions that are not in the form of common stock) into a single category, investments in the capital of unconsolidated financial institutions, and applies a limit of 25 percent of CET1 capital on the amount of these investments that can be included in 14 The agencies note that An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Public Law 115–97 (originally introduced as the Tax Cuts and Jobs Act), enacted December 22, 2017, eliminated the concept of net operating loss carrybacks for U.S. federal income tax purposes, although the concept may still exist in particular jurisdictions for state or foreign income tax purposes. VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 capital. Any investments in excess of the 25 percent limit would be deducted from regulatory capital using the corresponding deduction approach. Consistent with the current capital rule, an institution must risk weight MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that are not deducted. The agencies proposed revisions to allow institutions to enter values into the Column K— 250% risk weight on Schedule RC–R, Part II, in the FFIEC 051 Call Report, which is currently shaded out, and remove footnote two on the second page of Schedule RC–R, Part II, and the corresponding footnote on subsequent pages of Schedule RC–R, Part II, in all three versions of the Call Reports effective as of the March 31, 2020, report date to accommodate the capital simplifications rule revisions to the risk weight for MSAs and temporary difference DTAs. Consistent with the capital simplifications rule, nonadvanced approaches institutions will not be required to differentiate among categories of investments in the capital of unconsolidated financial institutions. The risk weight for such equity exposures generally will be 100 percent, provided the exposures qualify for this risk weight.15 For non-advanced approaches institutions, the capital simplifications rule eliminates the exclusion of significant investments in the capital of unconsolidated financial institutions in the form of common stock from being eligible for a 100 percent risk weight.16 The application of the 100 percent risk weight (i) requires a banking organization to follow an enumerated process for calculating adjusted carrying value and (ii) mandates the equity exposures that must be included in determining whether the threshold has been reached. Equity exposures that do not qualify for a preferential risk weight will generally 15 12 CFR 3.52 and .53 (OCC); 12 CFR 217.52 and .53 (Board); 12 CFR 324.52 and .53 (FDIC). Note that for purposes of calculating the 10 percent nonsignificant equity bucket, the capital rule excludes equity exposures that are assigned a risk weight of zero percent and 20 percent, and community development equity exposures and the effective portion of hedge pairs, both of which are assigned a 100 percent risk weight. In addition, the 10 percent non-significant bucket excludes equity exposures to an investment firm that would not meet the definition of traditional securitization were it not for the application of criterion 8 of the definition of traditional securitization, and has greater than immaterial leverage. 16 Equity exposures that exceed, in the aggregate, 10 percent of a non-advanced approaches banking organization’s total capital would then be assigned a risk weight based upon the approaches available in sections 52 and 53 of the capital rule. 12 CFR 3.52 and .53 (OCC); 12 CFR 217.52 and .53 (Board); 12 CFR 324.52 and .53 (FDIC). PO 00000 Frm 00164 Fmt 4703 Sfmt 4703 4785 receive risk weights of either 300 percent or 400 percent, depending on whether the equity exposures are publicly traded. In order to implement these regulatory capital changes from a regulatory reporting perspective, the agencies proposed in their October 2019 notice to make a number of revisions to Schedule RC–R, Part I, for nonadvanced approaches institutions effective March 31, 2020. Specifically, in Schedule RC–R, Part I, in the FFIEC 041 and FFIEC 051 Call Reports, the agencies proposed to remove item 11 and modify item 13 to reflect the consolidation of all investments in unconsolidated financial institutions into a single category and apply a single 25 percent of CET1 capital limit to these investments. The agencies proposed to modify items 14 and 15 to reflect the 25 percent of CET1 capital limit for MSAs and certain temporary difference DTAs, respectively. The agencies also proposed to remove item 16, which applies to the aggregate 15 percent limitation that was removed from the capital rule for non-advanced approaches institutions. In the FFIEC 031 Call Report, the agencies proposed to create two columns for existing items 11 through 19. Column A would be reported by non-advanced approaches institutions that elect to adopt the capital simplifications rule on January 1, 2020, in the March 2020 Call Report and by all non-advanced approaches institutions beginning in the June 2020 Call Report using the definitions under the capital simplifications rule. Column A would not include items 11 or 16, and items 13 through 15 would be designated as items 13.a through 15.a to reflect the new calculation methodology. Column B would be reported by advanced approaches institutions and by non-advanced approaches institutions that elect to wait to adopt the capital simplifications rule on April 1, 2020, in the March 2020 Call Report and only by advanced approaches institutions beginning in the June 2020 Call Report using the existing definitions. Existing items 13 through 15 would be designated as items 13.b through 15.b to reflect continued use of the existing calculation methodology. The agencies did not propose any changes to the form to incorporate the minority interest revisions. However, the agencies proposed to modify the instructions for the existing minority interest items in all versions of the Call Report to reflect the ability of nonadvanced approaches institutions to use the revised method under the capital simplifications rule to calculate minority interest in existing items 4, 22, E:\FR\FM\27JAN1.SGM 27JAN1 4786 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES and 29 (CET1, additional tier 1, and tier 2 minority interest, respectively). 3. Comments Received and Final Capital Simplifications Rule Reporting Revisions Two commenters opposed the agencies’ proposal to require all advanced approaches institutions and Category III institutions to file the FFIEC 031 Call Report because this requirement could impact the reporting burden of numerous small depository institution subsidiaries of holding companies that are advanced approaches and Category III institutions. The agencies agree with the commenters with respect to Category III institutions, and therefore they will allow such institutions that are not otherwise required to file the FFIEC 031 Call Report to file the FFIEC 041 Call Report. To do so, the agencies will retain three existing data items for reporting supplementary leverage ratio information and countercyclical capital buffer information in the FFIEC 041 Call Report for use by Category III institutions. Specifically, the agencies will retain items 45.a and 45.b (renumbered as items 55.a and 55.b) in the FFIEC 041 to collect supplementary leverage ratio information from institutions with domestic offices only and total assets less than $100 billion that are subsidiaries of banking organizations subject to Category III capital standards. Additionally, the agencies will retain item 46.b (renumbered as item 52.b) in the FFIEC 041 to collect countercyclical capital buffer information from Category III institutions. In proposing to require all advanced approaches institutions to file the FFIEC 031 Call Report (including those advanced approaches institutions that currently file the FFIEC 041 Call Report) in conjunction with the implementation of the capital simplifications rule, the agencies sought to retain a streamlined and straightforward Part I of Schedule RC–R for the more than 1,400 nonadvanced approaches institutions that filed the FFIEC 041 Call Report (based on data as of September 30, 2019). When the capital simplifications rule takes effect in the first quarter of 2020, allowing advanced approaches institutions currently filing the FFIEC 041 Call Report to continue to do so, rather than requiring them to begin filing the FFIEC 031 Call Report as had been proposed, would subject all institutions filing the FFIEC 041 to the complexity of the same dual column structure for items 11 through 19 of Schedule RC–R, Part I, that is discussed above in the context of the FFIEC 031 VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 reporting form. The benefit of a simple, straightforward Part I of Schedule RC– R in the FFIEC 041 Call Report that would be applicable only to the more than 1,400 non-advanced approaches institutions is expected to offset the impact on the small group of less than 20 advanced approaches institutions that currently file the FFIEC 041 Call Report of having to migrate to the FFIEC 031 Call Report when the capital simplifications rule takes effect. Thus, the agencies are not adopting the commenters’ recommendation to permit advanced approaches institutions currently eligible to file the FFIEC 041 to continue to file this version of the Call Report. In addition, as a consequence of the technical amendments that the capital simplifications rule made to the agencies’ capital rule effective October 1, 2019, the agencies are clarifying when an institution must report the amount of distributions and discretionary bonus payments in Schedule RC–R, Part I, item 48 (which would be renumbered as item 54). The agencies are clarifying the instructions for renumbered item 54 to explain that an institution must report the amount of distributions and discretionary bonus payments made during the calendar quarter ending on the report date if the amount of its capital conservation buffer that it reported for the previous calendar quarter-end report date was less than its applicable required buffer percentage on that previous calendar quarter-end report date. This change will enhance the agencies’ ability to monitor compliance with the limitations on distributions and discretionary bonus payments. Institutions must comply with this instructional clarification beginning with the March 31, 2020, report date. C. Community Bank Leverage Ratio Rule 1. Background In November 2019, the agencies published a final rule to provide a simplified alternative measure of capital adequacy, the community bank leverage ratio (CBLR), for qualifying community banking organizations with less than $10 billion in total consolidated assets (CBLR final rule).17 In addition, the FDIC recently approved a final rule regarding the application of the CBLR framework to the deposit insurance assessment system (CBLR assessments final rule).18 Certain clarifications would be made to the Schedule RC–O instructions to 17 84 FR 61776 (November 13, 2019). FR 66833 (December 6, 2019). See also FDIC Press Release 80–2019, dated September 17, 2019. 18 84 PO 00000 Frm 00165 Fmt 4703 Sfmt 4703 address the application of the CBLR framework to the FDIC’s deposit insurance assessment system in accordance with the CBLR assessments final rule, but no revisions would be made to the data items in this schedule. Under the CBLR final rule, banking organizations that have less than $10 billion in total consolidated assets, meet risk-based qualifying criteria, and have a leverage ratio of greater than 9 percent are eligible to opt into the CBLR framework. A banking organization that opts into the CBLR framework, maintains a leverage ratio of greater than 9 percent, and meets the other qualifying criteria will not be subject to other risk-based and leverage capital requirements and, in the case of an insured depository institution (IDI), is considered to have met the well capitalized capital ratio requirements for purposes of the agencies’ prompt corrective action framework. Under the CBLR final rule, a bank or savings association (bank) that opts into the CBLR framework (CBLR bank) may opt out of the CBLR framework at any time, without restriction, by reverting to the generally applicable capital requirements in the agencies’ capital rule 19 and reporting its regulatory capital information in Call Report Schedule RC–R, ‘‘Regulatory Capital,’’ Parts I and II, at the time of opting out. As described in the CBLR final rule, a banking organization that no longer meets the qualifying criteria for the CBLR framework will be required within two consecutive calendar quarters (grace period) either to once again satisfy the qualifying criteria or demonstrate compliance with the generally applicable capital requirements. During the grace period, the bank would continue to be treated as a CBLR bank and would be required to report its leverage ratio and related components in Call Report Schedule RC–R, Part I, in the manner described in this notice.20 A CBLR bank that ceases to meet the qualifying criteria as a result of a business combination (e.g., a merger) would receive no grace period, 19 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR part 324 (FDIC). 20 For example, if the banking organization electing the CBLR no longer meets one of the qualifying criteria as of February 15, and still does not meet the criteria as of the end of that quarter, the grace period for such a banking organization will begin as of the end of the quarter ending March 31. The banking organization may continue to use the community bank leverage ratio framework as of June 30, but will need to comply fully with the generally applicable rule (including the associated reporting requirements) as of September 30, unless the banking organization once again meets all qualifying criteria of the community bank leverage ratio framework, including a leverage ratio of greater than 9 percent, by that date. E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES and would immediately become subject to the generally applicable capital requirements. Similarly, a CBLR bank that fails to maintain a leverage ratio greater than 8 percent would not be permitted to use the grace period and would immediately become subject to the generally applicable capital requirements. 2. Proposed Revisions to Call Report Schedule RC–R In the October 2019 notice, the agencies proposed reporting revisions to the Call Reports for banks that qualify for and opt into the CBLR framework, consistent with the CBLR final rule. The agencies also proposed in the October 2019 notice that the reporting changes to the Call Reports to implement the CBLR framework would take effect in the same quarter as the effective date of the final rule adopting the CBLR framework. As provided in the CBLR final rule, the numerator of the community bank leverage ratio will be tier 1 capital, which is currently reported in Schedule RC–R, Part I, item 26. Therefore, the agencies are not proposing any changes related to the numerator of the community bank leverage ratio. As provided in the CBLR final rule, the denominator of the community bank leverage ratio will be average total consolidated assets. Specifically, average total consolidated assets would be calculated in accordance with the existing reporting instructions for Schedule RC–R, Part I, items 36 through 39. The agencies did not propose any substantive changes related to the denominator of the community bank leverage ratio. However, the agencies are proposing to move existing items 36 through 39 of Schedule RC–R, Part I, and renumber them as items 27 through 30 of Schedule RC–R, Part I, to consolidate all of the community-bankleverage-ratio-related capital items earlier in Schedule RC–R, Part I. As provided in the CBLR final rule, a CBLR bank will calculate its community bank leverage ratio by dividing tier 1 capital by average total consolidated assets (as adjusted), and the community bank leverage ratio would be reported as a percentage, rounded to four decimal places. Since this calculation is essentially identical to the existing calculation of the tier 1 leverage ratio in Schedule RC–R, Part I, item 44, the agencies are not proposing a separate item for the community bank leverage ratio in Schedule RC–R, Part I. Instead, the agencies proposed to move the tier 1 leverage ratio from item 44 of Part I and renumber it as item 31, and rename the item the Leverage Ratio, as this ratio VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 would apply to all institutions (as the community bank leverage ratio for qualifying institutions or the tier 1 leverage ratio for all other institutions). As provided in the CBLR final rule, a CBLR bank will need to satisfy certain qualifying criteria in order to be eligible to opt into the CBLR framework. The proposed items identified below would collect information necessary to ensure that a bank continuously meets the qualifying criteria for using the CBLR framework. Specifically, a CBLR bank is a bank that is not an advanced approaches institution and meets the following qualifying criteria: • A leverage ratio of greater than 9 percent; • Total consolidated assets of less than $10 billion; • Total trading assets and trading liabilities of 5 percent or less of total consolidated assets; and • Total off-balance sheet exposures (excluding derivatives other than sold credit derivatives and unconditionally cancelable commitments) of 25 percent or less of total consolidated assets.21 Accordingly, the agencies proposed to collect the items described below for community bank leverage ratio reporting purposes. In proposed item 32 of Schedule RC– R, Part I, a CBLR bank would report total assets, as reported in Call Report Schedule RC, item 12. In proposed item 33, a CBLR bank would report the sum of trading assets from Schedule RC, item 5, and trading liabilities from Schedule RC, item 15, in Column A. The bank would also report that sum divided by total assets from Schedule RC, item 12, and expressed as a percentage in Column B. As provided in the CBLR final rule, trading assets and trading liabilities would be added together, not netted, for purposes of this calculation. Also as discussed in the CBLR final rule, a bank would not meet the definition of a qualifying community banking organization for 21 Under the CBLR final rule, the agencies have reserved the authority to disallow the use of the CBLR framework by a depository institution or depository institution holding company based on the risk profile of the banking organization. This authority is reserved under the general reservation of authority included in the capital rule, in which the CBLR framework would be codified. See 12 CFR 3.1(d) (OCC); 12 CFR 217.1(d) (Board); and 12 CFR 324.1(d) (FDIC). In addition, for purposes of the capital rule and section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) (Pub. L. 115–174, 132 Stat. 1296 (2018)), the agencies have reserved the authority to take action under other provisions of law, including action to address unsafe or unsound practices or conditions, deficient capital levels, or violations of law or regulation. See 12 CFR 3.1(b) (OCC); 12 CFR 217.1(b) (Board); and 12 CFR 324.1(b) (FDIC). PO 00000 Frm 00166 Fmt 4703 Sfmt 4703 4787 purposes of the CBLR framework if the percentage reported in Column B is greater than 5 percent. In proposed items 34.a through 34.d, a CBLR bank would report information related to commitments, other offbalance sheet exposures, and sold credit derivatives. In proposed item 34.a, a CBLR bank would report the unused portion of conditionally cancelable commitments. This amount would be the amount of all unused commitments less the amount of unconditionally cancelable commitments, as discussed in the planned CBLR final rule and defined in the agencies’ capital rule.22 This item would be calculated consistent with the sum of Schedule RC–R, Part II, items 18.a and 18.b, Column A. In proposed item 34.b, a CBLR bank would report total securities lent and borrowed, which would be the sum of Schedule RC–L, items 6.a and 6.b. In proposed item 34.c, a CBLR bank would report the sum of certain other off-balance sheet exposures and sold credit derivatives. Specifically, a CBLR bank would report the sum of selfliquidating, trade-related contingent items that arise from the movement of goods; transaction-related contingent items (performance bonds, bid bonds, warranties, and performance standby letters of credit); sold credit protection in the form of guarantees and credit derivatives; credit-enhancing representations and warranties; financial standby letters of credit; forward agreements that are not derivative contracts; and off-balance sheet securitizations. A CBLR bank would not include derivatives that are not sold credit derivatives, such as foreign exchange swaps and interest rate swaps, in proposed item 34.c. In proposed item 34.d, a CBLR bank would report the sum of proposed items 34.a through 34.c in Column A. The bank would also report that sum divided by total assets from Schedule RC, item 12, and expressed as a percentage in Column B. As discussed in the planned CBLR final rule, a bank would not be eligible to opt into the CBLR framework if this percentage is greater than 25 percent. In proposed item 35, a CBLR bank would report the total of unconditionally cancellable commitments, which would be calculated consistent with the instructions for existing Schedule RC–R, Part II, item 19. This item is not used specifically to calculate a bank’s 22 See definition of ‘‘unconditionally cancellable’’ in 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC). E:\FR\FM\27JAN1.SGM 27JAN1 khammond on DSKJM1Z7X2PROD with NOTICES 4788 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices eligibility for the CBLR framework. However, the agencies are collecting this information to identify any bank using the CBLR framework that may have significant or excessive concentrations in unconditionally cancellable commitments that would warrant the agencies’ use of the reservation of authority in their capital rule to direct an otherwise-eligible CBLR bank to report its regulatory capital using the generally applicable capital requirements.23 In proposed item 36, a CBLR bank would report the amount of investments in the capital instruments of an unconsolidated financial institution that would qualify as tier 2 capital. Since the CBLR framework does not have a total capital requirement, a CBLR bank is neither required to calculate tier 2 capital nor make any deductions that would be taken from tier 2 capital. Therefore, if a CBLR bank has investments in the capital instruments of an unconsolidated financial institution that would qualify as tier 2 capital of the CBLR bank under the generally applicable capital requirements (tier 2 qualifying instruments), and the CBLR bank’s total investments in the capital of unconsolidated financial institutions exceed 25 percent of its CET1 capital, the CBLR bank is not required to deduct the tier 2 qualifying instruments. A CBLR bank is required to make a deduction from CET1 capital or tier 1 capital only if the sum of its investments in the capital of an unconsolidated financial institution is in a form that would qualify as CET1 capital or tier 1 capital instruments of the CBLR bank and the sum exceeds the 25 percent CET1 threshold. The agencies believe it is important to continue collecting information on the amount of investments in tier 2 qualifying instruments as excessive investments similarly could warrant the agencies’ use of their reservation of authority. In proposed item 37, a CBLR bank would be required to report its allocated transfer risk reserve (ATRR), as currently calculated and reported in Schedule RC–R, Part II, item 30. In proposed items 38.a through 38.c, a CBLR bank that has adopted Accounting Standards Update (ASU) No. 2016–13 on credit losses must report the amount of any allowances for credit losses on purchased credit-deteriorated loans and leases held for investment, held-to23 Other factors also may lead the agencies to determine that the risk profile of an otherwiseeligible CBLR bank would warrant the use of the reservation of authority. VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 maturity debt securities, and other financial assets measured at amortized cost, as currently calculated and reported in Schedule RC–R, Part II, Memorandum items 4.a through 4.c. The amount of the ATRR, if any, is necessary to calculate capital and surplus and corresponding limits in a number of the OCC’s regulations, including investment securities limits (12 CFR part 1) and lending limits (12 CFR part 32). After an institution adopts ASU 2016–13, allowances for credit losses on purchased credit-deteriorated assets similarly would affect the calculation of these limits. While these limits apply directly to institutions supervised by the OCC, a number of federal or state laws may apply the OCC’s calculation of certain limits to state-chartered institutions supervised by the FDIC or the Board. Therefore, the agencies are proposing to retain this information for all CBLR banks. As CBLR banks would not complete Schedule RC–R, Part II, this information would otherwise not be readily available for the agencies to calculate the relevant regulatory limits for these institutions.24 Because a CBLR bank would not be subject to the generally applicable capital requirements, a CBLR bank would not need to complete any of the items in Schedule RC–R, Part I, after proposed item 38, nor would the bank need to complete Schedule RC–R, Part II, Risk-Weighted Assets. In connection with moving the leverage ratio calculations and inserting items for the CBLR qualifying criteria in Schedule RC–R, Part I, existing items 27 through 35 of Schedule RC–R, Part I, will be renumbered as items 39 through 47. Existing items 40 through 43 will be renumbered as items 48 through 51, while existing items 46 through 48 will be renumbered as items 52 through 54. For advanced approaches institutions filing the FFIEC 031 Call Report, existing items 45.a and 45.b for total leverage exposure and the supplementary leverage ratio, respectively, will be renumbered as items 55.a and 55.b. As proposed in the October 2019 notice, a CBLR bank would indicate that it has elected to apply the CBLR framework by completing Schedule RC– R, Part I, items 32 through 38. Institutions not subject to the CBLR 24 Institutions that are not CBLR banks would not complete proposed items 37 and 38.a through 38.c, but would continue to report any ATRR and any allowances for credit losses on purchased creditdeteriorated loans and leases held for investment, held-to-maturity debt securities, and other financial assets measured at amortized cost in Schedule RC– R, Part II. PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 framework would be required to report all data items in Schedule RC–R, Part I, except for items 32 through 38. 3. Other Proposed Call Report Revisions Related to the CBLR While not specifically part of the CBLR final rule, the agencies currently collect information in Call Report Schedule RC–C, Part I, ‘‘Loans and Leases,’’ Memorandum item 13, from institutions that have a significant amount of construction, land development, and other land loans with interest reserves in relation to their total regulatory capital as reported as of the previous calendar year-end report date. At present, total regulatory capital is defined as total capital reported on Schedule RC–R, Part I, item 35 (FFIEC 051) or item 35.a (FFIEC 031 or FFIEC 041). While CBLR banks would no longer report their total capital in Schedule RC–R, Part I, the agencies believe it is still important to collect this information from CBLR banks that have a significant amount of construction, land development, and other land loans with interest reserves. Therefore, effective March 31, 2021,25 the agencies proposed to revise the reporting threshold for Schedule RC–C, Part I, Memorandum item 13, for all institutions to reference the sum of tier 1 capital as reported in Schedule RC–R, Part I, item 26, plus the allowance for loan and lease losses or the allowance for credit losses on loan and leases, as applicable, as reported in Schedule RC, item 4.c. 4. Comments Received and Final CBLR Rule Reporting Revisions Two commenters addressed certain aspects of the proposed CBLR reporting revisions. Aspects of the proposed CBLR reporting revisions on which no comments were received, including the proposed change in the reporting threshold for Schedule RC–C, Part I, Memorandum item 13, would be implemented as proposed. One commenter supported ‘‘the proposed line item additions to RC–R, Part I reporting to support changes to the leverage ratio,’’ but the other commenter recommended removing 25 For report dates during 2020, the reporting threshold for Schedule RC–C, Part I, Memorandum item 13, would be the total capital an institution reported in Schedule RC–R, Part I, as of December 31, 2019, which will predate the initial reporting under the CBLR framework in Schedule RC–R. The first year-end report date under the CBLR framework would be December 31, 2020, which would be the report date to which a CBLR bank would refer in order to determine whether it would need to complete Schedule RC–C, Part I, Memorandum item 13, as of each quarter-end report date during 2021. E:\FR\FM\27JAN1.SGM 27JAN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices proposed items 35 through 38.c of Part I because the data to be reported are not qualifying criteria under the CBLR framework. Both commenters did not favor the proposal to move existing items 36 through 39 of Schedule RC–R, Part I, which are used to measure total assets for the leverage ratio, and existing item 44, ‘‘Tier 1 leverage ratio,’’ from their present locations in Part I of the schedule to an earlier position in Part I where all of the CBLR-related items would be reported and these five items would be renumbered as items 27 through 31. One of the commenters stated that, although this proposed change in the presentation of Part I of Schedule RC–R would not affect the results of individual items in Part I, the proposed new presentation could be confusing to end users of the schedule. The second commenter expressed concern about inserting the data items for the CBLR framework within existing Schedule RC–R, Part I, rather than in a separate version of the schedule as the agencies had originally proposed in April 2019, because the insertion of these data items was confusing and could lead to reporting errors. Thus, this commenter suggested that the agencies break the proposed revised structure of Part I of Schedule RC–R into three separate parts with existing Part II of Schedule RC–R becoming the fourth part of the schedule. In addition, this commenter noted that an institution that is eligible to opt into the CBLR framework may opt into and out of the framework at any time, and that there is a grace period for an institution that no longer meets the qualifying criteria for the CBLR framework. During the grace period, the institution continues to be treated as a CBLR bank. Because an institution’s status, i.e., as a CBLR bank or as subject to the generally applicable capital requirements, can change from quarter to quarter, the commenter recommended the addition of data items to Schedule RC–R for reporting the institution’s status with respect to the CBLR framework. The agencies have considered these comments and will retain proposed items 35 through 38.c for reporting by CBLR banks in Schedule RC–R, Part I, as proposed for the reasons cited in the October 2019 notice.26 When unconditionally cancellable commitments or investments in the tier 2 capital instruments of unconsolidated financial institutions, as reported in proposed items 35 and 36, reach excessive levels, this may warrant the agencies’ use of the reservation of authority in their capital rule to direct 26 See 84 FR 53234 (October 4, 2019). VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 an otherwise-eligible CBLR bank to report its regulatory capital using the generally applicable capital requirements. The allocated transfer risk reserve and allowances for credit losses on purchased credit-deteriorated assets, which would be reported in proposed items 37 and 38.a through 38.c, currently exist in Part II of Schedule RC–R, which a CBLR bank would no longer complete. The agencies use the information reported in these data items in the calculation of regulatory limits on investment securities and lending where relevant. The agencies also will retain the proposed movement of the data items related to the leverage ratio to a position immediately after the calculation of tier 1 capital (designated items 27 through 31 of Schedule RC–R, Part I, as it would be revised) as well as the placement of the proposed data items to be completed only by CBLR banks, including those within the grace period (designated items 32 through 38.c of Schedule RC– R, Part I, as it would be revised). Because all institutions are subject to a leverage ratio requirement, all institutions must calculate and report the ratio’s numerator, which is tier 1 capital, and its denominator, which is based on average total assets. As a consequence, items 1 through 31 of Part I would be applicable to and completed by all institutions. Moving the leverage ratio data items as proposed would allow CBLR banks to avoid completing the remainder of Schedule RC–R after item 38.c of Part I, which the agencies believe will be less confusing for CBLR banks than having to complete the leverage ratio items in their current location in Part I of the schedule, which is after numerous items that will not be applicable to CBLR banks. Furthermore, the agencies will modify the formatting of Schedule RC–R, Part I, to better distinguish the data items that should be completed only by CBLR banks and those that should be completed only by those institutions applying the generally applicable capital requirements. This will be accomplished by improving the captioning before Schedule RC–R, Part I, item 32, which is the first data item to completed only by CBLR banks, and between items 38.c, which is the final data item only for CBLR banks, and item 39, which is the first data item applicable only to other institutions subject to the generally applicable capital requirements. The portion of Schedule RC–R, Part I, applicable only to CBLR banks also will be marked by bordering. These modifications to the formatting of Part I should functionally achieve an outcome similar to the PO 00000 Frm 00168 Fmt 4703 Sfmt 4703 4789 comment suggesting that Part I be split into Parts 1, 2, and 3 with existing Part II then renumbered as Part 4. In addition, the agencies acknowledge that, under the CBLR final rule, an institution that is eligible to opt into the CBLR framework may choose to opt into or out of this framework at any time and for any reason. Accordingly, the agencies see merit in a commenter’s recommendation that an institution should report its status as of the report date regarding the use of the CBLR framework. Therefore, the agencies propose to add a ‘‘yes/no’’ item 31.a to Schedule RC–R, Part I, after item 31, ‘‘Leverage ratio,’’ in which each institution would report whether it has a CBLR framework election in effect as of the quarter-end report date. An institution would answer ‘‘yes’’ if it qualifies for the CBLR framework (even if it is within the grace period) and has elected to adopt the framework as of that report date. Otherwise, the institution would answer ‘‘no.’’ Captioning after the ‘‘yes/no’’ response to item 31.a would indicate which of the subsequent data items in Schedule RC– R should be completed based on the response to item 31.a. This ‘‘yes/no’’ response should assist an institution in understanding which specific data items it should complete in the rest of Schedule RC–R. The response also should assist users of Schedule RC–R in understanding the regulatory capital regime an institution is following as of the report date. The agencies are not adopting a commenter’s recommendation to add additional data items relating to use of the CBLR, for example by differentiating between banks that currently meet the CBLR qualifying criteria and those that are within the grace period, as the agencies do not need this additional level of detail in the Call Report. The agencies believe these modifications to the format and structure of Part I of Schedule RC–R will limit the burden on reporting institutions and lessen possible confusion, including for users of Schedule RC–R and for those qualifying community institutions that elect to adopt the CBLR framework. Redlined drafts of Call Report Schedule RC–R in all three versions of the Call Report as it is proposed to be revised, with the modifications described in this Section II.C.4., will be available on the FFIEC’s Reporting Forms web page. D. Tailoring Rule 1. Background On November 1, 2019, the agencies published a final rule to revise the E:\FR\FM\27JAN1.SGM 27JAN1 4790 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES criteria for determining the applicability of regulatory capital and liquidity requirements for large U.S. banking organizations and the U.S. intermediate holding companies of certain foreign banking organizations (tailoring final rule).27 Under the tailoring final rule, the most stringent set of standards (Category I) applies to U.S. global systemically important banks (GSIBs). The second set of standards (Category II) applies to banking organizations that are very large or have significant international activity, but are not GSIBs. Like Category I, this category generally includes standards that are based on standards that reflect agreements reached by the Basel Committee on Banking Supervision. The third set of standards (Category III) applies to banking organizations with $250 billion or more in total consolidated assets that do not meet the criteria for Category I or II. The third set of standards also applies to banking organizations with total consolidated assets of $100 billion or more, but less than $250 billion, that meet or exceed other specified riskbased indicators. The fourth set of standards (Category IV) applies to banking organizations with total consolidated assets of $100 billion or more that do not meet the thresholds for one of the other categories. Under the tailoring final rule, depository institution subsidiaries generally are subject to the same category of standards that apply at the holding company level.28 Based on the proposed capital and liquidity requirements that would apply to institutions subject to Category I, II, III, or IV capital standards in the domestic interagency tailoring and foreign interagency tailoring NPRs, the agencies proposed in their October 2019 notice to amend certain regulatory reporting forms to clarify the reporting requirements for those institutions that would be subject to those proposed rules. Specifically, the agencies proposed changes to Call Report Schedule RC–R, Part I, Regulatory Capital Components and Ratios, and FFIEC 101 Schedule A, Advanced Approaches Regulatory Capital, to provide clarification for institutions subject to Category III capital standards.29 27 84 FR 59230 (November 1, 2019). standardized liquidity requirements apply only to depository institution subsidiaries with $10 billion or more in total consolidated assets under Categories I through III, and such requirements do not apply to depository institution subsidiaries under Category IV. 29 In the October 2019 notice, the agencies stated that they do not believe reporting form or 28 However, VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 In addition, the agencies proposed in the October 2019 notice that all institutions subject to Category I, II, or III capital standards would be required to file the FFIEC 031 Call Report. While the agencies proposed to require all advanced approaches institutions to file the FFIEC 031 Call Report in connection with the capital simplifications rule (see Section II.B., above), the tailoring rules would narrow the scope of institutions calculating risk-weighted assets under the advanced approaches. In the October 2019 notice, the agencies stated that they expected the revision in the scope of advanced approaches institutions to have little, if any, impact on current institutions, as all institutions with total consolidated assets of $100 billion or more or with foreign offices already are required to file the FFIEC 031, which generally aligns with the standards for Category I, II, and III institutions. However, the agencies noted in the October 2019 notice that, under the domestic interagency tailoring and foreign interagency tailoring NPRs, institutions that are subsidiaries of institutions subject to Category I, II, or III capital standards also are considered Category I, II, or III institutions. The tailoring final rule maintains the application of the same category of capital standards to depository institution holding companies and their depository institution subsidiaries. Thus, the proposed change in scope for the FFIEC 031 under the October 2019 notice meant that depository institutions considered Category I, II, or III institutions, but not required to file the FFIEC 031 Call Report at that time, would have been required to begin filing the FFIEC 031. The agencies noted that modifying the scope of the Call Report in this manner would enable them to streamline Schedule RC–R, Part I, of the FFIEC 041 report by removing data items that apply only to the limited number of institutions then considered advanced approaches institutions that were then also eligible to file the FFIEC 041 report and to any future institutions that would, absent this change in scope, be eligible to file the FFIEC 041 report. instructional clarifications are needed to reflect capital requirements that would apply to institutions subject to Category I, II, or IV capital standards under the domestic interagency tailoring and foreign interagency tailoring NPRs. With the issuance of the tailoring final rule, the agencies continue to believe no such reporting form or instructional clarifications are needed. PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 2. Proposed Revisions to Call Report Schedule RC–R, Part I In order to implement the clarifications for institutions subject to Category III capital standards, as discussed above, the agencies proposed to require all Category III institutions to file the FFIEC 031 Call Report and to revise the caption for Schedule RC–R, Part I, item 45, ‘‘Advanced approaches institutions only: Supplementary leverage ratio information,’’ on the FFIEC 031 Call Report. Specifically, the agencies proposed to clarify that item 45 (proposed to be renumbered as item 55) applies to ‘‘advanced approaches and Category III institutions’’ on the FFIEC 031 report form. Item 45 would be removed from the FFIEC 041 report form. The instructions for Schedule RC– R, Part I, item 45 (proposed to be renumbered as item 55), in the FFIEC 031–FFIEC 041 instruction book also would be revised in the same manner. The general instructions for Schedule RC–R, Part I, in the FFIEC 031–FFIEC 041 instruction book also would be clarified to indicate that Category III institutions are not required to calculate risk-weighted assets according to the advanced approaches rule, but are subject to the supplementary leverage ratio and countercyclical capital buffer. 3. Proposed Revisions to the FFIEC 101 To implement the clarification for institutions subject to Category III capital standards, the agencies proposed to revise the instructions for the scope of the FFIEC 101. Specifically, because Category III institutions are not required to calculate risk-weighted assets according to the advanced approaches rule, the FFIEC 101 instructions would be revised to clarify that top-tier Category III bank holding companies, savings and loan holding companies, and insured depository institutions, and all Category III U.S. intermediate holding companies, must complete FFIEC 101 Schedule A, SLR Tables 1 and 2, only and would not complete or file any other part of the FFIEC 101. In addition, any Category III banking organization that is a consolidated subsidiary of a top-tier Category III bank holding company, savings and loan holding company, U.S. intermediate holding company, or insured depository institution would not complete or file any part of the FFIEC 101. Instead, Category III subsidiary banking organizations that file Call Reports would report SLR data in Call Report Schedule RC–R, Part I, item 45 (proposed to be renumbered as item 55). E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices All Category IV institutions would not complete or file any part of the FFIEC 101. khammond on DSKJM1Z7X2PROD with NOTICES 4. Comments Received and Final Tailoring Rule Reporting Revisions a. Call Report Revisions Two commenters addressed the agencies’ proposal to require all institutions subject to Category I, II, or III capital standards to file the FFIEC 031 Call Report. One commenter observed that institutions that are subsidiaries of Category I, II, and III institutions, and therefore also considered Category I, II, and III institutions, will experience increases in overall reporting burden if they currently file the FFIEC 041 Call Report, but now must file the FFIEC 031 Call Report. The other commenter explicitly stated that the agencies should not expand the scope of the FFIEC 031 to require subsidiaries of Category I, II, and III institutions that previously were eligible to file the FFIEC 041 Call Report to file the FFIEC 031 Call Report. This commenter recommended that the agencies confirm that subsidiary depository institutions that currently file the FFIEC 041 or FFIEC 051 Call Report should continue to do so rather than ‘‘filing the more burdensome FFIEC 031.’’ As previously discussed in Section II.B.3., the agencies have reviewed these comments and are modifying the proposed change in scope as it applies to Category III institutions not currently required to file the FFIEC 031 Call Report. Accordingly, Category III institutions that have less than $100 billion in total assets and have no foreign offices (as defined in the Call Report instructions) would be eligible to file the FFIEC 041 Call Report and would not be required to file the FFIEC 031. Such institutions also would not be eligible to file the FFIEC 051 Call Report. As previously mentioned, to accommodate this modification to the originally proposed change in scope for Category III institutions, the agencies will retain existing SLR information items 45.a and 45.b (proposed to be renumbered as items 55.a and 55.b), as well as existing item 46.b for the countercyclical capital buffer (proposed to be renumbered as item 56.b), in Schedule RC–R, Part I, in the FFIEC 041 Call Report rather than removing these three items from this report as had been proposed. However, the agencies would require all Category I and II institutions, including depository institution subsidiaries of Category I and II institutions, to file the FFIEC 031 Call Report as proposed. As advanced VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 approaches institutions, depository institutions that are Category I and II institutions are not eligible to file the FFIEC 051 Call Report. b. FFIEC 101 Revisions Two commenters recommended that Category III institutions should not be required to file the FFIEC 101. Such institutions are not required to calculate risk-weighted assets according to the advanced approaches rule, but are subject to the supplementary leverage ratio (SLR). Thus, the only portions of the FFIEC 101 report applicable to Category III institutions are Supplementary Leverage Ratio Tables 1 and 2. However, one commenter noted that depository institution subsidiaries of Category III institutions, which are themselves considered Category III institutions, are not required to complete these two tables in the FFIEC 101 and instead report specified SLR data only in Call Report Schedule RC– R, Part I. In support of their recommendation to eliminate SLR data from the FFIEC 101, these commenters asserted that holding companies that report detailed SLR information in the FFIEC 101 report duplicate information in the Board’s FR Y–15.30 However, the instructions for the FR Y–15 state that ‘‘[i]f the banking organization files the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101) for the same reporting period, then’’12 data items in Schedule A of the FR Y–15 ‘‘will be populated automatically’’ from the corresponding data items reported in FFIEC 101 SLR Table 2. Furthermore, the FR Y–15 does not collect data comparable to the data reported in FFIEC 101 SLR Table 1, ‘‘Summary comparison of accounting assets and total leverage exposure.’’ Both commenters also noted that Table 13 of the Pillar 3 disclosures 31 requires certain institutions to disclose the same SLR information as is reported in FFIEC 101 SLR Tables 1 and 2. These commenters also cited these Pillar 3 disclosures as a reason for eliminating the SLR Tables from the FFIEC 101. However, the agencies’ capital rule provides that the management of an institution required to make the Pillar 3 public disclosures may provide all of the required disclosures in one place on its public website ‘‘or may provide the disclosures in more than one public financial report or other regulatory reports,’’ provided the institution 30 Banking Organization Systemic Risk Report (FR Y–15), OMB No. 3064–0352. 31 See 12 CFR 3.173 (OCC); 12 CFR 217.173 (Board); 12 CFR 324.173 (FDIC). PO 00000 Frm 00170 Fmt 4703 Sfmt 4703 4791 ‘‘publicly provides a summary table specifically indicating the location(s) of all such disclosures.’’ 32 Thus, an institution could satisfy the Table 13 disclosure requirement through the use of FFIEC 101 SLR Tables 1 and 2, the location of which would be provided in the institution’s summary table. Although the agencies recognize the existence of overlaps between the SLR information in the FR Y–15, Table 13 of the Pillar 3 disclosures, and SLR Tables 1 and 2 of the FFIEC 101, the latter serves, or can serve, as the source for some or all of the SLR information in the other two. Therefore, the agencies do not agree with the comments that SLR Tables 1 and 2 in the FFIEC 101 duplicate other available information and will retain these tables. In addition, one commenter suggested that if the requirement to complete SLR Tables 1 and 2 is retained for top-tier Category III banking organizations, as proposed, ‘‘a change to Line 2.20 Tier 1 capital for Category III firms to account for Tier 1 capital calculation differences would be appropriate.’’ On the FFIEC 101 reporting form, the caption for Item 2.20 currently says, ‘‘Tier 1 capital (from Schedule A, item 45).’’ The agencies note that the existing instructions for Item 2.20 already state that an institution ‘‘that does not complete Schedule A, except for the SLR disclosures, must use the corresponding item as reported on the institution’s Schedule RC–R of the Call Report or Schedule HC–R of the FR Y–9C, as applicable.’’ Thus, the Item 2.20 instructions already address the commenter’s suggestion. However, the agencies will modify the caption for Item 2.20 to clarify the source for the amount of Tier 1 capital to be reported in this item. E. Revisions to the Supplementary Leverage Ratio for Certain Central Bank Deposits of Custodial Banks 1. Background On November 19, 2019, the agencies announced that they had finalized the proposed revisions to the SLR for certain central bank deposits of banking organizations predominantly engaged in custodial activities.33 The final rule, which implements section 402 of the EGRRCPA, takes effect April 1, 2020. In the October 2019 notice, the agencies proposed changes to the instructions for Call Report Schedule 32 See 12 CFR 3.172(c)(1) (OCC); 12 CFR 217.172(c)(1) (Board); 12 CFR 324.172(c)(1) (FDIC). 33 See the custodial bank SLR final rule attached to OCC News Release 2019–135, Board Press Release, and FDIC Press Release 109–2019, all of which are dated November 19, 2019. E:\FR\FM\27JAN1.SGM 27JAN1 4792 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices RC–R and the addition of a new data item to both SLR Tables 1 and 2 in FFIEC 101 Schedule A that would implement the proposed changes to the agencies’ capital rule. 2. Proposed Revisions to Call Report Schedule RC–R, Part I In the October 2019 notice, the agencies proposed to modify the instructions for the calculation of the total leverage exposure to enable an institution that qualifies as a ‘‘custodial banking organization’’ to exclude deposits placed at a ‘‘qualifying central bank’’ from the total leverage exposure reported in Schedule RC–R, Part I, item 45.a (which would become item 54.a of Part I, as proposed above). The excluded deposits would be limited to the amount of deposit liabilities on the consolidated balance sheet of the custodial banking organization that are linked to fiduciary or custody and safekeeping accounts. 3. Proposed Revisions to FFIEC 101 Schedule A In the October 2019 notice, the agencies also proposed to revise the total leverage exposure calculation that would be reported on the FFIEC 101 Schedule A through the addition of a new data item for the qualifying central bank deduction to the calculations of the total leverage exposure in SLR Tables 1 and 2 of this schedule. The new reporting item would be placed between existing data items 1.7 and 1.8 in SLR Table 1 and between data items 2.2 and 2.3 in SLR Table 2. 4. Final Reporting Revisions The agencies received no comments on the proposed changes to Call Report Schedule RC–R, Part I, and FFIEC 101 Schedule A for the SLR for custodial banks and will implement the changes as proposed. khammond on DSKJM1Z7X2PROD with NOTICES F. Standardized Approach for Counterparty Credit Risk on Derivative Contracts 1. Background On November 19, 2019, the agencies announced that they had adopted a final rule implementing a new approach for calculating the exposure amount of derivative contracts under the capital rule: The standardized approach for counterparty credit risk (SA–CCR final rule).34 The SA–CCR final rule takes effect April 1, 2020 (i.e., for the Call Report and the FFIEC 101 for the June 30, 2020, report date) with a mandatory 34 See the SA–CCR final rule attached to OCC News Release 2019–136, Board Press Release, and FDIC Press Release 110–2019, all of which are dated November 19, 2019. VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 compliance date of January 1, 2022 (i.e., for the Call Report and the FFIEC 101 for the March 31, 2022, report date). The SA–CCR final rule replaces the current exposure methodology (CEM) with SA–CCR in the capital rule for advanced approaches institutions. The final rule requires banking organizations subject to Category I and II standards (Category I and II banking organizations) in the agencies’ tailoring final rule,35 discussed in Section II.D. above, to use SA–CCR to calculate their standardized total risk-weighted assets and permits non-advanced approaches banking organizations the option of using SA– CCR in place of CEM to calculate the exposure amount of their noncleared and cleared derivative contracts. Category I and II banking organizations would have to choose either SA–CCR or the internal models methodology (IMM) to calculate the exposure amount of their noncleared and cleared derivative contracts in connection with calculating their risk-based capital under the advanced approaches. The SA–CCR final rule provides for the eventual elimination of the current methods for Category I and II banking organizations to determine the risk-weighted asset amount for their default fund contributions to a central counterparty (CCP) or a qualifying central counterparty (QCCP) and implements a new and simpler method that would be based on the banking organization’s prorata share of the CCP’s and QCCP’s default fund. However, the final rule allows banking organizations that elect to use SA–CCR to continue to use method 1 and method 2 under CEM to calculate the risk-weighted asset amount for default fund contributions until January 1, 2022. The SA–CCR final rule also requires Category I and Category II banking organizations to use SA–CCR to determine the exposure amount of derivative contracts for purposes of calculating total leverage exposure for the supplementary leverage ratio. If a Category III banking organization chooses to use SA–CCR to calculate its total risk-weighted assets, it must use SA–CCR to determine the exposure amount of derivative contracts for its total leverage exposure. Where a banking organization has the option to choose among the approaches applicable to such banking organization under the capital rule, it must use the same approach for all purposes. Furthermore, the final rule allows a clearing member banking organization to recognize the counterparty credit risk-reducing effect of client collateral 35 84 PO 00000 FR 59231 (November 1, 2019). Frm 00171 Fmt 4703 Sfmt 4703 in replacement cost and potential future exposure (PFE) for purposes of calculating total leverage exposure under certain circumstances. In particular, this treatment applies to a clearing member banking organization’s exposure from its client-facing derivative transactions. For such exposures, a clearing member banking organization would use SA–CCR, as applied for risk-based capital purposes, which permits recognition of both cash and non-cash forms of margin in the form of financial collateral received from a client to offset the replacement cost and PFE components for clientfacing derivative transactions. In the October 2019 notice, the agencies proposed to revise the instructions for Call Report Schedule RC–R, Part II, as well as for SLR Table 2 in FFIEC 101 Schedule A, to implement the changes to the calculation of the exposure amount of derivative contracts under the agencies’ capital rule. Additionally, the SA–CCR final rule notes that the FDIC is unable to incorporate the SA–CCR methodology into the deposit insurance assessment pricing methodology for highly complex institutions 36 upon the effective date of this rule, but will consider options for addressing the use of SA–CCR in the deposit insurance system as derivative exposure data reported using SA–CCR becomes available. In the meantime, certain clarifications would be made to the instructions for reporting counterparty exposures in Schedule RC–O, Memorandum items 14 and 15, of the FFIEC 031 and the FFIEC 041 Call Reports, requiring highly complex institutions to continue to calculate derivative exposures using CEM, but without any reduction for collateral other than cash collateral that is all or part of variation margin and that satisfies certain requirements.37 Similarly, certain clarifications would be made to the instructions for Schedule RC–O, Memorandum items 14 and 15, in the FFIEC 031 and the FFIEC 041 Call Reports requiring highly complex institutions to continue to report the exposure amount associated with securities financing transactions, including cleared transactions that are 36 See 12 CFR 327.8(g). 12 CFR 3.10(c)(4)(ii)(C)(1)(ii) and (iii) and 3.10(c)(4)(ii)(C)(3)–(7) (OCC); 12 CFR 217.10(c)(4)(ii)(C)(1)(ii) and (iii) and 217.10(c)(4)(ii)(C)(3)–(7) (Board); and 12 CFR 324.10(c)(4)(ii)(C)(1)(ii) and (iii) and 324.10(c)(4)(ii)(C)(3)–(7) (FDIC) (as amended under the SA–CCR final rule). 37 See E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices securities financing transactions, using the standardized approach.38 2. Proposed Revisions to Call Report Schedule RC–R, Part II A banking organization that applies the generally applicable capital requirements must report the notional amount and regulatory capital exposure amount of its derivatives exposures in Schedule RC–R, Part II. In the October 2019 notice, the agencies proposed to revise the instructions for Schedule RC– R, Part II, to be consistent with SA–CCR. Generally, the proposed revisions to the reporting of derivatives elements in Schedule RC–R, Part II, are driven by the treatment of cleared derivatives’ variation margin (settled-to-market versus collateralized-to-market), netting provisions impacting the calculations of notional and exposure amounts, and attributions of derivatives to cleared versus noncleared derivatives. The General Instructions for Schedule RC–R, Part II, and the instructions for Schedule RC–R, Part II, items 20, 21, and Memorandum items 1 through 3 would be revised. khammond on DSKJM1Z7X2PROD with NOTICES 3. Proposed Revisions to FFIEC 101 Schedule A, SLR Table 2 In connection with their calculation of the supplementary leverage ratio, Category I, II, and III banking organizations must report the exposure amount of their derivatives in SLR Table 2 of FFIEC 101 Schedule A. In the October 2019 notice, the agencies proposed to revise the instructions for SLR Table 2 to be consistent with SA– CCR. Institutions that continue to use the CEM would use the current FFIEC 101 Schedule A instructions to complete SLR Table 2. 4. Comments Received and Instructions for Reporting Derivatives The agencies did not receive comments specifically addressing their proposals to revise the instructions for Schedule RC–R, Part II, and for FFIEC 101 Schedule A, SLR Table 2, consistent with the SA–CCR final rule. However, two commenters submitted similar questions and requests for clarifications related to certain derivatives reporting issues. In Schedule RC–R, Part II, Memorandum item 3, institutions report the notional principal amounts of centrally cleared derivative contracts by remaining maturity. Commenters sought clarification as to whether, for purposes of reporting derivatives referred to as settled-to-market contracts in 38 See 12 CFR 3.37(b) or (c) (OCC); 12 CFR 217.37(b) or (c) (Board); and 12 CFR 324.37(b) or (c) (FDIC) (as amended under the SA–CCR final rule). VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 Memorandum item 3, the remaining maturity of such derivatives should be the remaining maturity used to determine the conversion factor for the calculation of the PFE of these contracts or the contractual remaining maturity of these contracts. The derivatives information reported in Memorandum items 1 through 3 of Schedule RC–R, Part II, is collected to assist the agencies in understanding, and assessing the reasonableness of, the credit equivalent amounts of the over-the-counter derivatives and the centrally cleared derivatives reported in Schedule RC–R, Part II, items 20 and 21, column B. Accordingly, when reporting settled-tomarket centrally cleared derivative contracts in Memorandum item 3, the remaining maturity used to determine the applicable conversion factor should be the basis for reporting. The agencies will clarify the instructions for Memorandum item 3 to address the reporting of settled-to-market contracts. Both commenters stated that the Call Report instructions do not explain whether institutions should report notional amounts in Schedule RC–L, Derivatives and Off-Balance Sheet Items, and Schedule RC–R, Part II, RiskWeighted Assets, for derivatives that have matured, but have associated unsettled receivables or payables that are reported as assets or liabilities, respectively, on the balance sheet as of the quarter-end report date. In seeking clarification of the reporting requirements for such situations, the commenters recommended that notional amounts not be reported for derivatives that have matured. The agencies agree and will clarify the Call Report instructions to so indicate. For purposes of reporting notional amounts in the Call Report, one commenter recommended that the agencies clarify whether the notional amount as defined in U.S. generally accepted accounting principles (GAAP) 39 or under the SA–CCR final rule should be used when an institution must report the notional amount of derivative contracts in Schedule RC–R, Regulatory Capital, and elsewhere in the Call Report, such as Schedule RC–L. The agencies believe that the SA–CCR notional amount should be reported in Schedule RC–R only when an institution uses SA–CCR to calculate its exposure amounts when the institution determines its standardized total riskweighted assets. When an institution uses CEM to calculate exposure amounts for its derivative contracts, the notional amounts to be reported in 39 See Accounting Standards Codification Section 815–10–20. PO 00000 Frm 00172 Fmt 4703 Sfmt 4703 4793 Schedule RC–R should be based on the definition in U.S. GAAP. All notional amounts reported in Schedule RC–L should be based on the U.S. GAAP notional amount. The agencies will revise the instructions for Schedules RC–L and RC–R in this manner. Both commenters addressed the reporting of the fair value of collateral held against over-the-counter (OTC) derivative exposures by type of collateral and type of derivative counterparty in Schedule RC–L, item 16.b, and questioned whether this information is meaningful. One commenter requested clarification of the purpose for collecting this information while the other recommended that the agencies no longer collect this information. The data items for reporting the fair value of collateral are applicable to institutions with total assets of $10 billion or more. In general, the agencies use this information in their oversight and supervision of banks engaging in OTC derivative activities. The breakdown of the fair value of collateral posted for OTC derivative exposures in item 16.b provides the agencies with important insights into the extent to which collateral is used as part of the credit risk management practices associated with derivative credit exposures to different types of counterparties and changes over time in the nature and extent of the collateral protection. As a result of the agencies’ review of Schedule RC–L in 2016 during their most recent statutorily mandated review of existing Call Report data items,40 the agencies reduced the level of detail required to be reported on the fair value of collateral posted for OTC derivative exposures in item 16.b effective June 30, 2018. The agencies’ use of the information reported in Schedule RC–L, item 16.b, will be reviewed again before the end of 2022 as part of their next statutorily mandated review. G. High Volatility Commercial Real Estate (HVCRE) Land Development Loans 1. Background On December 13, 2019, the agencies published a final rule that conforms the HVCRE exposure definition in section 2 of the capital rule 41 to the statutory definition of an HVCRE ADC loan 42 and clarifies the capital treatment for loans that finance the development of land 40 This review is mandated by section 604 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 1817(a)(11)). 41 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); and 12 CFR 324.2 (FDIC). 42 See Section 214 of the EGRRCPA. E:\FR\FM\27JAN1.SGM 27JAN1 4794 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices under the revised HVCRE exposure definition (HVCRE final rule).43 This final rule takes effect April 1, 2020. 2. Proposed Revisions to Call Report Schedule RC–R, Part II The agencies’ adoption of the HVCRE final rule supersedes the July 6, 2018, interagency statement.44 In relevant part, this statement advised institutions that, when determining which loans should be subject to a heightened risk weight, until the agencies take further action institutions may choose to continue to apply the current regulatory definition of HVCRE exposure, or they may choose to apply the heightened risk weight only to those loans they reasonably believe meet the statutory definition of HVCRE ADC loan. Institutions will be required to apply the HVCRE exposure definition in the final rule beginning with the Call Report for June 30, 2020. Therefore, the agencies will make conforming revisions to the instructions for Schedule RC–R, Part II, items 4.b and 5.b, in all versions of the Call Report effective as of that report date. No revisions to the Call Report forms are necessary. khammond on DSKJM1Z7X2PROD with NOTICES 3. Proposed Revisions to FFIEC 101 Schedule G The changes to the HVCRE exposure definition discussed above would also affect the instructions for Schedule G— Wholesale Exposure in the FFIEC 101. Therefore, the agencies also will make conforming revisions to the FFIEC 101 instructions to align with the new HVCRE exposure definition in the final rule effective as of the June 30, 2020, report date. H. Operating Lease Liabilities In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016–02, ‘‘Leases,’’ which added Topic 842, Leases, to the Accounting Standards Codification (ASC). Once ASU 2016–02 is effective for an institution, the ASU’s accounting requirements, as amended by certain subsequent ASUs, supersede ASC Topic 840, Leases. The most significant change that ASC Topic 842 makes to the previous lease accounting requirements is to lessee accounting. Under the lease accounting standards in ASC Topic 840, lessees recognize lease assets and lease liabilities on the balance sheet for 43 84 FR 68019 (December 13, 2019). FDIC, and OCC, Interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), https://www.federalreserve.gov/ newsevents/pressreleases/files/ bcreg20180706a1.pdf. 44 Board, VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 capital leases, but do not recognize operating leases on the balance sheet. The lessee accounting model under Topic 842 retains the distinction between operating leases and capital leases, which the new standard labels finance leases. However, the new standard requires lessees to record a right-of-use (ROU) asset and a lease liability on the balance sheet for operating leases. (For finance leases, a lessee’s lease asset also is designated an ROU asset.) In general, the new standard permits a lessee to make an accounting policy election to exempt leases with a term of one year or less at their commencement date from on-balance sheet recognition. For institutions that are public business entities, as defined under U.S. GAAP, Topic 842 is currently in effect. For institutions that are not public business entities, the FASB recently amended the effective date of the new standard so that Topic 842 will now take effect for fiscal years beginning after December 15, 2020, and interim reporting periods within fiscal years beginning after December 15, 2021.45 Early application of the new standard is permitted for all institutions. The Call Report Supplemental Instructions for March 2019 46 stated that a lessee should report lease liabilities for operating leases and finance leases, including lease liabilities recorded upon adoption of the ASU, in Schedule RC–M, items 5.b, ‘‘Other borrowings,’’ and 10.b, ‘‘Amount of ‘Other borrowings’ that are secured,’’ which is consistent with the current Call Report instructions for reporting a lessee’s obligations under capital leases under ASC Topic 840. In response to this instructional guidance, the agencies received questions from institutions concerning the reporting of a bank lessee’s lease liabilities for operating leases. These institutions indicated that reporting operating lease liabilities as other liabilities instead of other borrowings would better align the reporting of the single noninterest expense item for operating leases in the income statement (which is the presentation required by ASC Topic 842) with their balance sheet classification and would be consistent with how these institutions report operating lease liabilities internally. The agencies considered the views expressed by these institutions and 45 See FASB ASU 2019–10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. 46 https://www.ffiec.gov/pdf/FFIEC_forms/ FFIEC031_FFIEC041_FFIEC051_suppinst_ 201903.pdf. PO 00000 Frm 00173 Fmt 4703 Sfmt 4703 proposed in the October 2019 notice to require that operating lease liabilities be reported on the Call Report balance sheet in Schedule RC, item 20, ‘‘Other liabilities.’’ In Schedule RC–G, Other Liabilities, operating lease liabilities would be reported in item 4, ‘‘All other liabilities.’’ In subitems of Schedule RC– G, item 4, institutions must itemize and describe any components of this item in amounts greater than $100,000 that exceed 25 percent of the amount reported in item 4. Because of the expected prevalence of operating lease liabilities, the agencies also proposed to add a new subitem with the preprinted caption ‘‘Operating lease liabilities’’ to item 4 to facilitate the reporting of these liabilities when their amount exceeds the reporting threshold for itemizing and describing components of ‘‘All other liabilities.’’ These changes would take effect as of the March 31, 2020, report date. The agencies received no comments on these proposed revisions for operating lease liabilities and will implement them as proposed. I. Reporting Home Equity Lines of Credit That Convert From Revolving to NonRevolving Status 1. Proposed Instructional Clarification Institutions 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 RC–C, Part I, Loans and Leases. The amounts of closed-end loans secured by 1–4 family residential properties are reported in Schedule RC–C, Part I, item 1.c.(2)(a) or (b), depending on whether the loan is a first or a junior lien.47 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 repaid over the remaining loan term through monthly payments. Because the Call Report 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 47 Institutions report additional information on open-end and closed-end loans secured by 1–4 family residential properties in certain other Call Report schedules in accordance with the loan category definitions in Schedule RC–C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b). E:\FR\FM\27JAN1.SGM 27JAN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices revolving to non-revolving status, the agencies have found diversity in how these credits are reported in Schedule RC–C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b), and in other Call Report items that use the definitions of these three loan categories. In September 2015, to address this absence of instructional guidance and promote consistency in reporting, the agencies proposed to clarify the instructions for reporting loans secured by 1–4 family residential properties by specifying that after a revolving openend line of credit has converted to nonrevolving closed-end status, the loan should be reported as closed-end in Schedule RC–C, Part I, item 1.c.(2)(a) or (b), as appropriate.48 As discussed in a subsequent notice,49 the agencies received a number of comments that raised concerns with the proposal. In particular, some commenters stated that reclassifying HELOCs after the draw period could raise operational challenges for institutions’ loan systems that would require additional time to implement. Based on the feedback received, the agencies did not proceed with their proposed instructional clarification at that time. The agencies continue to believe that it is important to collect accurate data on loans secured by 1–4 family residential properties in the Call Report. Consistent classification of HELOCs based on the status of the draw period is particularly important for the agencies’ safety and soundness monitoring. Due to the structure of HELOCs discussed above, borrowers generally are not required to make principal repayments during the draw period, which may create a financial shock for borrowers when they must make a balloon payment or begin regular monthly repayments after the draw period. With some institutions reporting HELOCs past the draw period as revolving, this increases the amounts outstanding, charge-offs, recoveries, past dues, and nonaccruals reported in the open-end category relative to the amounts reported by institutions that treat HELOCs past the draw period as closed-end, which makes the data less useful for agency comparisons and safety and soundness monitoring. In addition, in ASU No. 2019–04,50 the FASB amended ASC Subtopic 326–20 on credit losses to require that, when presenting credit quality disclosures in notes to financial statements prepared 48 See 80 FR 56539 (September 18, 2015). 81 FR 45357 (July 13, 2016). 50 ASU No. 2019–04, ‘‘Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,’’ issued in April 2019. 49 See VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 in accordance with U.S. GAAP, an entity must separately disclose line-ofcredit arrangements that are converted to term loans from line-of-credit arrangements that remain in revolving status. The agencies further stated in the October 2019 notice that they had determined that there would be little or no impact to the regulatory capital calculations, FDIC deposit insurance assessments, or other regulatory reporting requirements as a result of this proposed clarification, which were other concerns previously raised by commenters. Therefore, in the October 2019 notice, the agencies re-proposed to clarify the Call Report instructions for Schedule RC–C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b), to address continuing diversity in reporting practices by stating that revolving, open-end lines of credit secured by 1–4 family residential properties that have converted to nonrevolving closed-end status should be reported as closed-end loans. The effect of this clarification would extend to the instructions for numerous data items elsewhere in the Call Report that reference the Schedule RC–C, Part I, loan category definitions for open-end and closed-end loans secured by 1–4 family residential properties and were identified in the October 2019 notice. That notice also identified a limited number of Call Report data items to which this instructional clarification would not be applied. To address prior comments regarding the time needed for any systems changes, the agencies proposed that compliance with the clarified instructions would not be required until the March 31, 2021, report date. The October 2019 notice further proposed that institutions not currently reporting in accordance with the clarified instructions would be permitted, but not required, to report in accordance with the clarified instructions before that date. 2. Comments Received and Final Reporting Revisions Three commenters opposed the agencies’ proposal to require that HELOCs that have converted to nonrevolving closed-end status should be reported as closed-end loans. Commenters cited the numerous data items in multiple Call Report schedules that would be affected by this proposed instructional clarification and the reconfiguration of systems that would need to be undertaken as well as a definitional conflict between the Call Report instructions as the agencies proposed to clarify them and the instructions for the Board’s FR Y–14M PO 00000 Frm 00174 Fmt 4703 Sfmt 4703 4795 report filed by holding companies with total consolidated assets of $100 billion or more.51 In addition, one commenter stated that the proposed Call Report instructional clarification may lead to inconsistencies between the reporting of HELOCs in open-end and closed-end status in the Call Report and disclosures of HELOCs made in filings with the Securities and Exchange Commission under the federal securities laws. Another commenter cited differences in the risk profiles of loans underwritten as HELOCs and those underwritten as closed-end loans at origination and indicated that the proposed instructional clarification could distort performance trends for loans secured by 1–4 family residential properties as HELOCs migrate between the open-end and closed-end loan categories in the Call Report. Two of the commenters opposing the proposed instructional clarification instead recommended the creation of a memorandum item in the Call Report loan schedule (Schedule RC–C, Part I) to identify for supervisory purposes the amount of HELOCs that have converted to non-revolving closedend status. The other commenter suggested segregating closed-end HELOCs using a separate loan category code, which may also imply separate reporting and disclosure of such HELOCs. One commenter also requested that the agencies clarify the reporting treatment for ‘‘drawdowns of a HELOC Flex product that contain ‘lock-out’ features,’’ which was described as the borrower’s exercise of an option to convert a draw on the line of credit to ‘‘a fixed rate interest structure with defined payments and term.’’ After considering the comments received, the agencies will not implement the proposed clarification to the instructions for Schedule RC–C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b) that would result in revolving, open-end lines of credit secured by 1–4 family residential properties that have converted to non-revolving closed-end status being reported as closed-end loans. In light of the guidance in the instructions for the Board’s FR Y–14M report that directs reporting entities to continue to report HELOCs that are no longer revolving credits in the Home Equity schedule, the agencies propose to adopt this treatment for Call Report purposes. However, recognizing the existing diversity in practice in which some institutions report HELOCs that have converted from revolving to nonrevolving status as closed-end loans in 51 Capital Assessments and Stress Testing Report (FR Y–14M), OMB Number 7100–0341. E:\FR\FM\27JAN1.SGM 27JAN1 khammond on DSKJM1Z7X2PROD with NOTICES 4796 Federal Register / Vol. 85, No. 17 / Monday, January 27, 2020 / Notices the Call Report while other institutions continue to report such HELOCs as open-end loans, the agencies propose that institutions report all HELOCs that convert to closed-end status on or after January 1, 2021, as open-end loans in Schedule RC–C, Part I, item 1.c.(1). An institution that currently reports HELOCs that have converted to nonrevolving closed-end status as open-end loans in Schedule RC–C, Part I, item 1.c.(1), should not change its reporting practice for these loans and should continue to report these loans in item 1.c.(1) regardless of their conversion date. An institution that currently reports HELOCs that convert to nonrevolving closed-end status as closedend loans in Schedule RC–C, Part I, item 1.c.(2)(a) or 1.c.(2)(b), as appropriate, may continue to report HELOCs that convert on or before December 31, 2020, as closed-end loans in Call Reports for report dates after that date. Alternatively, the institution may choose to begin reporting some or all of these closed-end HELOCs as open-end loans in item 1.c.(1) as of the March 31, 2020, or any subsequent report date, provided this reporting treatment is consistently applied. With respect to HELOC Flex products, the proposed reporting treatment described above would mean that amounts drawn on a HELOC during its draw period that a borrower converts to a closed-end amount before the end of this period also should be reported as open-end loans in Schedule RC–C, Part I, item 1.c.(1), subject to the transition guidance above. The agencies also agree with commenters’ suggestion to create a memorandum item in Schedule RC–C, Part I, in which institutions would report the amount of HELOCs that have converted to non-revolving closed-end status that are included in item 1.c.(1), ‘‘Revolving, open-end loans secured by 1–4 family residential properties and extended under lines of credit.’’ This new Memorandum item 16 in Schedule RC–C, Part I, would enable the agencies to monitor the proportion of an institution’s home equity credits in revolving and non-revolving status and changes therein and assess whether changes in this proportion in relation to changes in past due and nonaccrual home equity credits and charge-offs and recoveries of such credits warrant supervisory follow-up. Memorandum item 16 would be collected quarterly in the FFIEC 031 and the FFIEC 041 Call Reports and semiannually as of June 30 and December 31 in the FFIEC 051 Call Report. To provide time needed for any systems changes, the agencies propose VerDate Sep<11>2014 16:54 Jan 24, 2020 Jkt 250001 to implement this new memorandum item as of the March 31, 2021, report date in the FFIEC 031 and the FFIEC 041 Call Reports and as of the June 30, 2021, report date in the FFIEC 051 Call Report. III. Timing As stated in their October 2019 notice, the agencies plan to make the capitalrelated reporting changes described in Sections II.B. through II.G. effective the same quarters as the effective dates of the various final capital rules discussed in this notice. Thus, the reporting revisions to the Call Report and the FFIEC 101, as applicable, would take effect March 31, 2020, for the capital simplifications rule, the community bank leverage ratio rule, and the tailoring final rule. In this regard, the filing of the FFIEC 031 Call Report by all institutions that are advanced approaches institutions under the tailoring final rule and the filing of the FFIEC 031 or FFIEC 041 Call Report by institutions considered Category III institutions under this rule would take effect as of March 31, 2020. Nonadvanced approaches institutions may elect to wait to adopt the capital simplifications rule for reporting purposes until the June 30, 2020, report date. The reporting revisions to the Call Report and the FFIEC 101, as applicable, would take effect June 30, 2020, for the custodial bank supplementary leverage ratio final rule, the standardized approach for counterparty credit risk on derivative contracts final rule, and the high volatility commercial real estate exposures final rule. However, the mandatory compliance date for reporting in accordance with the standardized approach for counterparty credit risk final rule is the March 31, 2022, report date. In addition, the reporting of operating lease liabilities as ‘‘All other liabilities’’ in Call Report Schedule RC–G would take effect March 31, 2020, and the change in the reporting of construction, land development, and other land loans with interest reserves in Call Report Schedule RC–C, Part I, would take effect March 31, 2021. The requirement to continue reporting HELOCs that convert to closed-end status as open-end loans in Schedule RC–C, Part I, would apply to those HELOCs that convert on or after January 1, 2021, with pre-2021 conversions subject to the transition guidance described in Section II.I. above; new Memorandum item 16 in Schedule RC–C, Part I, for HELOCs in non-revolving closed-end status that are reported as open-end loans would take effect March 31, 2021, in the FFIEC 031 and the FFIEC 041 Call Reports and PO 00000 Frm 00175 Fmt 4703 Sfmt 4703 June 30, 2021, in the FFIEC 051 Call Report. The specific wording of the captions for the new or revised Call Report data items discussed in this notice and the numbering of these data items should be regarded as preliminary. IV. Request for Comment Public comment is requested on all aspects of this joint notice. Comment is specifically invited on: (a) Whether the proposed revisions to the collections of information that are the subject of this notice are necessary for the proper performance of the agencies’ functions, including whether the information has practical utility; (b) The accuracy of the agencies’ estimates of the burden of the information collections as they are proposed to be revised, 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 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 joint notice will be shared among the agencies. Dated: January 21, 2020. Theodore J. Dowd, Deputy Chief Counsel, Office of the Comptroller of the Currency. Board of Governors of the Federal Reserve System, January 21, 2020. Ann E. Misback, Secretary of the Board. Federal Deposit Insurance Corporation. Dated at Washington, DC, on January 21, 2020. Annmarie H. Boyd, Assistant Executive Secretary. [FR Doc. 2020–01292 Filed 1–24–20; 8:45 am] BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of the Registration of Money Services Businesses Regulation and FinCEN Form 107 Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. AGENCY: E:\FR\FM\27JAN1.SGM 27JAN1

Agencies

[Federal Register Volume 85, Number 17 (Monday, January 27, 2020)]
[Notices]
[Pages 4780-4796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01292]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

FEDERAL RESERVE SYSTEM

FEDERAL DEPOSIT INSURANCE CORPORATION


Agency Information Collection Activities; Submission for OMB 
Review; 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 of 1995 (PRA), 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. On October 4, 
2019, the agencies, under the auspices of the Federal Financial 
Institutions Examination Council (FFIEC), requested public comment for 
60 days on a proposal to revise and extend the Consolidated Reports of 
Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, and FFIEC 
051) and the Regulatory Capital Reporting for Institutions Subject to 
the Advanced Capital Adequacy Framework (FFIEC 101), which are 
currently approved collections of information.
    The comment period for the October 2019 notice ended on December 3, 
2019. As described in the SUPPLEMENTARY INFORMATION section, after 
considering the comments received on the proposal, the agencies are 
proceeding with the proposed revisions to the reporting forms and 
instructions for the Call Reports and the FFIEC 101 (except for the 
reporting changes arising from the proposed total loss absorbing 
capacity holdings rule that has not yet been finalized), but with 
certain modifications. In general, the modifications relate to the 
disclosure of an institution's election of the community bank leverage 
ratio framework, a change in the scope of the FFIEC 031 Call Report, 
and the reporting of home equity lines of credit that convert from 
revolving to non-revolving status. The reporting revisions that 
implement various changes to the agencies' capital rule would take 
effect in the same quarters as the effective dates of the capital rule 
changes, i.e., primarily as of the March 31 and June 30, 2020, report 
dates. Call Report revisions applicable to operating lease liabilities 
and home equity lines of credit would take effect in the first quarter 
of 2020 and 2021, respectively.
    In addition, the agencies are giving notice they are sending the 
collections to OMB for review.

DATES: Comments must be submitted on or before February 26, 2020.

ADDRESSES: Interested parties are invited to submit written comments to 
any or all of the agencies. All comments, which should refer to the 
``Call Report and FFIEC 101 Reporting Revisions,'' will be shared among 
the agencies.
    OCC: You may submit comments, which should refer to ``Call Report 
and FFIEC 101 Reporting Revisions,'' by any of the following methods:
     Email: [email protected].
     Mail: Chief Counsel's Office, Office of the Comptroller of 
the Currency, Attention: 1557-0081 and 1557-0239, 400 7th Street SW, 
Suite 3E-218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219.

[[Page 4781]]

    Instructions: You must include ``OCC'' as the agency name and 
``1557-0081 and 1557-0239'' in your comment. In general, the OCC will 
publish comments on www.reginfo.gov without change, including any 
business or personal information provided, such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
these information collections following the close of the 30-Day comment 
period for this notice by any of the following methods:
     Viewing Comments Electronically: Go to www.reginfo.gov. 
Click on the ``Information Collection Review'' tab. Underneath the 
``Currently under Review'' section heading, from the drop-down menu 
select ``Department of Treasury'' and then click ``submit.'' These 
information collections can be located by searching by OMB control 
number ``1557-0081'' or ``1557-0239.'' Upon finding the appropriate 
information collection, click on the related ``ICR Reference Number.'' 
On the next screen, select ``View Supporting Statement and Other 
Documents'' and then click on the link to any comment listed at the 
bottom of the screen.
     For assistance in navigating www.reginfo.gov, please 
contact the Regulatory Information Service Center at (202) 482-7340.
     Viewing Comments Personally: You may personally inspect 
comments at the OCC, 400 7th Street SW, Washington, DC. For security 
reasons, the OCC requires that visitors make an appointment to inspect 
comments. You may do so by calling (202) 649-6700 or, for persons who 
are deaf or hearing impaired, TTY, (202) 649-5597. Upon arrival, 
visitors will be required to present valid government-issued photo 
identification and submit to security screening in order to inspect 
comments.
    Board: You may submit comments, which should refer to ``Call Report 
and FFIEC 101 Reporting Revisions,'' by any of the following methods:
     Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at: http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: [email protected]. Include ``Call 
Report and FFIEC 101 Reporting Revisions'' 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 on the Board's website at https://www.federalreserve.gov/apps/foia/proposedregs.aspx 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 146, 
1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and 
5:00 p.m. on weekdays. For security reasons, the Board requires that 
visitors make an appointment to inspect comments. You may do so by 
calling (202) 452-3684. 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.
    FDIC: You may submit comments, which should refer to ``Call Report 
and FFIEC 101 Reporting Revisions,'' by any of the following methods:
     Agency Website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the FDIC's 
website.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include ``Call Report and FFIEC 
101 Reporting Revisions'' in the subject line of the message.
     Mail: Manuel E. Cabeza, Counsel, Attn: Comments, Room MB-
3128, 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 7:00 a.m. and 5:00 p.m.
     Public Inspection: All comments received will be posted 
without change to https://www.fdic.gov/regulations/laws/federal/ 
including any personal information provided. Paper copies of public 
comments may be requested from the FDIC Public Information Center, 3501 
North Fairfax Drive, Arlington, VA 22226, or by telephone at (877) 275-
3342 or (703) 562-2200.
    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 information collections discussed in this 
notice, please contact any of the agency staff whose names appear 
below. In addition, copies of the report forms for the Call Report and 
the FFIEC 101 can be obtained at the FFIEC's website (https://www.ffiec.gov/ffiec_report_forms.htm).
    OCC: Kevin Korzeniewski, Counsel, Chief Counsel's Office, (202) 
649-5490, or for persons who are deaf or hearing impaired, TTY, (202) 
649-5597.
    Board: 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.
    FDIC: Manuel E. Cabeza, Counsel, (202) 898-3767, Legal Division, 
Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, 
DC 20429.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Affected Reports
    A. Call Reports
    B. FFIEC 101
II. Current Actions
    A. Overview
    B. Capital Simplifications Rule
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R
    3. Comments Received and Final Capital Simplifications Rule 
Reporting Revisions
    C. Community Bank Leverage Ratio (CBLR) Rule
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R
    3. Other Proposed Call Report Revisions Related to the CBLR
    4. Comments Received and Final CBLR Rule Reporting Revisions
    D. Tailoring Rule
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R, Part I
    3. Proposed Revisions to the FFIEC 101
    4. Comments Received and Final Tailoring Rule Reporting 
Revisions
    a. Call Report Revisions
    b. FFIEC 101 Revisions
    E. Revisions to the Supplementary Leverage Ratio for Certain 
Central Bank Deposits of Custodial Banks
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R, Part I
    3. Proposed Revisions to FFIEC 101 Schedule A

[[Page 4782]]

    4. Final Reporting Revisions
    F. Standardized Approach for Counterparty Credit Risk on 
Derivative Contracts
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R, Part II
    3. Proposed Revisions to FFIEC 101 Schedule A, SLR Table 2
    4. Comments Received and Instructions for Reporting Derivatives
    G. High Volatility Commercial Real Estate (HVCRE) Land 
Development Loans
    1. Background
    2. Proposed Revisions to Call Report Schedule RC-R, Part II
    3. Proposed Revisions to FFIEC 101 Schedule G
    H. Operating Lease Liabilities
    I. Reporting Home Equity Lines of Credit That Convert From 
Revolving to Non-Revolving Status
    1. Proposed Instructional Clarification
    2. Comments Received and Final Reporting Revisions
III. Timing
IV. Request for Comment

I. Affected Reports

    All of the proposed changes discussed below affect the Call 
Reports, while a number of the changes also affect the FFIEC 101. On 
December 27, 2019, the Board separately proposed to make revisions to 
the Consolidated Financial Statements for Holding Companies (FR Y-9C) 
\1\ corresponding to those initially proposed by the agencies on 
October 4, 2019.\2\
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    \1\ See 84 FR 71414, December 27, 2019. Consolidated Financial 
Statements for Holding Companies (FR Y-9C), OMB Number 7100-0128.
    \2\ 84 FR 53227, October 4, 2019.
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A. Call Reports

    The agencies propose to extend for three years, with revision, the 
FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports.
    Report Title: Consolidated Reports of Condition and Income (Call 
Report).
    Form Number: FFIEC 031 (Consolidated Reports of Condition and 
Income for a Bank with Domestic and Foreign Offices), FFIEC 041 
(Consolidated Reports of Condition and Income for a Bank with Domestic 
Offices Only), and FFIEC 051 (Consolidated Reports of Condition and 
Income for a Bank with Domestic Offices Only and Total Assets Less Than 
$5 Billion).
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
    Type of Review: Revision and extension of currently approved 
collections.
OCC
    OMB Control No.: 1557-0081.
    Estimated Number of Respondents: 1,143 national banks and federal 
savings associations.
    Estimated Average Burden per Response: 41.24 burden hours per 
quarter to file.
    Estimated Total Annual Burden: 188,549 burden hours to file.
Board
    OMB Control No.: 7100-0036.
    Estimated Number of Respondents: 779 state member banks.
    Estimated Average Burden per Response: 44.45 burden hours per 
quarter to file.
    Estimated Total Annual Burden: 138,506 burden hours to file.
FDIC
    OMB Control No.: 3064-0052.
    Estimated Number of Respondents: 3,386 insured state nonmember 
banks and state savings associations.
    Estimated Average Burden per Response: 39.43 burden hours per 
quarter to file.
    Estimated Total Annual Burden: 534,040 burden hours to file.
    The estimated average burden hours collectively reflect the 
estimates for the FFIEC 051, the FFIEC 041, and the FFIEC 031 reports 
for each agency. When the estimates are calculated by type of report 
across the agencies, the estimated average burden hours per quarter are 
36.70 (FFIEC 051), 50.11(FFIEC 041), and 95.42 (FFIEC 031). The 
estimated burden hours for the currently approved reports are 40.27 
(FFIEC 051), 53.72 (FFIEC 041), and 95.60 (FFIEC 031), so the revisions 
proposed in this notice would represent a reduction in estimated 
average burden hours per quarter of 3.57 (FFIEC 051), 3.61 (FFIEC 041), 
and 0.18 (FFIEC 031). The change in burden is predominantly due to 
changes associated with the community bank leverage ratio final rule. 
The reduction in average burden hours is significantly less for the 
FFIEC 031 than for the FFIEC 041 or the FFIEC 051 because greater 
percentages of institutions that would be eligible to report under the 
proposed community bank leverage ratio framework currently file the 
FFIEC 041 or the FFIEC 051 than the FFIEC 031.\3\ The estimated burden 
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).
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    \3\ For estimating burden hours, the agencies assumed 60 percent 
of eligible institutions would use the framework.
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    Type of Review: Extension and revision of currently approved 
collections.
Legal Basis and Need for Collections
    The Call Report 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 and text, these information 
collections are not given confidential treatment.
    Banks and savings associations 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 serve a regulatory or public 
policy purpose by assisting the agencies in fulfilling their shared 
missions of ensuring the safety and soundness of financial institutions 
and the financial system and protecting consumer financial rights, as 
well as agency-specific missions affecting national and state-chartered 
institutions, such as conducting monetary policy, ensuring financial 
stability, and administering federal deposit insurance. Call Reports 
are the source of the most current statistical data available for 
identifying areas of focus for on-site and off-site examinations. Among 
other purposes, the agencies use Call Report data in evaluating 
institutions' corporate applications, including interstate merger and 
acquisition applications for which the agencies are required by law to 
determine whether the resulting institution would control more than 10 
percent of the total amount of deposits of insured depository 
institutions in the United States. Call Report data also are used to 
calculate institutions' deposit insurance assessments and national 
banks' and federal savings associations' semiannual assessment fees.

B. FFIEC 101

    The agencies propose to extend for three years, with revision, the 
FFIEC 101 report.
    Report Title: Risk-Based Capital Reporting for Institutions Subject 
to the Advanced Capital Adequacy Framework.
    Form Number: FFIEC 101.
    Frequency of Response: Quarterly.
    Affected Public: Business or other for-profit.
OCC:
    OMB Control No.: 1557-0239.

[[Page 4783]]

    Estimated Number of Respondents: 5 national banks and federal 
savings associations.
    Estimated Time per Response: 674 burden hours per quarter to file 
for banks and federal savings associations.
    Estimated Total Annual Burden: 13,480 burden hours to file.
Board
    OMB Control No.: 7100-0319.
    Estimated Number of Respondents: 4 state member banks; 4 bank 
holding companies and savings and loan holding companies that complete 
Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 9 other bank 
holding companies and savings and loan holding companies; and 6 
intermediate holding companies.
    Estimated Time per Response: 674 burden hours per quarter to file 
for state member banks; 3 burden hours per quarter to file for bank 
holding companies and savings and loan holding companies that complete 
Supplementary Leverage Ratio (SLR) Tables 1 and 2 only; 677 burden 
hours per quarter to file for other bank holding companies and savings 
and loan holding companies; and 3 burden hours per quarter to file for 
intermediate holding companies.
    Estimated Total Annual Burden: 10,784 burden hours for state member 
banks to file; 48 burden hours for bank holding companies and savings 
and loan holding companies that complete Supplementary Leverage Ratio 
(SLR) Tables 1 and 2 only to file; 24,372 burden hours for other bank 
holding companies and savings and loan holding companies to file; and 
72 burden hours for intermediate holding companies to file.
FDIC
    OMB Control No.: 3064-0159.
    Estimated Number of Respondents: 1 insured state nonmember bank and 
state savings association.
    Estimated Time per Response: 674 burden hours per quarter to file.
    Estimated Total Annual Burden: 2,696 burden hours to file.
    Type of Review: Extension and revision of currently approved 
collections.
Legal Basis and Need for Collections
    Each advanced approaches institution \4\ is required to report 
quarterly regulatory capital data on the FFIEC 101. Each Category III 
institution \5\ is required to report supplementary leverage ratio 
information on the FFIEC 101. The FFIEC 101 information collections are 
mandatory for advanced approaches and Category III institutions: 12 
U.S.C. 161 (national banks), 12 U.S.C. 324 (state member banks), 12 
U.S.C. 1844(c) (bank holding companies), 12 U.S.C. 1467a(b) (savings 
and loan holding companies), 12 U.S.C. 1817 (insured state non-member 
commercial and savings banks), 12 U.S.C. 1464 (savings associations), 
and 12 U.S.C. 1844(c), 3106, and 3108 (intermediate holding companies). 
Certain data items in this information collection are given 
confidential treatment under 5 U.S.C. 552(b)(4) and (8).
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    \4\ See 12 CFR 3.100(b) (OCC); 12 CFR 217.100(b) (Board); 12 CFR 
324.100(b) (FDIC).
    \5\ See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 
(FDIC).
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    The agencies use data reported in the FFIEC 101 to assess and 
monitor the levels and components of each reporting entity's applicable 
capital requirements and the adequacy of the entity's capital under the 
Advanced Capital Adequacy Framework \6\ and the supplementary leverage 
ratio,\7\ as applicable; to evaluate the impact of the Advanced Capital 
Adequacy Framework and the supplementary leverage ratio, as applicable, 
on individual reporting entities and on an industry-wide basis and its 
competitive implications; and to supplement on-site examination 
processes. The reporting schedules also assist advanced approaches 
institutions and Category III institutions in understanding 
expectations relating to the system development necessary for 
implementation and validation of the Advanced Capital Adequacy 
Framework and the supplementary leverage ratio, as applicable. 
Submitted data that are released publicly will also provide other 
interested parties with information about advanced approaches 
institutions' and Category III institutions' regulatory capital.
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    \6\ 12 CFR part 3, subpart E (OCC); 12 CFR part 217, subpart E 
(Board); 12 CFR part 324, subpart E (FDIC).
    \7\ 12 CFR 3.10(c)(4) (OCC); 12 CFR 217.10(c)(4) (Board); 12 CFR 
324.10(c)(4) (FDIC).
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II. Current Actions

A. Overview

    On October 4, 2019, the agencies proposed revisions to the Call 
Reports and the FFIEC 101 that would implement various changes to the 
agencies' regulatory capital rule \8\ that, as of that date, the 
agencies had finalized or were considering finalizing.\9\ The changes 
to the agencies' regulatory capital rule included in their October 2019 
notice were the capital simplifications rule, the community bank 
leverage ratio (CBLR) rule, the proposed tailoring rule, the proposed 
total loss absorbing capacity (TLAC) holdings rule, the proposed rule 
for supplementary leverage ratio (SLR) revisions for certain central 
bank deposits of custodial banks, the proposed rule for the 
standardized approach for counterparty credit risk (SA-CCR) on 
derivative contracts, and the high volatility commercial real estate 
(HVCRE) land development proposal.
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    \8\ 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR part 
324 (FDIC). While the agencies have codified the capital rule in 
different parts of title 12 of the Code of Federal Regulations, the 
internal structure of the sections within each agency's rule is 
substantially similar.
    \9\ 84 FR 53227, October 4, 2019.
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    The agencies also proposed a change in the scope of the FFIEC 031 
Call Report; a change in the reporting of construction, land 
development, and other land loans with interest reserves in the Call 
Report; and Call Report instructional revisions for the reporting of 
operating lease liabilities and home equity lines of credit (HELOCs) 
that convert from revolving to non-revolving status.
    The comment period for the October 2019 notice ended on December 3, 
2019. The agencies received comments on the proposed reporting changes 
covered in the notice from four entities: Three bankers' associations 
and one savings association. These comments are addressed in the 
following sections of this notice.
    Except for the proposed TLAC holdings rule, final rules have been 
adopted for all of the regulatory capital rulemakings addressed in the 
October 2019 notice. The capital-related reporting changes discussed in 
the October 2019 notice will be effective in the same quarters as the 
effective dates of the various capital rules that have been finalized 
(see Section III below). However, because the proposed TLAC holdings 
rule has not been finalized, at this time the agencies are not 
proceeding with the implementation of the TLAC-related reporting 
changes proposed in the October 2019 notice. Once the proposed TLAC 
holdings rule is finalized, the agencies plan to issue a 30-day Federal 
Register notice pursuant to the PRA to implement the associated 
reporting changes, which would address any comments received on the 
proposed changes.
    After carefully considering the comments received on the October 
2019 notice, the agencies are adopting the reporting changes proposed 
in that notice (other than for TLAC) with modifications discussed in 
the following sections of this notice.

[[Page 4784]]

B. Capital Simplifications Rule

1. Background
    On July 22, 2019, the agencies published a final rule amending 
their regulatory capital rule to make a number of burden-reducing 
changes to the capital rule (capital simplifications rule).\10\ The 
capital simplifications rule had an effective date of April 1, 2020. 
However, the agencies subsequently approved a final rule that permits 
non-advanced approaches banking organizations \11\ to implement the 
capital simplifications rule on January 1, 2020.\12\ As a result, non-
advanced approaches banking organizations have the option to implement 
the capital simplifications rule on the revised effective date of 
January 1, 2020, or in the quarter beginning April 1, 2020.
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    \10\ 84 FR 35234 (July 22, 2019).
    \11\ Non-advanced approaches banking organizations are 
institutions that do not meet the criteria in 12 CFR 3.100(b) (OCC); 
12 CFR 217.100(b) (Board); or 12 CFR 324.100(b) (FDIC).
    \12\ 84 FR 61804 (November 13, 2019).
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    The agencies proposed revisions to Call Report Schedule RC-R, 
Regulatory Capital, in all three versions of the Call Report to 
implement the associated changes to the agencies' regulatory capital 
rule effective as of the March 31, 2020, report date, consistent with 
the final rule that effectively permits early adoption of the capital 
simplifications rule.
2. Proposed Revisions to Call Report Schedule RC-R
    The revisions in the capital simplifications rule would make a 
number of changes to the calculation of common equity tier 1 (CET1) 
capital, additional tier 1 capital, and tier 2 capital for non-advanced 
approaches institutions that do not apply to advanced approaches 
institutions. Thus, the capital simplifications rule results in 
different sets of calculations for these tiers of regulatory capital 
for non-advanced approaches institutions and advanced approaches 
institutions. At present, the FFIEC 031 and the FFIEC 041 Call Reports 
are completed by both non-advanced approaches institutions and advanced 
approaches institutions while only non-advanced approaches institutions 
are eligible to file the FFIEC 051 Call Report. To mitigate the 
complexity of revising existing Schedule RC-R, Part I, Regulatory 
Capital Components and Ratios, to incorporate the different sets of 
regulatory capital calculations for non-advanced approaches 
institutions and advanced approaches institutions, and to reflect the 
effects of the capital simplifications rule in both the FFIEC 031 and 
FFIEC 041 Call Reports, the agencies proposed in the October 2019 
notice to require all advanced approaches institutions to file the 
FFIEC 031 Call Report effective as of the March 31, 2020, report 
date.\13\ As a result, the agencies proposed to adjust the existing 
regulatory capital calculations reported on Schedule RC-R, Part I, for 
the FFIEC 041 Call Report, and also for the FFIEC 051 Call Report, to 
reflect the effects of the capital simplifications rule for non-
advanced approaches institutions. For the FFIEC 031 Call Report, which 
is filed by the fewest number of institutions, the agencies proposed to 
incorporate the two different sets of regulatory capital calculations 
(one for non-advanced approaches institutions and the other for 
advanced approaches institutions) in Schedule RC-R, Part I, and, as 
mentioned above, require all advanced approaches institutions to file 
this version of the Call Report.
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    \13\ As discussed in Sections II.B.3. and II.D.1., below, the 
agencies also proposed in their October 2019 notice to require all 
Category III institutions to file the FFIEC 031 Call Report 
effective as of the March 31, 2020, report date.
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    In the October 2019 notice, the agencies proposed a number of 
revisions that would simplify the capital calculations on each version 
of Schedule RC-R, Part I, effective March 31, 2020, and thereby reduce 
reporting burden. Because both non-advanced approaches institutions and 
advanced approaches institutions file the FFIEC 031 Call Report, the 
FFIEC 031 Call Report would include two different sets of calculations 
(one that incorporates the effects of the capital simplifications rule 
and another that does not) in adjacent columns in the affected portion 
of Schedule RC-R, Part I. An institution would complete only the column 
for the set of calculations applicable to that institution. For the 
March 31, 2020, report date, non-advanced approaches institutions that 
file the FFIEC 031 Call Report and elect to adopt the capital 
simplifications rule on January 1, 2020, would complete the column for 
the set of calculations that incorporates the effects of the capital 
simplifications rule. Non-advanced approaches institutions that elect 
to wait to adopt the capital simplifications rule on April 1, 2020, and 
all advanced approaches institutions would complete the column for the 
set of calculations that does not reflect the effects of the capital 
simplifications rule (i.e., that reflects the capital calculation in 
effect for all institutions before this revision). Beginning with the 
June 30, 2020, report date, all non-advanced approaches institutions 
that file the FFIEC 031 Call Report would complete the column for the 
set of calculations that incorporates the effects of the capital 
simplifications rule; all advanced approaches institutions that file 
this Call Report would complete the column that does not reflect the 
effects of the capital simplifications rule.
    Because advanced approaches institutions currently are not 
permitted to file the FFIEC 051 Call Report and, as proposed in the 
October 2019 notice, would not be permitted to file the FFIEC 041 Call 
Report, the FFIEC 041 and FFIEC 051 Call Reports would include a single 
column for the capital calculation in Schedule RC-R, Part I, that would 
be revised effective March 31, 2020, to incorporate the effects of the 
capital simplifications rule. For the March 31, 2020, report date, non-
advanced approaches institutions that file the FFIEC 041 or FFIEC 051 
Call Report and elect to adopt the capital simplifications rule on 
January 1, 2020, would complete the capital calculation column in 
Schedule RC-R, Part I, as revised for the capital simplifications rule. 
The agencies would provide instructions for non-advanced approaches 
institutions that file the FFIEC 041 or FFIEC 051 Call Report that 
elect to wait to adopt the capital simplifications rule on April 1, 
2020, on how to complete Schedule RC-R, including the capital 
calculation column, for the March 31, 2020, report date in accordance 
with the capital rule in effect before the capital simplifications 
rule's revised effective date of January 1, 2020. Such non-advanced 
approaches institutions would use these instructions on a one-time 
basis for the March 31, 2020, report date only. Beginning with the June 
30, 2020, report date, all non-advanced approaches institutions that 
file the FFIEC 041 or FFIEC 051 Call Report would complete Schedule RC-
R as revised for the capital simplifications rule.
    In connection with proposing that all advanced approaches 
institutions file the FFIEC 031 Call Report in the October 2019 notice, 
the agencies proposed to remove certain items from the FFIEC 041 Call 
Report that apply only to advanced approaches institutions. Thus, for 
Schedule RC-R, Part I, in the FFIEC 041 Call Report, the agencies 
proposed to remove items 30.b, 32.b, 34.b, 35.b, 40.b, 41 through 43 
(Column B only), 45.a, 45.b, and 46.b. The agencies proposed to 
renumber items 30.a, 32.a, 34.a, 35.a, 40.a, and 46.a as items 30, 32, 
34, 35, 40, and 46, respectively.
    In the capital simplifications rule, the agencies increased the 
thresholds for

[[Page 4785]]

including mortgage servicing assets (MSAs), temporary difference 
deferred tax assets that could not be realized through net operating 
loss carrybacks (temporary difference DTAs),\14\ and investments in the 
capital of unconsolidated financial institutions for non-advanced 
approaches institutions. In addition, the agencies revised the capital 
calculation for minority interests included in the various capital 
categories for non-advanced approaches institutions and to the 
calculation of the capital conservation buffer.
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    \14\ The agencies note that An Act to provide for reconciliation 
pursuant to titles II and V of the concurrent resolution on the 
budget for fiscal year 2018, Public Law 115-97 (originally 
introduced as the Tax Cuts and Jobs Act), enacted December 22, 2017, 
eliminated the concept of net operating loss carrybacks for U.S. 
federal income tax purposes, although the concept may still exist in 
particular jurisdictions for state or foreign income tax purposes.
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    The current regulatory capital calculations in Call Report Schedule 
RC-R, which do not yet reflect the revisions contained in the capital 
simplifications rule, require that an institution's capital cannot 
include MSAs, certain temporary difference DTAs, and significant 
investments in the common stock of unconsolidated financial 
institutions in an amount greater than 10 percent of CET1 capital, on 
an individual basis, and those three data items combined cannot 
comprise more than 15 percent of CET1 capital. When the reporting of 
regulatory capital calculations by non-advanced approaches institutions 
in accordance with the capital simplifications rule takes effect, this 
calculation would be revised in Schedule RC-R, Part I, to require that 
only MSAs or temporary difference DTAs in an amount greater than 25 
percent of CET1 capital, on an individual basis, could not be included 
in a non-advanced approaches institution's regulatory capital. The 15 
percent aggregate limit would be removed. In addition, the capital 
simplifications rule combines the current three categories of 
investments in financial institutions (non-significant investments in 
the capital of unconsolidated financial institutions, significant 
investments in the capital of unconsolidated financial institutions 
that are in the form of common stock, and significant investments in 
the capital of unconsolidated financial institutions that are not in 
the form of common stock) into a single category, investments in the 
capital of unconsolidated financial institutions, and applies a limit 
of 25 percent of CET1 capital on the amount of these investments that 
can be included in capital. Any investments in excess of the 25 percent 
limit would be deducted from regulatory capital using the corresponding 
deduction approach.
    Consistent with the current capital rule, an institution must risk 
weight MSAs, temporary difference DTAs, and investments in the capital 
of unconsolidated financial institutions that are not deducted. The 
agencies proposed revisions to allow institutions to enter values into 
the Column K--250% risk weight on Schedule RC-R, Part II, in the FFIEC 
051 Call Report, which is currently shaded out, and remove footnote two 
on the second page of Schedule RC-R, Part II, and the corresponding 
footnote on subsequent pages of Schedule RC-R, Part II, in all three 
versions of the Call Reports effective as of the March 31, 2020, report 
date to accommodate the capital simplifications rule revisions to the 
risk weight for MSAs and temporary difference DTAs. Consistent with the 
capital simplifications rule, non-advanced approaches institutions will 
not be required to differentiate among categories of investments in the 
capital of unconsolidated financial institutions. The risk weight for 
such equity exposures generally will be 100 percent, provided the 
exposures qualify for this risk weight.\15\ For non-advanced approaches 
institutions, the capital simplifications rule eliminates the exclusion 
of significant investments in the capital of unconsolidated financial 
institutions in the form of common stock from being eligible for a 100 
percent risk weight.\16\ The application of the 100 percent risk weight 
(i) requires a banking organization to follow an enumerated process for 
calculating adjusted carrying value and (ii) mandates the equity 
exposures that must be included in determining whether the threshold 
has been reached. Equity exposures that do not qualify for a 
preferential risk weight will generally receive risk weights of either 
300 percent or 400 percent, depending on whether the equity exposures 
are publicly traded.
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    \15\ 12 CFR 3.52 and .53 (OCC); 12 CFR 217.52 and .53 (Board); 
12 CFR 324.52 and .53 (FDIC). Note that for purposes of calculating 
the 10 percent nonsignificant equity bucket, the capital rule 
excludes equity exposures that are assigned a risk weight of zero 
percent and 20 percent, and community development equity exposures 
and the effective portion of hedge pairs, both of which are assigned 
a 100 percent risk weight. In addition, the 10 percent non-
significant bucket excludes equity exposures to an investment firm 
that would not meet the definition of traditional securitization 
were it not for the application of criterion 8 of the definition of 
traditional securitization, and has greater than immaterial 
leverage.
    \16\ Equity exposures that exceed, in the aggregate, 10 percent 
of a non-advanced approaches banking organization's total capital 
would then be assigned a risk weight based upon the approaches 
available in sections 52 and 53 of the capital rule. 12 CFR 3.52 and 
.53 (OCC); 12 CFR 217.52 and .53 (Board); 12 CFR 324.52 and .53 
(FDIC).
---------------------------------------------------------------------------

    In order to implement these regulatory capital changes from a 
regulatory reporting perspective, the agencies proposed in their 
October 2019 notice to make a number of revisions to Schedule RC-R, 
Part I, for non-advanced approaches institutions effective March 31, 
2020. Specifically, in Schedule RC-R, Part I, in the FFIEC 041 and 
FFIEC 051 Call Reports, the agencies proposed to remove item 11 and 
modify item 13 to reflect the consolidation of all investments in 
unconsolidated financial institutions into a single category and apply 
a single 25 percent of CET1 capital limit to these investments. The 
agencies proposed to modify items 14 and 15 to reflect the 25 percent 
of CET1 capital limit for MSAs and certain temporary difference DTAs, 
respectively. The agencies also proposed to remove item 16, which 
applies to the aggregate 15 percent limitation that was removed from 
the capital rule for non-advanced approaches institutions. In the FFIEC 
031 Call Report, the agencies proposed to create two columns for 
existing items 11 through 19. Column A would be reported by non-
advanced approaches institutions that elect to adopt the capital 
simplifications rule on January 1, 2020, in the March 2020 Call Report 
and by all non-advanced approaches institutions beginning in the June 
2020 Call Report using the definitions under the capital 
simplifications rule. Column A would not include items 11 or 16, and 
items 13 through 15 would be designated as items 13.a through 15.a to 
reflect the new calculation methodology. Column B would be reported by 
advanced approaches institutions and by non-advanced approaches 
institutions that elect to wait to adopt the capital simplifications 
rule on April 1, 2020, in the March 2020 Call Report and only by 
advanced approaches institutions beginning in the June 2020 Call Report 
using the existing definitions. Existing items 13 through 15 would be 
designated as items 13.b through 15.b to reflect continued use of the 
existing calculation methodology.
    The agencies did not propose any changes to the form to incorporate 
the minority interest revisions. However, the agencies proposed to 
modify the instructions for the existing minority interest items in all 
versions of the Call Report to reflect the ability of non-advanced 
approaches institutions to use the revised method under the capital 
simplifications rule to calculate minority interest in existing items 
4, 22,

[[Page 4786]]

and 29 (CET1, additional tier 1, and tier 2 minority interest, 
respectively).
3. Comments Received and Final Capital Simplifications Rule Reporting 
Revisions
    Two commenters opposed the agencies' proposal to require all 
advanced approaches institutions and Category III institutions to file 
the FFIEC 031 Call Report because this requirement could impact the 
reporting burden of numerous small depository institution subsidiaries 
of holding companies that are advanced approaches and Category III 
institutions. The agencies agree with the commenters with respect to 
Category III institutions, and therefore they will allow such 
institutions that are not otherwise required to file the FFIEC 031 Call 
Report to file the FFIEC 041 Call Report. To do so, the agencies will 
retain three existing data items for reporting supplementary leverage 
ratio information and countercyclical capital buffer information in the 
FFIEC 041 Call Report for use by Category III institutions. 
Specifically, the agencies will retain items 45.a and 45.b (renumbered 
as items 55.a and 55.b) in the FFIEC 041 to collect supplementary 
leverage ratio information from institutions with domestic offices only 
and total assets less than $100 billion that are subsidiaries of 
banking organizations subject to Category III capital standards. 
Additionally, the agencies will retain item 46.b (renumbered as item 
52.b) in the FFIEC 041 to collect countercyclical capital buffer 
information from Category III institutions.
    In proposing to require all advanced approaches institutions to 
file the FFIEC 031 Call Report (including those advanced approaches 
institutions that currently file the FFIEC 041 Call Report) in 
conjunction with the implementation of the capital simplifications 
rule, the agencies sought to retain a streamlined and straightforward 
Part I of Schedule RC-R for the more than 1,400 non-advanced approaches 
institutions that filed the FFIEC 041 Call Report (based on data as of 
September 30, 2019). When the capital simplifications rule takes effect 
in the first quarter of 2020, allowing advanced approaches institutions 
currently filing the FFIEC 041 Call Report to continue to do so, rather 
than requiring them to begin filing the FFIEC 031 Call Report as had 
been proposed, would subject all institutions filing the FFIEC 041 to 
the complexity of the same dual column structure for items 11 through 
19 of Schedule RC-R, Part I, that is discussed above in the context of 
the FFIEC 031 reporting form. The benefit of a simple, straightforward 
Part I of Schedule RC-R in the FFIEC 041 Call Report that would be 
applicable only to the more than 1,400 non-advanced approaches 
institutions is expected to offset the impact on the small group of 
less than 20 advanced approaches institutions that currently file the 
FFIEC 041 Call Report of having to migrate to the FFIEC 031 Call Report 
when the capital simplifications rule takes effect. Thus, the agencies 
are not adopting the commenters' recommendation to permit advanced 
approaches institutions currently eligible to file the FFIEC 041 to 
continue to file this version of the Call Report.
    In addition, as a consequence of the technical amendments that the 
capital simplifications rule made to the agencies' capital rule 
effective October 1, 2019, the agencies are clarifying when an 
institution must report the amount of distributions and discretionary 
bonus payments in Schedule RC-R, Part I, item 48 (which would be 
renumbered as item 54). The agencies are clarifying the instructions 
for renumbered item 54 to explain that an institution must report the 
amount of distributions and discretionary bonus payments made during 
the calendar quarter ending on the report date if the amount of its 
capital conservation buffer that it reported for the previous calendar 
quarter-end report date was less than its applicable required buffer 
percentage on that previous calendar quarter-end report date. This 
change will enhance the agencies' ability to monitor compliance with 
the limitations on distributions and discretionary bonus payments. 
Institutions must comply with this instructional clarification 
beginning with the March 31, 2020, report date.

C. Community Bank Leverage Ratio Rule

1. Background
    In November 2019, the agencies published a final rule to provide a 
simplified alternative measure of capital adequacy, the community bank 
leverage ratio (CBLR), for qualifying community banking organizations 
with less than $10 billion in total consolidated assets (CBLR final 
rule).\17\
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    \17\ 84 FR 61776 (November 13, 2019).
---------------------------------------------------------------------------

    In addition, the FDIC recently approved a final rule regarding the 
application of the CBLR framework to the deposit insurance assessment 
system (CBLR assessments final rule).\18\ Certain clarifications would 
be made to the Schedule RC-O instructions to address the application of 
the CBLR framework to the FDIC's deposit insurance assessment system in 
accordance with the CBLR assessments final rule, but no revisions would 
be made to the data items in this schedule.
---------------------------------------------------------------------------

    \18\ 84 FR 66833 (December 6, 2019). See also FDIC Press Release 
80-2019, dated September 17, 2019.
---------------------------------------------------------------------------

    Under the CBLR final rule, banking organizations that have less 
than $10 billion in total consolidated assets, meet risk-based 
qualifying criteria, and have a leverage ratio of greater than 9 
percent are eligible to opt into the CBLR framework. A banking 
organization that opts into the CBLR framework, maintains a leverage 
ratio of greater than 9 percent, and meets the other qualifying 
criteria will not be subject to other risk-based and leverage capital 
requirements and, in the case of an insured depository institution 
(IDI), is considered to have met the well capitalized capital ratio 
requirements for purposes of the agencies' prompt corrective action 
framework.
    Under the CBLR final rule, a bank or savings association (bank) 
that opts into the CBLR framework (CBLR bank) may opt out of the CBLR 
framework at any time, without restriction, by reverting to the 
generally applicable capital requirements in the agencies' capital rule 
\19\ and reporting its regulatory capital information in Call Report 
Schedule RC-R, ``Regulatory Capital,'' Parts I and II, at the time of 
opting out.
---------------------------------------------------------------------------

    \19\ 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR part 
324 (FDIC).
---------------------------------------------------------------------------

    As described in the CBLR final rule, a banking organization that no 
longer meets the qualifying criteria for the CBLR framework will be 
required within two consecutive calendar quarters (grace period) either 
to once again satisfy the qualifying criteria or demonstrate compliance 
with the generally applicable capital requirements. During the grace 
period, the bank would continue to be treated as a CBLR bank and would 
be required to report its leverage ratio and related components in Call 
Report Schedule RC-R, Part I, in the manner described in this 
notice.\20\ A CBLR bank that ceases to meet the qualifying criteria as 
a result of a business combination (e.g., a merger) would receive no 
grace period,

[[Page 4787]]

and would immediately become subject to the generally applicable 
capital requirements. Similarly, a CBLR bank that fails to maintain a 
leverage ratio greater than 8 percent would not be permitted to use the 
grace period and would immediately become subject to the generally 
applicable capital requirements.
---------------------------------------------------------------------------

    \20\ For example, if the banking organization electing the CBLR 
no longer meets one of the qualifying criteria as of February 15, 
and still does not meet the criteria as of the end of that quarter, 
the grace period for such a banking organization will begin as of 
the end of the quarter ending March 31. The banking organization may 
continue to use the community bank leverage ratio framework as of 
June 30, but will need to comply fully with the generally applicable 
rule (including the associated reporting requirements) as of 
September 30, unless the banking organization once again meets all 
qualifying criteria of the community bank leverage ratio framework, 
including a leverage ratio of greater than 9 percent, by that date.
---------------------------------------------------------------------------

2. Proposed Revisions to Call Report Schedule RC-R
    In the October 2019 notice, the agencies proposed reporting 
revisions to the Call Reports for banks that qualify for and opt into 
the CBLR framework, consistent with the CBLR final rule. The agencies 
also proposed in the October 2019 notice that the reporting changes to 
the Call Reports to implement the CBLR framework would take effect in 
the same quarter as the effective date of the final rule adopting the 
CBLR framework.
    As provided in the CBLR final rule, the numerator of the community 
bank leverage ratio will be tier 1 capital, which is currently reported 
in Schedule RC-R, Part I, item 26. Therefore, the agencies are not 
proposing any changes related to the numerator of the community bank 
leverage ratio.
    As provided in the CBLR final rule, the denominator of the 
community bank leverage ratio will be average total consolidated 
assets. Specifically, average total consolidated assets would be 
calculated in accordance with the existing reporting instructions for 
Schedule RC-R, Part I, items 36 through 39. The agencies did not 
propose any substantive changes related to the denominator of the 
community bank leverage ratio. However, the agencies are proposing to 
move existing items 36 through 39 of Schedule RC-R, Part I, and 
renumber them as items 27 through 30 of Schedule RC-R, Part I, to 
consolidate all of the community-bank-leverage-ratio-related capital 
items earlier in Schedule RC-R, Part I.
    As provided in the CBLR final rule, a CBLR bank will calculate its 
community bank leverage ratio by dividing tier 1 capital by average 
total consolidated assets (as adjusted), and the community bank 
leverage ratio would be reported as a percentage, rounded to four 
decimal places. Since this calculation is essentially identical to the 
existing calculation of the tier 1 leverage ratio in Schedule RC-R, 
Part I, item 44, the agencies are not proposing a separate item for the 
community bank leverage ratio in Schedule RC-R, Part I. Instead, the 
agencies proposed to move the tier 1 leverage ratio from item 44 of 
Part I and renumber it as item 31, and rename the item the Leverage 
Ratio, as this ratio would apply to all institutions (as the community 
bank leverage ratio for qualifying institutions or the tier 1 leverage 
ratio for all other institutions).
    As provided in the CBLR final rule, a CBLR bank will need to 
satisfy certain qualifying criteria in order to be eligible to opt into 
the CBLR framework. The proposed items identified below would collect 
information necessary to ensure that a bank continuously meets the 
qualifying criteria for using the CBLR framework.
    Specifically, a CBLR bank is a bank that is not an advanced 
approaches institution and meets the following qualifying criteria:
     A leverage ratio of greater than 9 percent;
     Total consolidated assets of less than $10 billion;
     Total trading assets and trading liabilities of 5 percent 
or less of total consolidated assets; and
     Total off-balance sheet exposures (excluding derivatives 
other than sold credit derivatives and unconditionally cancelable 
commitments) of 25 percent or less of total consolidated assets.\21\
---------------------------------------------------------------------------

    \21\ Under the CBLR final rule, the agencies have reserved the 
authority to disallow the use of the CBLR framework by a depository 
institution or depository institution holding company based on the 
risk profile of the banking organization. This authority is reserved 
under the general reservation of authority included in the capital 
rule, in which the CBLR framework would be codified. See 12 CFR 
3.1(d) (OCC); 12 CFR 217.1(d) (Board); and 12 CFR 324.1(d) (FDIC). 
In addition, for purposes of the capital rule and section 201 of the 
Economic Growth, Regulatory Relief, and Consumer Protection Act 
(EGRRCPA) (Pub. L. 115-174, 132 Stat. 1296 (2018)), the agencies 
have reserved the authority to take action under other provisions of 
law, including action to address unsafe or unsound practices or 
conditions, deficient capital levels, or violations of law or 
regulation. See 12 CFR 3.1(b) (OCC); 12 CFR 217.1(b) (Board); and 12 
CFR 324.1(b) (FDIC).
---------------------------------------------------------------------------

    Accordingly, the agencies proposed to collect the items described 
below for community bank leverage ratio reporting purposes.
    In proposed item 32 of Schedule RC-R, Part I, a CBLR bank would 
report total assets, as reported in Call Report Schedule RC, item 12.
    In proposed item 33, a CBLR bank would report the sum of trading 
assets from Schedule RC, item 5, and trading liabilities from Schedule 
RC, item 15, in Column A. The bank would also report that sum divided 
by total assets from Schedule RC, item 12, and expressed as a 
percentage in Column B. As provided in the CBLR final rule, trading 
assets and trading liabilities would be added together, not netted, for 
purposes of this calculation. Also as discussed in the CBLR final rule, 
a bank would not meet the definition of a qualifying community banking 
organization for purposes of the CBLR framework if the percentage 
reported in Column B is greater than 5 percent.
    In proposed items 34.a through 34.d, a CBLR bank would report 
information related to commitments, other off-balance sheet exposures, 
and sold credit derivatives.
    In proposed item 34.a, a CBLR bank would report the unused portion 
of conditionally cancelable commitments. This amount would be the 
amount of all unused commitments less the amount of unconditionally 
cancelable commitments, as discussed in the planned CBLR final rule and 
defined in the agencies' capital rule.\22\ This item would be 
calculated consistent with the sum of Schedule RC-R, Part II, items 
18.a and 18.b, Column A.
---------------------------------------------------------------------------

    \22\ See definition of ``unconditionally cancellable'' in 12 CFR 
3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC).
---------------------------------------------------------------------------

    In proposed item 34.b, a CBLR bank would report total securities 
lent and borrowed, which would be the sum of Schedule RC-L, items 6.a 
and 6.b.
    In proposed item 34.c, a CBLR bank would report the sum of certain 
other off-balance sheet exposures and sold credit derivatives. 
Specifically, a CBLR bank would report the sum of self-liquidating, 
trade-related contingent items that arise from the movement of goods; 
transaction-related contingent items (performance bonds, bid bonds, 
warranties, and performance standby letters of credit); sold credit 
protection in the form of guarantees and credit derivatives; credit-
enhancing representations and warranties; financial standby letters of 
credit; forward agreements that are not derivative contracts; and off-
balance sheet securitizations. A CBLR bank would not include 
derivatives that are not sold credit derivatives, such as foreign 
exchange swaps and interest rate swaps, in proposed item 34.c.
    In proposed item 34.d, a CBLR bank would report the sum of proposed 
items 34.a through 34.c in Column A. The bank would also report that 
sum divided by total assets from Schedule RC, item 12, and expressed as 
a percentage in Column B. As discussed in the planned CBLR final rule, 
a bank would not be eligible to opt into the CBLR framework if this 
percentage is greater than 25 percent.
    In proposed item 35, a CBLR bank would report the total of 
unconditionally cancellable commitments, which would be calculated 
consistent with the instructions for existing Schedule RC-R, Part II, 
item 19. This item is not used specifically to calculate a bank's

[[Page 4788]]

eligibility for the CBLR framework. However, the agencies are 
collecting this information to identify any bank using the CBLR 
framework that may have significant or excessive concentrations in 
unconditionally cancellable commitments that would warrant the 
agencies' use of the reservation of authority in their capital rule to 
direct an otherwise-eligible CBLR bank to report its regulatory capital 
using the generally applicable capital requirements.\23\
---------------------------------------------------------------------------

    \23\ Other factors also may lead the agencies to determine that 
the risk profile of an otherwise-eligible CBLR bank would warrant 
the use of the reservation of authority.
---------------------------------------------------------------------------

    In proposed item 36, a CBLR bank would report the amount of 
investments in the capital instruments of an unconsolidated financial 
institution that would qualify as tier 2 capital. Since the CBLR 
framework does not have a total capital requirement, a CBLR bank is 
neither required to calculate tier 2 capital nor make any deductions 
that would be taken from tier 2 capital. Therefore, if a CBLR bank has 
investments in the capital instruments of an unconsolidated financial 
institution that would qualify as tier 2 capital of the CBLR bank under 
the generally applicable capital requirements (tier 2 qualifying 
instruments), and the CBLR bank's total investments in the capital of 
unconsolidated financial institutions exceed 25 percent of its CET1 
capital, the CBLR bank is not required to deduct the tier 2 qualifying 
instruments. A CBLR bank is required to make a deduction from CET1 
capital or tier 1 capital only if the sum of its investments in the 
capital of an unconsolidated financial institution is in a form that 
would qualify as CET1 capital or tier 1 capital instruments of the CBLR 
bank and the sum exceeds the 25 percent CET1 threshold. The agencies 
believe it is important to continue collecting information on the 
amount of investments in tier 2 qualifying instruments as excessive 
investments similarly could warrant the agencies' use of their 
reservation of authority.
    In proposed item 37, a CBLR bank would be required to report its 
allocated transfer risk reserve (ATRR), as currently calculated and 
reported in Schedule RC-R, Part II, item 30. In proposed items 38.a 
through 38.c, a CBLR bank that has adopted Accounting Standards Update 
(ASU) No. 2016-13 on credit losses must report the amount of any 
allowances for credit losses on purchased credit-deteriorated loans and 
leases held for investment, held-to-maturity debt securities, and other 
financial assets measured at amortized cost, as currently calculated 
and reported in Schedule RC-R, Part II, Memorandum items 4.a through 
4.c. The amount of the ATRR, if any, is necessary to calculate capital 
and surplus and corresponding limits in a number of the OCC's 
regulations, including investment securities limits (12 CFR part 1) and 
lending limits (12 CFR part 32). After an institution adopts ASU 2016-
13, allowances for credit losses on purchased credit-deteriorated 
assets similarly would affect the calculation of these limits. While 
these limits apply directly to institutions supervised by the OCC, a 
number of federal or state laws may apply the OCC's calculation of 
certain limits to state-chartered institutions supervised by the FDIC 
or the Board. Therefore, the agencies are proposing to retain this 
information for all CBLR banks. As CBLR banks would not complete 
Schedule RC-R, Part II, this information would otherwise not be readily 
available for the agencies to calculate the relevant regulatory limits 
for these institutions.\24\
---------------------------------------------------------------------------

    \24\ Institutions that are not CBLR banks would not complete 
proposed items 37 and 38.a through 38.c, but would continue to 
report any ATRR and any allowances for credit losses on purchased 
credit-deteriorated loans and leases held for investment, held-to-
maturity debt securities, and other financial assets measured at 
amortized cost in Schedule RC-R, Part II.
---------------------------------------------------------------------------

    Because a CBLR bank would not be subject to the generally 
applicable capital requirements, a CBLR bank would not need to complete 
any of the items in Schedule RC-R, Part I, after proposed item 38, nor 
would the bank need to complete Schedule RC-R, Part II, Risk-Weighted 
Assets.
    In connection with moving the leverage ratio calculations and 
inserting items for the CBLR qualifying criteria in Schedule RC-R, Part 
I, existing items 27 through 35 of Schedule RC-R, Part I, will be 
renumbered as items 39 through 47. Existing items 40 through 43 will be 
renumbered as items 48 through 51, while existing items 46 through 48 
will be renumbered as items 52 through 54. For advanced approaches 
institutions filing the FFIEC 031 Call Report, existing items 45.a and 
45.b for total leverage exposure and the supplementary leverage ratio, 
respectively, will be renumbered as items 55.a and 55.b.
    As proposed in the October 2019 notice, a CBLR bank would indicate 
that it has elected to apply the CBLR framework by completing Schedule 
RC-R, Part I, items 32 through 38. Institutions not subject to the CBLR 
framework would be required to report all data items in Schedule RC-R, 
Part I, except for items 32 through 38.
3. Other Proposed Call Report Revisions Related to the CBLR
    While not specifically part of the CBLR final rule, the agencies 
currently collect information in Call Report Schedule RC-C, Part I, 
``Loans and Leases,'' Memorandum item 13, from institutions that have a 
significant amount of construction, land development, and other land 
loans with interest reserves in relation to their total regulatory 
capital as reported as of the previous calendar year-end report date. 
At present, total regulatory capital is defined as total capital 
reported on Schedule RC-R, Part I, item 35 (FFIEC 051) or item 35.a 
(FFIEC 031 or FFIEC 041). While CBLR banks would no longer report their 
total capital in Schedule RC-R, Part I, the agencies believe it is 
still important to collect this information from CBLR banks that have a 
significant amount of construction, land development, and other land 
loans with interest reserves. Therefore, effective March 31, 2021,\25\ 
the agencies proposed to revise the reporting threshold for Schedule 
RC-C, Part I, Memorandum item 13, for all institutions to reference the 
sum of tier 1 capital as reported in Schedule RC-R, Part I, item 26, 
plus the allowance for loan and lease losses or the allowance for 
credit losses on loan and leases, as applicable, as reported in 
Schedule RC, item 4.c.
---------------------------------------------------------------------------

    \25\ For report dates during 2020, the reporting threshold for 
Schedule RC-C, Part I, Memorandum item 13, would be the total 
capital an institution reported in Schedule RC-R, Part I, as of 
December 31, 2019, which will predate the initial reporting under 
the CBLR framework in Schedule RC-R. The first year-end report date 
under the CBLR framework would be December 31, 2020, which would be 
the report date to which a CBLR bank would refer in order to 
determine whether it would need to complete Schedule RC-C, Part I, 
Memorandum item 13, as of each quarter-end report date during 2021.
---------------------------------------------------------------------------

4. Comments Received and Final CBLR Rule Reporting Revisions
    Two commenters addressed certain aspects of the proposed CBLR 
reporting revisions. Aspects of the proposed CBLR reporting revisions 
on which no comments were received, including the proposed change in 
the reporting threshold for Schedule RC-C, Part I, Memorandum item 13, 
would be implemented as proposed.
    One commenter supported ``the proposed line item additions to RC-R, 
Part I reporting to support changes to the leverage ratio,'' but the 
other commenter recommended removing

[[Page 4789]]

proposed items 35 through 38.c of Part I because the data to be 
reported are not qualifying criteria under the CBLR framework. Both 
commenters did not favor the proposal to move existing items 36 through 
39 of Schedule RC-R, Part I, which are used to measure total assets for 
the leverage ratio, and existing item 44, ``Tier 1 leverage ratio,'' 
from their present locations in Part I of the schedule to an earlier 
position in Part I where all of the CBLR-related items would be 
reported and these five items would be renumbered as items 27 through 
31. One of the commenters stated that, although this proposed change in 
the presentation of Part I of Schedule RC-R would not affect the 
results of individual items in Part I, the proposed new presentation 
could be confusing to end users of the schedule. The second commenter 
expressed concern about inserting the data items for the CBLR framework 
within existing Schedule RC-R, Part I, rather than in a separate 
version of the schedule as the agencies had originally proposed in 
April 2019, because the insertion of these data items was confusing and 
could lead to reporting errors. Thus, this commenter suggested that the 
agencies break the proposed revised structure of Part I of Schedule RC-
R into three separate parts with existing Part II of Schedule RC-R 
becoming the fourth part of the schedule. In addition, this commenter 
noted that an institution that is eligible to opt into the CBLR 
framework may opt into and out of the framework at any time, and that 
there is a grace period for an institution that no longer meets the 
qualifying criteria for the CBLR framework. During the grace period, 
the institution continues to be treated as a CBLR bank. Because an 
institution's status, i.e., as a CBLR bank or as subject to the 
generally applicable capital requirements, can change from quarter to 
quarter, the commenter recommended the addition of data items to 
Schedule RC-R for reporting the institution's status with respect to 
the CBLR framework.
    The agencies have considered these comments and will retain 
proposed items 35 through 38.c for reporting by CBLR banks in Schedule 
RC-R, Part I, as proposed for the reasons cited in the October 2019 
notice.\26\ When unconditionally cancellable commitments or investments 
in the tier 2 capital instruments of unconsolidated financial 
institutions, as reported in proposed items 35 and 36, reach excessive 
levels, this may warrant the agencies' use of the reservation of 
authority in their capital rule to direct an otherwise-eligible CBLR 
bank to report its regulatory capital using the generally applicable 
capital requirements. The allocated transfer risk reserve and 
allowances for credit losses on purchased credit-deteriorated assets, 
which would be reported in proposed items 37 and 38.a through 38.c, 
currently exist in Part II of Schedule RC-R, which a CBLR bank would no 
longer complete. The agencies use the information reported in these 
data items in the calculation of regulatory limits on investment 
securities and lending where relevant.
---------------------------------------------------------------------------

    \26\ See 84 FR 53234 (October 4, 2019).
---------------------------------------------------------------------------

    The agencies also will retain the proposed movement of the data 
items related to the leverage ratio to a position immediately after the 
calculation of tier 1 capital (designated items 27 through 31 of 
Schedule RC-R, Part I, as it would be revised) as well as the placement 
of the proposed data items to be completed only by CBLR banks, 
including those within the grace period (designated items 32 through 
38.c of Schedule RC-R, Part I, as it would be revised). Because all 
institutions are subject to a leverage ratio requirement, all 
institutions must calculate and report the ratio's numerator, which is 
tier 1 capital, and its denominator, which is based on average total 
assets. As a consequence, items 1 through 31 of Part I would be 
applicable to and completed by all institutions. Moving the leverage 
ratio data items as proposed would allow CBLR banks to avoid completing 
the remainder of Schedule RC-R after item 38.c of Part I, which the 
agencies believe will be less confusing for CBLR banks than having to 
complete the leverage ratio items in their current location in Part I 
of the schedule, which is after numerous items that will not be 
applicable to CBLR banks.
    Furthermore, the agencies will modify the formatting of Schedule 
RC-R, Part I, to better distinguish the data items that should be 
completed only by CBLR banks and those that should be completed only by 
those institutions applying the generally applicable capital 
requirements. This will be accomplished by improving the captioning 
before Schedule RC-R, Part I, item 32, which is the first data item to 
completed only by CBLR banks, and between items 38.c, which is the 
final data item only for CBLR banks, and item 39, which is the first 
data item applicable only to other institutions subject to the 
generally applicable capital requirements. The portion of Schedule RC-
R, Part I, applicable only to CBLR banks also will be marked by 
bordering. These modifications to the formatting of Part I should 
functionally achieve an outcome similar to the comment suggesting that 
Part I be split into Parts 1, 2, and 3 with existing Part II then 
renumbered as Part 4.
    In addition, the agencies acknowledge that, under the CBLR final 
rule, an institution that is eligible to opt into the CBLR framework 
may choose to opt into or out of this framework at any time and for any 
reason. Accordingly, the agencies see merit in a commenter's 
recommendation that an institution should report its status as of the 
report date regarding the use of the CBLR framework. Therefore, the 
agencies propose to add a ``yes/no'' item 31.a to Schedule RC-R, Part 
I, after item 31, ``Leverage ratio,'' in which each institution would 
report whether it has a CBLR framework election in effect as of the 
quarter-end report date. An institution would answer ``yes'' if it 
qualifies for the CBLR framework (even if it is within the grace 
period) and has elected to adopt the framework as of that report date. 
Otherwise, the institution would answer ``no.'' Captioning after the 
``yes/no'' response to item 31.a would indicate which of the subsequent 
data items in Schedule RC-R should be completed based on the response 
to item 31.a. This ``yes/no'' response should assist an institution in 
understanding which specific data items it should complete in the rest 
of Schedule RC-R. The response also should assist users of Schedule RC-
R in understanding the regulatory capital regime an institution is 
following as of the report date. The agencies are not adopting a 
commenter's recommendation to add additional data items relating to use 
of the CBLR, for example by differentiating between banks that 
currently meet the CBLR qualifying criteria and those that are within 
the grace period, as the agencies do not need this additional level of 
detail in the Call Report.
    The agencies believe these modifications to the format and 
structure of Part I of Schedule RC-R will limit the burden on reporting 
institutions and lessen possible confusion, including for users of 
Schedule RC-R and for those qualifying community institutions that 
elect to adopt the CBLR framework. Redlined drafts of Call Report 
Schedule RC-R in all three versions of the Call Report as it is 
proposed to be revised, with the modifications described in this 
Section II.C.4., will be available on the FFIEC's Reporting Forms web 
page.

D. Tailoring Rule

1. Background
    On November 1, 2019, the agencies published a final rule to revise 
the

[[Page 4790]]

criteria for determining the applicability of regulatory capital and 
liquidity requirements for large U.S. banking organizations and the 
U.S. intermediate holding companies of certain foreign banking 
organizations (tailoring final rule).\27\
---------------------------------------------------------------------------

    \27\ 84 FR 59230 (November 1, 2019).
---------------------------------------------------------------------------

    Under the tailoring final rule, the most stringent set of standards 
(Category I) applies to U.S. global systemically important banks 
(GSIBs). The second set of standards (Category II) applies to banking 
organizations that are very large or have significant international 
activity, but are not GSIBs. Like Category I, this category generally 
includes standards that are based on standards that reflect agreements 
reached by the Basel Committee on Banking Supervision. The third set of 
standards (Category III) applies to banking organizations with $250 
billion or more in total consolidated assets that do not meet the 
criteria for Category I or II. The third set of standards also applies 
to banking organizations with total consolidated assets of $100 billion 
or more, but less than $250 billion, that meet or exceed other 
specified risk-based indicators. The fourth set of standards (Category 
IV) applies to banking organizations with total consolidated assets of 
$100 billion or more that do not meet the thresholds for one of the 
other categories.
    Under the tailoring final rule, depository institution subsidiaries 
generally are subject to the same category of standards that apply at 
the holding company level.\28\
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    \28\ However, standardized liquidity requirements apply only to 
depository institution subsidiaries with $10 billion or more in 
total consolidated assets under Categories I through III, and such 
requirements do not apply to depository institution subsidiaries 
under Category IV.
---------------------------------------------------------------------------

    Based on the proposed capital and liquidity requirements that would 
apply to institutions subject to Category I, II, III, or IV capital 
standards in the domestic interagency tailoring and foreign interagency 
tailoring NPRs, the agencies proposed in their October 2019 notice to 
amend certain regulatory reporting forms to clarify the reporting 
requirements for those institutions that would be subject to those 
proposed rules. Specifically, the agencies proposed changes to Call 
Report Schedule RC-R, Part I, Regulatory Capital Components and Ratios, 
and FFIEC 101 Schedule A, Advanced Approaches Regulatory Capital, to 
provide clarification for institutions subject to Category III capital 
standards.\29\
---------------------------------------------------------------------------

    \29\ In the October 2019 notice, the agencies stated that they 
do not believe reporting form or instructional clarifications are 
needed to reflect capital requirements that would apply to 
institutions subject to Category I, II, or IV capital standards 
under the domestic interagency tailoring and foreign interagency 
tailoring NPRs. With the issuance of the tailoring final rule, the 
agencies continue to believe no such reporting form or instructional 
clarifications are needed.
---------------------------------------------------------------------------

    In addition, the agencies proposed in the October 2019 notice that 
all institutions subject to Category I, II, or III capital standards 
would be required to file the FFIEC 031 Call Report. While the agencies 
proposed to require all advanced approaches institutions to file the 
FFIEC 031 Call Report in connection with the capital simplifications 
rule (see Section II.B., above), the tailoring rules would narrow the 
scope of institutions calculating risk-weighted assets under the 
advanced approaches. In the October 2019 notice, the agencies stated 
that they expected the revision in the scope of advanced approaches 
institutions to have little, if any, impact on current institutions, as 
all institutions with total consolidated assets of $100 billion or more 
or with foreign offices already are required to file the FFIEC 031, 
which generally aligns with the standards for Category I, II, and III 
institutions. However, the agencies noted in the October 2019 notice 
that, under the domestic interagency tailoring and foreign interagency 
tailoring NPRs, institutions that are subsidiaries of institutions 
subject to Category I, II, or III capital standards also are considered 
Category I, II, or III institutions. The tailoring final rule maintains 
the application of the same category of capital standards to depository 
institution holding companies and their depository institution 
subsidiaries. Thus, the proposed change in scope for the FFIEC 031 
under the October 2019 notice meant that depository institutions 
considered Category I, II, or III institutions, but not required to 
file the FFIEC 031 Call Report at that time, would have been required 
to begin filing the FFIEC 031.
    The agencies noted that modifying the scope of the Call Report in 
this manner would enable them to streamline Schedule RC-R, Part I, of 
the FFIEC 041 report by removing data items that apply only to the 
limited number of institutions then considered advanced approaches 
institutions that were then also eligible to file the FFIEC 041 report 
and to any future institutions that would, absent this change in scope, 
be eligible to file the FFIEC 041 report.
2. Proposed Revisions to Call Report Schedule RC-R, Part I
    In order to implement the clarifications for institutions subject 
to Category III capital standards, as discussed above, the agencies 
proposed to require all Category III institutions to file the FFIEC 031 
Call Report and to revise the caption for Schedule RC-R, Part I, item 
45, ``Advanced approaches institutions only: Supplementary leverage 
ratio information,'' on the FFIEC 031 Call Report. Specifically, the 
agencies proposed to clarify that item 45 (proposed to be renumbered as 
item 55) applies to ``advanced approaches and Category III 
institutions'' on the FFIEC 031 report form. Item 45 would be removed 
from the FFIEC 041 report form. The instructions for Schedule RC-R, 
Part I, item 45 (proposed to be renumbered as item 55), in the FFIEC 
031-FFIEC 041 instruction book also would be revised in the same 
manner. The general instructions for Schedule RC-R, Part I, in the 
FFIEC 031-FFIEC 041 instruction book also would be clarified to 
indicate that Category III institutions are not required to calculate 
risk-weighted assets according to the advanced approaches rule, but are 
subject to the supplementary leverage ratio and countercyclical capital 
buffer.
3. Proposed Revisions to the FFIEC 101
    To implement the clarification for institutions subject to Category 
III capital standards, the agencies proposed to revise the instructions 
for the scope of the FFIEC 101. Specifically, because Category III 
institutions are not required to calculate risk-weighted assets 
according to the advanced approaches rule, the FFIEC 101 instructions 
would be revised to clarify that top-tier Category III bank holding 
companies, savings and loan holding companies, and insured depository 
institutions, and all Category III U.S. intermediate holding companies, 
must complete FFIEC 101 Schedule A, SLR Tables 1 and 2, only and would 
not complete or file any other part of the FFIEC 101. In addition, any 
Category III banking organization that is a consolidated subsidiary of 
a top-tier Category III bank holding company, savings and loan holding 
company, U.S. intermediate holding company, or insured depository 
institution would not complete or file any part of the FFIEC 101. 
Instead, Category III subsidiary banking organizations that file Call 
Reports would report SLR data in Call Report Schedule RC-R, Part I, 
item 45 (proposed to be renumbered as item 55).

[[Page 4791]]

    All Category IV institutions would not complete or file any part of 
the FFIEC 101.
4. Comments Received and Final Tailoring Rule Reporting Revisions
a. Call Report Revisions
    Two commenters addressed the agencies' proposal to require all 
institutions subject to Category I, II, or III capital standards to 
file the FFIEC 031 Call Report. One commenter observed that 
institutions that are subsidiaries of Category I, II, and III 
institutions, and therefore also considered Category I, II, and III 
institutions, will experience increases in overall reporting burden if 
they currently file the FFIEC 041 Call Report, but now must file the 
FFIEC 031 Call Report. The other commenter explicitly stated that the 
agencies should not expand the scope of the FFIEC 031 to require 
subsidiaries of Category I, II, and III institutions that previously 
were eligible to file the FFIEC 041 Call Report to file the FFIEC 031 
Call Report. This commenter recommended that the agencies confirm that 
subsidiary depository institutions that currently file the FFIEC 041 or 
FFIEC 051 Call Report should continue to do so rather than ``filing the 
more burdensome FFIEC 031.''
    As previously discussed in Section II.B.3., the agencies have 
reviewed these comments and are modifying the proposed change in scope 
as it applies to Category III institutions not currently required to 
file the FFIEC 031 Call Report. Accordingly, Category III institutions 
that have less than $100 billion in total assets and have no foreign 
offices (as defined in the Call Report instructions) would be eligible 
to file the FFIEC 041 Call Report and would not be required to file the 
FFIEC 031. Such institutions also would not be eligible to file the 
FFIEC 051 Call Report. As previously mentioned, to accommodate this 
modification to the originally proposed change in scope for Category 
III institutions, the agencies will retain existing SLR information 
items 45.a and 45.b (proposed to be renumbered as items 55.a and 55.b), 
as well as existing item 46.b for the countercyclical capital buffer 
(proposed to be renumbered as item 56.b), in Schedule RC-R, Part I, in 
the FFIEC 041 Call Report rather than removing these three items from 
this report as had been proposed. However, the agencies would require 
all Category I and II institutions, including depository institution 
subsidiaries of Category I and II institutions, to file the FFIEC 031 
Call Report as proposed. As advanced approaches institutions, 
depository institutions that are Category I and II institutions are not 
eligible to file the FFIEC 051 Call Report.
b. FFIEC 101 Revisions
    Two commenters recommended that Category III institutions should 
not be required to file the FFIEC 101. Such institutions are not 
required to calculate risk-weighted assets according to the advanced 
approaches rule, but are subject to the supplementary leverage ratio 
(SLR). Thus, the only portions of the FFIEC 101 report applicable to 
Category III institutions are Supplementary Leverage Ratio Tables 1 and 
2. However, one commenter noted that depository institution 
subsidiaries of Category III institutions, which are themselves 
considered Category III institutions, are not required to complete 
these two tables in the FFIEC 101 and instead report specified SLR data 
only in Call Report Schedule RC-R, Part I.
    In support of their recommendation to eliminate SLR data from the 
FFIEC 101, these commenters asserted that holding companies that report 
detailed SLR information in the FFIEC 101 report duplicate information 
in the Board's FR Y-15.\30\ However, the instructions for the FR Y-15 
state that ``[i]f the banking organization files the Regulatory Capital 
Reporting for Institutions Subject to the Advanced Capital Adequacy 
Framework (FFIEC 101) for the same reporting period, then''12 data 
items in Schedule A of the FR Y-15 ``will be populated automatically'' 
from the corresponding data items reported in FFIEC 101 SLR Table 2. 
Furthermore, the FR Y-15 does not collect data comparable to the data 
reported in FFIEC 101 SLR Table 1, ``Summary comparison of accounting 
assets and total leverage exposure.''
---------------------------------------------------------------------------

    \30\ Banking Organization Systemic Risk Report (FR Y-15), OMB 
No. 3064-0352.
---------------------------------------------------------------------------

    Both commenters also noted that Table 13 of the Pillar 3 
disclosures \31\ requires certain institutions to disclose the same SLR 
information as is reported in FFIEC 101 SLR Tables 1 and 2. These 
commenters also cited these Pillar 3 disclosures as a reason for 
eliminating the SLR Tables from the FFIEC 101. However, the agencies' 
capital rule provides that the management of an institution required to 
make the Pillar 3 public disclosures may provide all of the required 
disclosures in one place on its public website ``or may provide the 
disclosures in more than one public financial report or other 
regulatory reports,'' provided the institution ``publicly provides a 
summary table specifically indicating the location(s) of all such 
disclosures.'' \32\ Thus, an institution could satisfy the Table 13 
disclosure requirement through the use of FFIEC 101 SLR Tables 1 and 2, 
the location of which would be provided in the institution's summary 
table.
---------------------------------------------------------------------------

    \31\ See 12 CFR 3.173 (OCC); 12 CFR 217.173 (Board); 12 CFR 
324.173 (FDIC).
    \32\ See 12 CFR 3.172(c)(1) (OCC); 12 CFR 217.172(c)(1) (Board); 
12 CFR 324.172(c)(1) (FDIC).
---------------------------------------------------------------------------

    Although the agencies recognize the existence of overlaps between 
the SLR information in the FR Y-15, Table 13 of the Pillar 3 
disclosures, and SLR Tables 1 and 2 of the FFIEC 101, the latter 
serves, or can serve, as the source for some or all of the SLR 
information in the other two. Therefore, the agencies do not agree with 
the comments that SLR Tables 1 and 2 in the FFIEC 101 duplicate other 
available information and will retain these tables.
    In addition, one commenter suggested that if the requirement to 
complete SLR Tables 1 and 2 is retained for top-tier Category III 
banking organizations, as proposed, ``a change to Line 2.20 Tier 1 
capital for Category III firms to account for Tier 1 capital 
calculation differences would be appropriate.'' On the FFIEC 101 
reporting form, the caption for Item 2.20 currently says, ``Tier 1 
capital (from Schedule A, item 45).'' The agencies note that the 
existing instructions for Item 2.20 already state that an institution 
``that does not complete Schedule A, except for the SLR disclosures, 
must use the corresponding item as reported on the institution's 
Schedule RC-R of the Call Report or Schedule HC-R of the FR Y-9C, as 
applicable.'' Thus, the Item 2.20 instructions already address the 
commenter's suggestion. However, the agencies will modify the caption 
for Item 2.20 to clarify the source for the amount of Tier 1 capital to 
be reported in this item.

E. Revisions to the Supplementary Leverage Ratio for Certain Central 
Bank Deposits of Custodial Banks

1. Background
    On November 19, 2019, the agencies announced that they had 
finalized the proposed revisions to the SLR for certain central bank 
deposits of banking organizations predominantly engaged in custodial 
activities.\33\ The final rule, which implements section 402 of the 
EGRRCPA, takes effect April 1, 2020.
---------------------------------------------------------------------------

    \33\ See the custodial bank SLR final rule attached to OCC News 
Release 2019-135, Board Press Release, and FDIC Press Release 109-
2019, all of which are dated November 19, 2019.
---------------------------------------------------------------------------

    In the October 2019 notice, the agencies proposed changes to the 
instructions for Call Report Schedule

[[Page 4792]]

RC-R and the addition of a new data item to both SLR Tables 1 and 2 in 
FFIEC 101 Schedule A that would implement the proposed changes to the 
agencies' capital rule.
2. Proposed Revisions to Call Report Schedule RC-R, Part I
    In the October 2019 notice, the agencies proposed to modify the 
instructions for the calculation of the total leverage exposure to 
enable an institution that qualifies as a ``custodial banking 
organization'' to exclude deposits placed at a ``qualifying central 
bank'' from the total leverage exposure reported in Schedule RC-R, Part 
I, item 45.a (which would become item 54.a of Part I, as proposed 
above). The excluded deposits would be limited to the amount of deposit 
liabilities on the consolidated balance sheet of the custodial banking 
organization that are linked to fiduciary or custody and safekeeping 
accounts.
3. Proposed Revisions to FFIEC 101 Schedule A
    In the October 2019 notice, the agencies also proposed to revise 
the total leverage exposure calculation that would be reported on the 
FFIEC 101 Schedule A through the addition of a new data item for the 
qualifying central bank deduction to the calculations of the total 
leverage exposure in SLR Tables 1 and 2 of this schedule. The new 
reporting item would be placed between existing data items 1.7 and 1.8 
in SLR Table 1 and between data items 2.2 and 2.3 in SLR Table 2.
4. Final Reporting Revisions
    The agencies received no comments on the proposed changes to Call 
Report Schedule RC-R, Part I, and FFIEC 101 Schedule A for the SLR for 
custodial banks and will implement the changes as proposed.

F. Standardized Approach for Counterparty Credit Risk on Derivative 
Contracts

1. Background
    On November 19, 2019, the agencies announced that they had adopted 
a final rule implementing a new approach for calculating the exposure 
amount of derivative contracts under the capital rule: The standardized 
approach for counterparty credit risk (SA-CCR final rule).\34\ The SA-
CCR final rule takes effect April 1, 2020 (i.e., for the Call Report 
and the FFIEC 101 for the June 30, 2020, report date) with a mandatory 
compliance date of January 1, 2022 (i.e., for the Call Report and the 
FFIEC 101 for the March 31, 2022, report date).
---------------------------------------------------------------------------

    \34\ See the SA-CCR final rule attached to OCC News Release 
2019-136, Board Press Release, and FDIC Press Release 110-2019, all 
of which are dated November 19, 2019.
---------------------------------------------------------------------------

    The SA-CCR final rule replaces the current exposure methodology 
(CEM) with SA-CCR in the capital rule for advanced approaches 
institutions. The final rule requires banking organizations subject to 
Category I and II standards (Category I and II banking organizations) 
in the agencies' tailoring final rule,\35\ discussed in Section II.D. 
above, to use SA-CCR to calculate their standardized total risk-
weighted assets and permits non-advanced approaches banking 
organizations the option of using SA-CCR in place of CEM to calculate 
the exposure amount of their noncleared and cleared derivative 
contracts. Category I and II banking organizations would have to choose 
either SA-CCR or the internal models methodology (IMM) to calculate the 
exposure amount of their noncleared and cleared derivative contracts in 
connection with calculating their risk-based capital under the advanced 
approaches. The SA-CCR final rule provides for the eventual elimination 
of the current methods for Category I and II banking organizations to 
determine the risk-weighted asset amount for their default fund 
contributions to a central counterparty (CCP) or a qualifying central 
counterparty (QCCP) and implements a new and simpler method that would 
be based on the banking organization's pro-rata share of the CCP's and 
QCCP's default fund. However, the final rule allows banking 
organizations that elect to use SA-CCR to continue to use method 1 and 
method 2 under CEM to calculate the risk-weighted asset amount for 
default fund contributions until January 1, 2022.
---------------------------------------------------------------------------

    \35\ 84 FR 59231 (November 1, 2019).
---------------------------------------------------------------------------

    The SA-CCR final rule also requires Category I and Category II 
banking organizations to use SA-CCR to determine the exposure amount of 
derivative contracts for purposes of calculating total leverage 
exposure for the supplementary leverage ratio. If a Category III 
banking organization chooses to use SA-CCR to calculate its total risk-
weighted assets, it must use SA-CCR to determine the exposure amount of 
derivative contracts for its total leverage exposure. Where a banking 
organization has the option to choose among the approaches applicable 
to such banking organization under the capital rule, it must use the 
same approach for all purposes.
    Furthermore, the final rule allows a clearing member banking 
organization to recognize the counterparty credit risk-reducing effect 
of client collateral in replacement cost and potential future exposure 
(PFE) for purposes of calculating total leverage exposure under certain 
circumstances. In particular, this treatment applies to a clearing 
member banking organization's exposure from its client-facing 
derivative transactions. For such exposures, a clearing member banking 
organization would use SA-CCR, as applied for risk-based capital 
purposes, which permits recognition of both cash and non-cash forms of 
margin in the form of financial collateral received from a client to 
offset the replacement cost and PFE components for client-facing 
derivative transactions.
    In the October 2019 notice, the agencies proposed to revise the 
instructions for Call Report Schedule RC-R, Part II, as well as for SLR 
Table 2 in FFIEC 101 Schedule A, to implement the changes to the 
calculation of the exposure amount of derivative contracts under the 
agencies' capital rule.
    Additionally, the SA-CCR final rule notes that the FDIC is unable 
to incorporate the SA-CCR methodology into the deposit insurance 
assessment pricing methodology for highly complex institutions \36\ 
upon the effective date of this rule, but will consider options for 
addressing the use of SA-CCR in the deposit insurance system as 
derivative exposure data reported using SA-CCR becomes available. In 
the meantime, certain clarifications would be made to the instructions 
for reporting counterparty exposures in Schedule RC-O, Memorandum items 
14 and 15, of the FFIEC 031 and the FFIEC 041 Call Reports, requiring 
highly complex institutions to continue to calculate derivative 
exposures using CEM, but without any reduction for collateral other 
than cash collateral that is all or part of variation margin and that 
satisfies certain requirements.\37\ Similarly, certain clarifications 
would be made to the instructions for Schedule RC-O, Memorandum items 
14 and 15, in the FFIEC 031 and the FFIEC 041 Call Reports requiring 
highly complex institutions to continue to report the exposure amount 
associated with securities financing transactions, including cleared 
transactions that are

[[Page 4793]]

securities financing transactions, using the standardized approach.\38\
---------------------------------------------------------------------------

    \36\ See 12 CFR 327.8(g).
    \37\ See 12 CFR 3.10(c)(4)(ii)(C)(1)(ii) and (iii) and 
3.10(c)(4)(ii)(C)(3)-(7) (OCC); 12 CFR 217.10(c)(4)(ii)(C)(1)(ii) 
and (iii) and 217.10(c)(4)(ii)(C)(3)-(7) (Board); and 12 CFR 
324.10(c)(4)(ii)(C)(1)(ii) and (iii) and 324.10(c)(4)(ii)(C)(3)-(7) 
(FDIC) (as amended under the SA-CCR final rule).
    \38\ See 12 CFR 3.37(b) or (c) (OCC); 12 CFR 217.37(b) or (c) 
(Board); and 12 CFR 324.37(b) or (c) (FDIC) (as amended under the 
SA-CCR final rule).
---------------------------------------------------------------------------

2. Proposed Revisions to Call Report Schedule RC-R, Part II
    A banking organization that applies the generally applicable 
capital requirements must report the notional amount and regulatory 
capital exposure amount of its derivatives exposures in Schedule RC-R, 
Part II. In the October 2019 notice, the agencies proposed to revise 
the instructions for Schedule RC-R, Part II, to be consistent with SA-
CCR. Generally, the proposed revisions to the reporting of derivatives 
elements in Schedule RC-R, Part II, are driven by the treatment of 
cleared derivatives' variation margin (settled-to-market versus 
collateralized-to-market), netting provisions impacting the 
calculations of notional and exposure amounts, and attributions of 
derivatives to cleared versus noncleared derivatives. The General 
Instructions for Schedule RC-R, Part II, and the instructions for 
Schedule RC-R, Part II, items 20, 21, and Memorandum items 1 through 3 
would be revised.
3. Proposed Revisions to FFIEC 101 Schedule A, SLR Table 2
    In connection with their calculation of the supplementary leverage 
ratio, Category I, II, and III banking organizations must report the 
exposure amount of their derivatives in SLR Table 2 of FFIEC 101 
Schedule A. In the October 2019 notice, the agencies proposed to revise 
the instructions for SLR Table 2 to be consistent with SA-CCR. 
Institutions that continue to use the CEM would use the current FFIEC 
101 Schedule A instructions to complete SLR Table 2.
4. Comments Received and Instructions for Reporting Derivatives
    The agencies did not receive comments specifically addressing their 
proposals to revise the instructions for Schedule RC-R, Part II, and 
for FFIEC 101 Schedule A, SLR Table 2, consistent with the SA-CCR final 
rule. However, two commenters submitted similar questions and requests 
for clarifications related to certain derivatives reporting issues. In 
Schedule RC-R, Part II, Memorandum item 3, institutions report the 
notional principal amounts of centrally cleared derivative contracts by 
remaining maturity. Commenters sought clarification as to whether, for 
purposes of reporting derivatives referred to as settled-to-market 
contracts in Memorandum item 3, the remaining maturity of such 
derivatives should be the remaining maturity used to determine the 
conversion factor for the calculation of the PFE of these contracts or 
the contractual remaining maturity of these contracts. The derivatives 
information reported in Memorandum items 1 through 3 of Schedule RC-R, 
Part II, is collected to assist the agencies in understanding, and 
assessing the reasonableness of, the credit equivalent amounts of the 
over-the-counter derivatives and the centrally cleared derivatives 
reported in Schedule RC-R, Part II, items 20 and 21, column B. 
Accordingly, when reporting settled-to-market centrally cleared 
derivative contracts in Memorandum item 3, the remaining maturity used 
to determine the applicable conversion factor should be the basis for 
reporting. The agencies will clarify the instructions for Memorandum 
item 3 to address the reporting of settled-to-market contracts.
    Both commenters stated that the Call Report instructions do not 
explain whether institutions should report notional amounts in Schedule 
RC-L, Derivatives and Off-Balance Sheet Items, and Schedule RC-R, Part 
II, Risk-Weighted Assets, for derivatives that have matured, but have 
associated unsettled receivables or payables that are reported as 
assets or liabilities, respectively, on the balance sheet as of the 
quarter-end report date. In seeking clarification of the reporting 
requirements for such situations, the commenters recommended that 
notional amounts not be reported for derivatives that have matured. The 
agencies agree and will clarify the Call Report instructions to so 
indicate.
    For purposes of reporting notional amounts in the Call Report, one 
commenter recommended that the agencies clarify whether the notional 
amount as defined in U.S. generally accepted accounting principles 
(GAAP) \39\ or under the SA-CCR final rule should be used when an 
institution must report the notional amount of derivative contracts in 
Schedule RC-R, Regulatory Capital, and elsewhere in the Call Report, 
such as Schedule RC-L. The agencies believe that the SA-CCR notional 
amount should be reported in Schedule RC-R only when an institution 
uses SA-CCR to calculate its exposure amounts when the institution 
determines its standardized total risk-weighted assets. When an 
institution uses CEM to calculate exposure amounts for its derivative 
contracts, the notional amounts to be reported in Schedule RC-R should 
be based on the definition in U.S. GAAP. All notional amounts reported 
in Schedule RC-L should be based on the U.S. GAAP notional amount. The 
agencies will revise the instructions for Schedules RC-L and RC-R in 
this manner.
---------------------------------------------------------------------------

    \39\ See Accounting Standards Codification Section 815-10-20.
---------------------------------------------------------------------------

    Both commenters addressed the reporting of the fair value of 
collateral held against over-the-counter (OTC) derivative exposures by 
type of collateral and type of derivative counterparty in Schedule RC-
L, item 16.b, and questioned whether this information is meaningful. 
One commenter requested clarification of the purpose for collecting 
this information while the other recommended that the agencies no 
longer collect this information. The data items for reporting the fair 
value of collateral are applicable to institutions with total assets of 
$10 billion or more. In general, the agencies use this information in 
their oversight and supervision of banks engaging in OTC derivative 
activities. The breakdown of the fair value of collateral posted for 
OTC derivative exposures in item 16.b provides the agencies with 
important insights into the extent to which collateral is used as part 
of the credit risk management practices associated with derivative 
credit exposures to different types of counterparties and changes over 
time in the nature and extent of the collateral protection. As a result 
of the agencies' review of Schedule RC-L in 2016 during their most 
recent statutorily mandated review of existing Call Report data 
items,\40\ the agencies reduced the level of detail required to be 
reported on the fair value of collateral posted for OTC derivative 
exposures in item 16.b effective June 30, 2018. The agencies' use of 
the information reported in Schedule RC-L, item 16.b, will be reviewed 
again before the end of 2022 as part of their next statutorily mandated 
review.
---------------------------------------------------------------------------

    \40\ This review is mandated by section 604 of the Financial 
Services Regulatory Relief Act of 2006 (12 U.S.C. 1817(a)(11)).
---------------------------------------------------------------------------

G. High Volatility Commercial Real Estate (HVCRE) Land Development 
Loans

1. Background
    On December 13, 2019, the agencies published a final rule that 
conforms the HVCRE exposure definition in section 2 of the capital rule 
\41\ to the statutory definition of an HVCRE ADC loan \42\ and 
clarifies the capital treatment for loans that finance the development 
of land

[[Page 4794]]

under the revised HVCRE exposure definition (HVCRE final rule).\43\ 
This final rule takes effect April 1, 2020.
---------------------------------------------------------------------------

    \41\ See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); and 12 CFR 
324.2 (FDIC).
    \42\ See Section 214 of the EGRRCPA.
    \43\ 84 FR 68019 (December 13, 2019).
---------------------------------------------------------------------------

2. Proposed Revisions to Call Report Schedule RC-R, Part II
    The agencies' adoption of the HVCRE final rule supersedes the July 
6, 2018, interagency statement.\44\ In relevant part, this statement 
advised institutions that, when determining which loans should be 
subject to a heightened risk weight, until the agencies take further 
action institutions may choose to continue to apply the current 
regulatory definition of HVCRE exposure, or they may choose to apply 
the heightened risk weight only to those loans they reasonably believe 
meet the statutory definition of HVCRE ADC loan. Institutions will be 
required to apply the HVCRE exposure definition in the final rule 
beginning with the Call Report for June 30, 2020. Therefore, the 
agencies will make conforming revisions to the instructions for 
Schedule RC-R, Part II, items 4.b and 5.b, in all versions of the Call 
Report effective as of that report date. No revisions to the Call 
Report forms are necessary.
---------------------------------------------------------------------------

    \44\ Board, FDIC, and OCC, Interagency statement regarding the 
impact of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act (EGRRCPA), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180706a1.pdf.
---------------------------------------------------------------------------

3. Proposed Revisions to FFIEC 101 Schedule G
    The changes to the HVCRE exposure definition discussed above would 
also affect the instructions for Schedule G--Wholesale Exposure in the 
FFIEC 101. Therefore, the agencies also will make conforming revisions 
to the FFIEC 101 instructions to align with the new HVCRE exposure 
definition in the final rule effective as of the June 30, 2020, report 
date.

H. Operating Lease Liabilities

    In February 2016, the Financial Accounting Standards Board (FASB) 
issued ASU No. 2016-02, ``Leases,'' which added Topic 842, Leases, to 
the Accounting Standards Codification (ASC). Once ASU 2016-02 is 
effective for an institution, the ASU's accounting requirements, as 
amended by certain subsequent ASUs, supersede ASC Topic 840, Leases.
    The most significant change that ASC Topic 842 makes to the 
previous lease accounting requirements is to lessee accounting. Under 
the lease accounting standards in ASC Topic 840, lessees recognize 
lease assets and lease liabilities on the balance sheet for capital 
leases, but do not recognize operating leases on the balance sheet. The 
lessee accounting model under Topic 842 retains the distinction between 
operating leases and capital leases, which the new standard labels 
finance leases. However, the new standard requires lessees to record a 
right-of-use (ROU) asset and a lease liability on the balance sheet for 
operating leases. (For finance leases, a lessee's lease asset also is 
designated an ROU asset.) In general, the new standard permits a lessee 
to make an accounting policy election to exempt leases with a term of 
one year or less at their commencement date from on-balance sheet 
recognition.
    For institutions that are public business entities, as defined 
under U.S. GAAP, Topic 842 is currently in effect. For institutions 
that are not public business entities, the FASB recently amended the 
effective date of the new standard so that Topic 842 will now take 
effect for fiscal years beginning after December 15, 2020, and interim 
reporting periods within fiscal years beginning after December 15, 
2021.\45\ Early application of the new standard is permitted for all 
institutions.
---------------------------------------------------------------------------

    \45\ See FASB ASU 2019-10, Financial Instruments--Credit Losses 
(Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 
842): Effective Dates.
---------------------------------------------------------------------------

    The Call Report Supplemental Instructions for March 2019 \46\ 
stated that a lessee should report lease liabilities for operating 
leases and finance leases, including lease liabilities recorded upon 
adoption of the ASU, in Schedule RC-M, items 5.b, ``Other borrowings,'' 
and 10.b, ``Amount of `Other borrowings' that are secured,'' which is 
consistent with the current Call Report instructions for reporting a 
lessee's obligations under capital leases under ASC Topic 840. In 
response to this instructional guidance, the agencies received 
questions from institutions concerning the reporting of a bank lessee's 
lease liabilities for operating leases. These institutions indicated 
that reporting operating lease liabilities as other liabilities instead 
of other borrowings would better align the reporting of the single 
noninterest expense item for operating leases in the income statement 
(which is the presentation required by ASC Topic 842) with their 
balance sheet classification and would be consistent with how these 
institutions report operating lease liabilities internally.
---------------------------------------------------------------------------

    \46\ https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_FFIEC051_suppinst_201903.pdf.
---------------------------------------------------------------------------

    The agencies considered the views expressed by these institutions 
and proposed in the October 2019 notice to require that operating lease 
liabilities be reported on the Call Report balance sheet in Schedule 
RC, item 20, ``Other liabilities.'' In Schedule RC-G, Other 
Liabilities, operating lease liabilities would be reported in item 4, 
``All other liabilities.'' In subitems of Schedule RC-G, item 4, 
institutions must itemize and describe any components of this item in 
amounts greater than $100,000 that exceed 25 percent of the amount 
reported in item 4. Because of the expected prevalence of operating 
lease liabilities, the agencies also proposed to add a new subitem with 
the preprinted caption ``Operating lease liabilities'' to item 4 to 
facilitate the reporting of these liabilities when their amount exceeds 
the reporting threshold for itemizing and describing components of 
``All other liabilities.'' These changes would take effect as of the 
March 31, 2020, report date.
    The agencies received no comments on these proposed revisions for 
operating lease liabilities and will implement them as proposed.

I. Reporting Home Equity Lines of Credit That Convert From Revolving to 
Non-Revolving Status

1. Proposed Instructional Clarification
    Institutions 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 RC-C, Part I, Loans and Leases. The amounts of 
closed-end loans secured by 1-4 family residential properties are 
reported in Schedule RC-C, Part I, item 1.c.(2)(a) or (b), depending on 
whether the loan is a first or a junior lien.\47\
---------------------------------------------------------------------------

    \47\ Institutions report additional information on open-end and 
closed-end loans secured by 1-4 family residential properties in 
certain other Call Report schedules in accordance with the loan 
category definitions in Schedule RC-C, Part I, items 1.c.(1), 
1.c.(2)(a), and 1.c.(2)(b).
---------------------------------------------------------------------------

    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 repaid over the remaining loan term through monthly 
payments. Because the Call Report 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

[[Page 4795]]

revolving to non-revolving status, the agencies have found diversity in 
how these credits are reported in Schedule RC-C, Part I, items 1.c.(1), 
1.c.(2)(a), and 1.c.(2)(b), and in other Call Report items that use the 
definitions of these three loan categories.
    In September 2015, to address this absence of instructional 
guidance and promote consistency in reporting, the agencies proposed to 
clarify the instructions for reporting loans secured by 1-4 family 
residential properties by specifying that after a revolving open-end 
line of credit has converted to non-revolving closed-end status, the 
loan should be reported as closed-end in Schedule RC-C, Part I, item 
1.c.(2)(a) or (b), as appropriate.\48\ As discussed in a subsequent 
notice,\49\ the agencies received a number of comments that raised 
concerns with the proposal. In particular, some commenters stated that 
reclassifying HELOCs after the draw period could raise operational 
challenges for institutions' loan systems that would require additional 
time to implement. Based on the feedback received, the agencies did not 
proceed with their proposed instructional clarification at that time.
---------------------------------------------------------------------------

    \48\ See 80 FR 56539 (September 18, 2015).
    \49\ See 81 FR 45357 (July 13, 2016).
---------------------------------------------------------------------------

    The agencies continue to believe that it is important to collect 
accurate data on loans secured by 1-4 family residential properties in 
the Call Report. Consistent classification of HELOCs based on the 
status of the draw period is particularly important for the agencies' 
safety and soundness monitoring. Due to the structure of HELOCs 
discussed above, borrowers generally are not required to make principal 
repayments during the draw period, which may create a financial shock 
for borrowers when they must make a balloon payment or begin regular 
monthly repayments after the draw period. With some institutions 
reporting HELOCs past the draw period as revolving, this increases the 
amounts outstanding, charge-offs, recoveries, past dues, and 
nonaccruals reported in the open-end category relative to the amounts 
reported by institutions that treat HELOCs past the draw period as 
closed-end, which makes the data less useful for agency comparisons and 
safety and soundness monitoring. In addition, in ASU No. 2019-04,\50\ 
the FASB amended ASC Subtopic 326-20 on credit losses to require that, 
when presenting credit quality disclosures in notes to financial 
statements prepared in accordance with U.S. GAAP, an entity must 
separately disclose line-of-credit arrangements that are converted to 
term loans from line-of-credit arrangements that remain in revolving 
status. The agencies further stated in the October 2019 notice that 
they had determined that there would be little or no impact to the 
regulatory capital calculations, FDIC deposit insurance assessments, or 
other regulatory reporting requirements as a result of this proposed 
clarification, which were other concerns previously raised by 
commenters.
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    \50\ ASU No. 2019-04, ``Codification Improvements to Topic 326, 
Financial Instruments--Credit Losses, Topic 815, Derivatives and 
Hedging, and Topic 825, Financial Instruments,'' issued in April 
2019.
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    Therefore, in the October 2019 notice, the agencies re-proposed to 
clarify the Call Report instructions for Schedule RC-C, Part I, items 
1.c.(1), 1.c.(2)(a), and 1.c.(2)(b), to address continuing diversity in 
reporting practices by stating that revolving, open-end lines of credit 
secured by 1-4 family residential properties that have converted to 
non-revolving closed-end status should be reported as closed-end loans. 
The effect of this clarification would extend to the instructions for 
numerous data items elsewhere in the Call Report that reference the 
Schedule RC-C, Part I, loan category definitions for open-end and 
closed-end loans secured by 1-4 family residential properties and were 
identified in the October 2019 notice. That notice also identified a 
limited number of Call Report data items to which this instructional 
clarification would not be applied.
    To address prior comments regarding the time needed for any systems 
changes, the agencies proposed that compliance with the clarified 
instructions would not be required until the March 31, 2021, report 
date. The October 2019 notice further proposed that institutions not 
currently reporting in accordance with the clarified instructions would 
be permitted, but not required, to report in accordance with the 
clarified instructions before that date.
2. Comments Received and Final Reporting Revisions
    Three commenters opposed the agencies' proposal to require that 
HELOCs that have converted to non-revolving closed-end status should be 
reported as closed-end loans. Commenters cited the numerous data items 
in multiple Call Report schedules that would be affected by this 
proposed instructional clarification and the reconfiguration of systems 
that would need to be undertaken as well as a definitional conflict 
between the Call Report instructions as the agencies proposed to 
clarify them and the instructions for the Board's FR Y-14M report filed 
by holding companies with total consolidated assets of $100 billion or 
more.\51\ In addition, one commenter stated that the proposed Call 
Report instructional clarification may lead to inconsistencies between 
the reporting of HELOCs in open-end and closed-end status in the Call 
Report and disclosures of HELOCs made in filings with the Securities 
and Exchange Commission under the federal securities laws. Another 
commenter cited differences in the risk profiles of loans underwritten 
as HELOCs and those underwritten as closed-end loans at origination and 
indicated that the proposed instructional clarification could distort 
performance trends for loans secured by 1-4 family residential 
properties as HELOCs migrate between the open-end and closed-end loan 
categories in the Call Report. Two of the commenters opposing the 
proposed instructional clarification instead recommended the creation 
of a memorandum item in the Call Report loan schedule (Schedule RC-C, 
Part I) to identify for supervisory purposes the amount of HELOCs that 
have converted to non-revolving closed-end status. The other commenter 
suggested segregating closed-end HELOCs using a separate loan category 
code, which may also imply separate reporting and disclosure of such 
HELOCs.
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    \51\ Capital Assessments and Stress Testing Report (FR Y-14M), 
OMB Number 7100-0341.
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    One commenter also requested that the agencies clarify the 
reporting treatment for ``drawdowns of a HELOC Flex product that 
contain `lock-out' features,'' which was described as the borrower's 
exercise of an option to convert a draw on the line of credit to ``a 
fixed rate interest structure with defined payments and term.''
    After considering the comments received, the agencies will not 
implement the proposed clarification to the instructions for Schedule 
RC-C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b) that would 
result in revolving, open-end lines of credit secured by 1-4 family 
residential properties that have converted to non-revolving closed-end 
status being reported as closed-end loans. In light of the guidance in 
the instructions for the Board's FR Y-14M report that directs reporting 
entities to continue to report HELOCs that are no longer revolving 
credits in the Home Equity schedule, the agencies propose to adopt this 
treatment for Call Report purposes. However, recognizing the existing 
diversity in practice in which some institutions report HELOCs that 
have converted from revolving to non-revolving status as closed-end 
loans in

[[Page 4796]]

the Call Report while other institutions continue to report such HELOCs 
as open-end loans, the agencies propose that institutions report all 
HELOCs that convert to closed-end status on or after January 1, 2021, 
as open-end loans in Schedule RC-C, Part I, item 1.c.(1). An 
institution that currently reports HELOCs that have converted to non-
revolving closed-end status as open-end loans in Schedule RC-C, Part I, 
item 1.c.(1), should not change its reporting practice for these loans 
and should continue to report these loans in item 1.c.(1) regardless of 
their conversion date. An institution that currently reports HELOCs 
that convert to non-revolving closed-end status as closed-end loans in 
Schedule RC-C, Part I, item 1.c.(2)(a) or 1.c.(2)(b), as appropriate, 
may continue to report HELOCs that convert on or before December 31, 
2020, as closed-end loans in Call Reports for report dates after that 
date. Alternatively, the institution may choose to begin reporting some 
or all of these closed-end HELOCs as open-end loans in item 1.c.(1) as 
of the March 31, 2020, or any subsequent report date, provided this 
reporting treatment is consistently applied. With respect to HELOC Flex 
products, the proposed reporting treatment described above would mean 
that amounts drawn on a HELOC during its draw period that a borrower 
converts to a closed-end amount before the end of this period also 
should be reported as open-end loans in Schedule RC-C, Part I, item 
1.c.(1), subject to the transition guidance above.
    The agencies also agree with commenters' suggestion to create a 
memorandum item in Schedule RC-C, Part I, in which institutions would 
report the amount of HELOCs that have converted to non-revolving 
closed-end status that are included in item 1.c.(1), ``Revolving, open-
end loans secured by 1-4 family residential properties and extended 
under lines of credit.'' This new Memorandum item 16 in Schedule RC-C, 
Part I, would enable the agencies to monitor the proportion of an 
institution's home equity credits in revolving and non-revolving status 
and changes therein and assess whether changes in this proportion in 
relation to changes in past due and nonaccrual home equity credits and 
charge-offs and recoveries of such credits warrant supervisory follow-
up. Memorandum item 16 would be collected quarterly in the FFIEC 031 
and the FFIEC 041 Call Reports and semiannually as of June 30 and 
December 31 in the FFIEC 051 Call Report. To provide time needed for 
any systems changes, the agencies propose to implement this new 
memorandum item as of the March 31, 2021, report date in the FFIEC 031 
and the FFIEC 041 Call Reports and as of the June 30, 2021, report date 
in the FFIEC 051 Call Report.

III. Timing

    As stated in their October 2019 notice, the agencies plan to make 
the capital-related reporting changes described in Sections II.B. 
through II.G. effective the same quarters as the effective dates of the 
various final capital rules discussed in this notice. Thus, the 
reporting revisions to the Call Report and the FFIEC 101, as 
applicable, would take effect March 31, 2020, for the capital 
simplifications rule, the community bank leverage ratio rule, and the 
tailoring final rule. In this regard, the filing of the FFIEC 031 Call 
Report by all institutions that are advanced approaches institutions 
under the tailoring final rule and the filing of the FFIEC 031 or FFIEC 
041 Call Report by institutions considered Category III institutions 
under this rule would take effect as of March 31, 2020. Non-advanced 
approaches institutions may elect to wait to adopt the capital 
simplifications rule for reporting purposes until the June 30, 2020, 
report date. The reporting revisions to the Call Report and the FFIEC 
101, as applicable, would take effect June 30, 2020, for the custodial 
bank supplementary leverage ratio final rule, the standardized approach 
for counterparty credit risk on derivative contracts final rule, and 
the high volatility commercial real estate exposures final rule. 
However, the mandatory compliance date for reporting in accordance with 
the standardized approach for counterparty credit risk final rule is 
the March 31, 2022, report date.
    In addition, the reporting of operating lease liabilities as ``All 
other liabilities'' in Call Report Schedule RC-G would take effect 
March 31, 2020, and the change in the reporting of construction, land 
development, and other land loans with interest reserves in Call Report 
Schedule RC-C, Part I, would take effect March 31, 2021. The 
requirement to continue reporting HELOCs that convert to closed-end 
status as open-end loans in Schedule RC-C, Part I, would apply to those 
HELOCs that convert on or after January 1, 2021, with pre-2021 
conversions subject to the transition guidance described in Section 
II.I. above; new Memorandum item 16 in Schedule RC-C, Part I, for 
HELOCs in non-revolving closed-end status that are reported as open-end 
loans would take effect March 31, 2021, in the FFIEC 031 and the FFIEC 
041 Call Reports and June 30, 2021, in the FFIEC 051 Call Report.
    The specific wording of the captions for the new or revised Call 
Report data items discussed in this notice and the numbering of these 
data items should be regarded as preliminary.

IV. Request for Comment

    Public comment is requested on all aspects of this joint notice. 
Comment is specifically invited on:
    (a) Whether the proposed revisions to the collections of 
information that are the subject of this notice are necessary for the 
proper performance of the agencies' functions, including whether the 
information has practical utility;
    (b) The accuracy of the agencies' estimates of the burden of the 
information collections as they are proposed to be revised, 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 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 joint notice will be shared 
among the agencies.

    Dated: January 21, 2020.
Theodore J. Dowd,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
    Board of Governors of the Federal Reserve System, January 21, 
2020.
Ann E. Misback,
Secretary of the Board.

    Federal Deposit Insurance Corporation.

    Dated at Washington, DC, on January 21, 2020.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2020-01292 Filed 1-24-20; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P