Inital FR Notice

Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
• The Commission’s contractor will
receive hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary at 236
Massachusetts Avenue, NE., Suite 110,
Washington, DC 20002. The filing hours
at this location are 8 a.m. to 7 p.m. All
hand deliveries must be held together
with rubber bands or fasteners. Any
envelopes must be disposed of before
entering the building.
• Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
• U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street, SW.,
Washington DC 20554.
People with Disabilities: To request
materials in accessible formats for
people with disabilities (braille, large
print, electronic files, audio format),
send an e-mail to [email protected] or call
the Consumer & Governmental Affairs
Bureau at 202–418–0530 (voice), 202–
418–0432 (tty).
Parties shall send one copy of their
comments and reply comments to Best
Copy and Printing, Inc., Portals II, 445
12th Street, SW., Room CY–B402,
Washington, DC 20554, (800) 378–3160,
e-mail [email protected]. Comments
filed in response to this public notice
will be available for public inspection
and copying during business hours in
the FCC Reference Information Center,
Portals II, 445 12th Street SW., Room
CY–A257, Washington, DC 20554, and
via the Commission’s Electronic
Comment Filing System (ECFS) by
entering the docket number, WT Docket
No. 08–165. The comments may also be
purchased from Best Copy and Printing,
Inc., telephone (800) 378–3160,
facsimile (202) 488–5563, or e-mail
[email protected].
Federal Communications Commission.
James D. Schlichting,
Acting Chief, Wireless Telecommunications
Bureau.
[FR Doc. E8–22311 Filed 9–22–08; 8:45 am]

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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
Proposed Agency Information
Collection Activities; Comment
Request
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.
AGENCIES:

In accordance with the
requirements of the Paperwork
Reduction Act of 1995 (44 U.S.C.
chapter 35), the OCC, the Board, and the
FDIC (the ‘‘agencies’’) may not conduct
or sponsor, and the respondent is not
required to respond to, an information
collection unless it displays a currently
valid Office of Management and Budget
(OMB) control number. The Federal
Financial Institutions Examination
Council (FFIEC), of which the agencies
are members, has approved the
agencies’ publication for public
comment of a proposal to extend, with
revision, the Consolidated Reports of
Condition and Income (Call Report),
which are currently approved
collections of information. At the end of
the comment period, the comments and
recommendations received will be
analyzed to determine the extent to
which the FFIEC and the agencies
should modify the proposed revisions
prior to giving final approval. The
agencies will then submit the revisions
to OMB for review and approval.
DATES: Comments must be submitted on
or before November 24, 2008.
ADDRESSES: Interested parties are
invited to submit written comments to
any or all of the agencies. All comments,
which should refer to the OMB control
number(s), will be shared among the
agencies.
OCC: You should direct all written
comments to: Communications
Division, Office of the Comptroller of
the Currency, Public Information Room,
Mailstop 1–5, Attention: 1557–0081,
250 E Street, SW., Washington, DC
20219. In addition, comments may be
sent by fax to (202) 874–4448, or by
electronic mail to
[email protected]. For
security reasons, the OCC requires that
visitors make an appointment to inspect
SUMMARY:

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comments. You may do so by calling
(202) 874–5043. Upon arrival, visitors
will be required to present valid
government-issued photo identification
and submit to security screening in
order to inspect and photocopy
comments.
Board: You may submit comments,
which should refer to ‘‘Consolidated
Reports of Condition and Income, 7100–
0036,’’ by any of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments
on the http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
[email protected].
Include docket number in the subject
line of the message.
• Fax: 202–452–3819 or 202–452–
3102.
• Mail: Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. All public comments are
available from the Board’s Web site at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
Public comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FDIC: You may submit comments,
which should refer to ‘‘Consolidated
Reports of Condition and Income, 3064–
0052,’’ by any of the following methods:
• Agency Web Site: http://
www.fdic.gov/regulations/laws/federal/
propose.html. Follow the instructions
for submitting comments on the FDIC
Web site.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: [email protected].
Include ‘‘Consolidated Reports of
Condition and Income, 3064–0052’’ in
the subject line of the message.
• Mail: Herbert J. Messite (202–898–
6834), Counsel, Attn: Comments, Room
F–1052, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7 a.m. and 5 p.m.

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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices

Public Inspection: All comments
received will be posted without change
to http://www.fdic.gov/regulations/laws/
federal/propose.html including any
personal information provided.
Additionally, commenters may send a
copy of their comments to the OMB
desk officer for the agencies by mail to
the Office of Information and Regulatory
Affairs, U.S. Office of Management and
Budget, New Executive Office Building,
Room 10235, 725 17th Street, NW.,
Washington, DC 20503, or by fax to
(202) 395–6974.
FOR FURTHER INFORMATION CONTACT: For
further information about the revisions
discussed in this notice, please contact
any of the agency clearance officers
whose names appear below. In addition,
copies of the Call Report forms can be
obtained at the FFIEC’s Web site
(http://www.ffiec.gov/
ffiec_report_forms.htm).
OCC: Mary Gottlieb, OCC Clearance
Officer, (202) 874–5090, Legislative and
Regulatory Activities Division, Office of
the Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
Board: Michelle E. Shore, Federal
Reserve Board Clearance Officer, (202)
452–3829, Division of Research and
Statistics, Board of Governors of the
Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551.
Telecommunications Device for the Deaf
(TDD) users may call (202) 263–4869.
FDIC: Herbert J. Messite, Counsel,
(202) 898–6834, Legal Division, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The
agencies are proposing to revise and
extend for three years the Call Report,
which are currently approved
collections of information.
Report Title: Consolidated Reports of
Condition and Income (Call Report).
Form Number: Call Report: FFIEC 031
(for banks with domestic and foreign
offices) and FFIEC 041 (for banks with
domestic offices only).
Frequency of Response: Quarterly.
Affected Public: Business or other forprofit.

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OCC
OMB Number: 1557–0081.
Estimated Number of Respondents:
1,650 national banks.
Estimated Time per Response: 46.24
burden hours.
Estimated Total Annual Burden:
305,237 burden hours.
Board
OMB Number: 7100–0036.
Estimated Number of Respondents:
874 state member banks.

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Estimated Time per Response: 52.82
burden hours.
Estimated Total Annual Burden:
184,653 burden hours.
FDIC
OMB Number: 3064–0052.
Estimated Number of Respondents:
5,162 insured state nonmember banks.
Estimated Time per Response: 36.88
burden hours.
Estimated Total Annual Burden:
761,498 burden hours.
The estimated time per response for
the Call Report is an average that varies
by agency because of differences in the
composition of the institutions under
each agency’s supervision (e.g., size
distribution of institutions, types of
activities in which they are engaged,
and existence of foreign offices). The
average reporting burden for the Call
Report is estimated to range from 16 to
650 hours per quarter, depending on an
individual institution’s circumstances.
General Description of Reports
These information collections are
mandatory: 12 U.S.C. 161 (for national
banks), 12 U.S.C. 324 (for state member
banks), and 12 U.S.C. 1817 (for insured
state nonmember commercial and
savings banks). At present, except for
selected data items, these information
collections are not given confidential
treatment.
Abstract
Institutions submit Call Report data to
the agencies each quarter for the
agencies’ use in monitoring the
condition, performance, and risk profile
of individual institutions and the
industry as a whole. Call Report data
provide the most current statistical data
available for evaluating institutions’
corporate applications, for identifying
areas of focus for both on-site and offsite examinations, and for monetary and
other public policy purposes. The
agencies use Call Report data in
evaluating interstate merger and
acquisition applications to determine, as
required by law, whether the resulting
institution would control more than ten
percent of the total amount of deposits
of insured depository institutions in the
United States. Call Report data are also
used to calculate institutions’ deposit
insurance and Financing Corporation
assessments and national banks’
semiannual assessment fees.
Current Actions
I. Overview
The agencies are proposing to
implement several changes to the Call
Report requirements on a phased-in
basis during 2009 to better support their

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

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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
Call Report data needs in this area in
response to the amended accounting
standards would then be incorporated
into a formal proposal that the agencies
would publish with a request for
comment in accordance with the
requirements of the Paperwork
Reduction Act of 1995.
The agencies’ review also identified a
need for data on higher risk 1–4 family
residential mortgage loans, often
referred to as subprime mortgages, that
are either held by banks or serviced for
others and on residential mortgagebacked securities for which a significant
portion of the underlying mortgage
loans are higher risk. The agencies will
be developing a separate reporting
proposal that would request industry
comment on the collection of
information in the Call Report on these
higher risk residential mortgages and
residential mortgage-backed securities,
including proposed definitions for such
mortgages and securities. The proposal
would be published in the Federal
Register and the comments received
would assist the agencies in
determining whether and how to
proceed with the collection of data on
these mortgages and securities in the
Call Report.
With respect to the proposed Call
Report changes that are the subject of
this proposal, the revisions that would
take effect as of March 31, 2009,
include:
• The addition of new items in
response to a revised accounting
standard that will provide information
on held-for-investment loans and leases
acquired in business combinations;
• Revisions to several Call Report
schedules in response to accounting
changes applicable to noncontrolling
(minority) interests in consolidated
subsidiaries;
• Clarifications of the definition of
the term ‘‘loan secured by real estate’’
and of the instructions for reporting
unused commitments;
• The addition of a new item to be
reported annually on the bank’s fiscal
year-end date;
• Exemptions from reporting certain
existing Call Report items for banks
with less than $1 billion in total assets;
• Instructional guidance on
quantifying misstatements in the Call
Report; and
• The elimination of confidential
treatment for data collected on fiduciary
income, expenses, and losses.
The proposed Call Report revisions to
be implemented as of June 30, 2009,
include new or revised items for:
• Real estate construction and
development loans outstanding with
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such interest included in income for the
quarter (for banks with construction and
development loan concentrations);
• Holdings of collateralized debt
obligations and other structured
financial products by type of product
and underlying collateral;
• Holdings of commercial mortgagebacked securities;
• Unused commitments with an
original maturity of one year or less to
asset-backed commercial paper
conduits;
• Fair value measurements by level
for asset and liability categories reported
at fair value on a recurring basis (for
banks that have $500 million or more in
total assets, apply a fair value option, or
are required to complete the Call Report
trading schedule);
• Pledged loans and pledged trading
assets;
• Collateral held against over-thecounter (OTC) derivative exposures by
type of collateral and type of
counterparty as well as the current
credit exposure on OTC derivatives by
type of counterparty (for banks with $10
billion or more in total assets);
• Remaining maturities of unsecured
other borrowings and subordinated
notes and debentures;
• Investments in real estate ventures;
• Held-to-maturity and available-forsale securities in domestic offices (for
banks that have both domestic and
foreign offices);
• Past due and nonaccrual trading
assets;
• Credit derivatives by credit quality
and remaining maturity and by
regulatory capital treatment; and
• Whether the bank is a trustee or
custodian for certain types of accounts
or provides certain services in
connection with orders for securities
transactions regardless of whether the
bank exercises trust powers, which will
take the form of yes/no questions.
The proposed Call Report revisions
that would take effect December 31,
2009, apply only to Schedule RC–T,
Fiduciary and Related Services. These
revisions include:
• Breaking out foundations and
endowments as well as investment
advisory agency accounts as separate
types of fiduciary accounts in the
schedule’s sections for reporting
fiduciary and related assets and income;
• Adding items for Individual
Retirement Accounts and similar
accounts included in fiduciary and
related assets;
• Expanding the breakdown of
managed assets by type of asset to cover
all types of fiduciary accounts;
• Adding new asset types in the
breakdown of managed assets by type of
asset;

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• Revising the manner in which
discretionary investments in common
trust funds and collective investment
funds are reported in the breakdown of
managed assets by type of asset;
• Adding items for the market value
of discretionary investments in
proprietary mutual funds and the
number of managed accounts holding
such investments; and
• Adding items for the number and
principal amount outstanding of debt
issues in substantive default for which
the institution serves as indenture
trustee.
For the March 31, June 30, and
December 31, 2009, report dates, banks
may provide reasonable estimates for
any new or revised Call Report item
initially required to be reported as of
that date for which the requested
information is not readily available. The
specific wording of the captions for the
new or revised Call Report data items
discussed in this proposal and the
numbering of these data items should be
regarded as preliminary.
Type of Review: Revision and
extension of currently approved
collections.
II. Discussion of Revisions Proposed for
March 2009
A. Loans and Leases Acquired in
Business Combinations
Banks must apply Statement of
Financial Accounting Standards No. 141
(Revised), Business Combinations (FAS
141(R)), which was issued in December
2007, prospectively to business
combinations for which the acquisition
date is on or after the beginning of their
first annual reporting period beginning
on or after December 15, 2008. Thus, for
banks with calendar year fiscal years,
FAS 141(R) will apply to business
combinations with acquisition dates on
or after January 1, 2009. Under FAS
141(R), all business combinations are to
be accounted for by applying the
acquisition method.
Under current generally accepted
accounting principles, loans to be held
for investment that are acquired in a
business combination accounted for
using the purchase method generally are
recorded at ‘‘present values of amounts
to be received determined at appropriate
current interest rates, less allowances’’
for loan and lease losses (ALLL).2 Thus,
2 See Statement of Financial Accounting
Standards No. 141, Business Combinations (FAS
141), paragraph 57(b). This accounting treatment
does not apply to those acquired loans within the
scope of American Institute of Certified Public
Accountants Statement of Position 03–3,
Accounting for Certain Loans or Debt Securities
Acquired in a Transfer (SOP 03–03).

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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices

in practice, an acquired bank’s ALLL
generally is carried over to the acquiring
bank’s (consolidated) balance sheet. In
contrast, under FAS 141(R), a bank
acquiring loans to be held for
investment in a business combination
accounted for using the acquisition
method must record these loans at fair
value. The fair value of these loans
incorporates assumptions regarding
credit risk. As a result, FAS 141(R) does
not permit an acquiring bank to carry
over the acquired bank’s ALLL. This
same prohibition on carrying over the
ALLL would apply in those situations
when a bank must apply push down
accounting, which is the establishment
of a new accounting basis for a bank in
its separate financial statements and its
Call Report as a result of the bank
becoming substantially wholly owned
via a purchase transaction or a series of
purchase transactions.
Because of this significant change in
the accounting for acquired loans,
paragraph 68(h) of FAS 141(R) requires
the following disclosures about the
loans (not subject to SOP 03–3) and
leases that were acquired in each
business combination that occurred
during the reporting period:
• The fair value of the loans and
leases;
• The gross contractual amounts
receivable; and
• The best estimate at the acquisition
date of the contractual cash flows not
expected to be collected.
These disclosures are intended to
assist users of financial statements in
understanding the credit quality and
collectibility of the acquired loans and
leases at the time of their acquisition.
Accordingly, and in recognition of this
significant change in accounting
practice for business combinations, the
agencies are proposing to add new items
to the Call Report that would encompass
the three acquisition date disclosures
required by FAS 141(R) cited above for
the following categories of acquired
held-for-investment loans (not subject to
SOP 03–3) and leases:
• Loans secured by real estate;
• Commercial and industrial loans;
• Loans to individuals for household,
family, and other personal expenditures;
and
• All other loans and all leases.
These new items would be completed
by banks that have engaged in business
combinations that must be accounted
for in accordance with FAS 141(R) or
that have been involved in push down
accounting transactions to which the
measurement principles in FAS 141(R)
apply, i.e., in general, transactions for
which the acquisition date is on or after
January 1, 2009. A bank that has

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completed one or more business
combinations or has applied push down
accounting during the current calendar
year would report these acquisition date
data (as aggregate totals if multiple
business combinations have occurred)
in each Call Report submission after the
acquisition date during that year.
The agencies are also considering
whether banks that have engaged in
FAS 141(R) business combinations
should provide additional information
in the Call Report about the acquired
held-for-investment loans (not subject to
SOP 03–3) and leases and the loss
allowances established for them in
periods after their acquisition. The
agencies are considering requiring banks
to report the outstanding balance of
these acquired loans and leases, their
carrying amount, and the amount of the
allowance for post-acquisition losses on
these loans and leases, which is
consistent with the information that
banks currently report in the Call Report
about ‘‘purchased impaired loans’’
accounted for in accordance with SOP
03–3. Since these purchased loans will
be recorded at fair value at acquisition,
this information would help the
agencies and other users of the Call
Report to track management’s judgments
regarding the collectibility of the
acquired loans and leases in periods
after the acquisition date and evaluate
fluctuations in the level of the overall
ALLL as a percentage of the held-forinvestment loan and lease portfolio in
periods after a business combination.
However, the agencies recognize that
information about acquired loans and
leases and related allowances will
become less useful from an analytical
standpoint with the passage of time after
a business combination.
The agencies request comment on the
merits and availability of the postacquisition loan and lease data
described above that are being
considered for possible addition to the
Call Report and the period of time after
a business combination this information
should be reported (e.g., through the
end of the calendar year of the
acquisition, through the end of the
calendar year after the year of the
acquisition, for a longer period, or for
some other period such as the first four
calendar quarters after the acquisition).
B. Noncontrolling Interests in
Consolidated Financial Statements
In December 2007, the FASB issued
Statement No. 160, Noncontrolling
Interests in Consolidated Financial
Statements (FAS 160). FAS 160 requires
a bank to clearly present in its
consolidated financial statements the
equity ownership interest in and the

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financial statement results of its
subsidiaries that are attributable to the
noncontrolling ownership interests in
these subsidiaries. FAS 160 defines a
noncontrolling interest, also called a
minority interest, as the portion of
equity in a bank’s subsidiary not
attributable, directly or indirectly, to the
parent bank. Under FAS 160, the
ownership interests in subsidiaries held
by the noncontrolling interests must be
clearly identified, labeled, and
presented in the consolidated balance
sheet within equity capital, but separate
from the parent bank’s equity capital.
FAS 160 also requires that the amount
of consolidated net income attributable
to the bank and to the noncontrolling
interests in the bank’s subsidiaries be
clearly identified and presented on the
face of the consolidated income
statement. In this regard, the
consolidated income statement will
reflect the amount of the bank’s
consolidated net income, with separate
line items then indicating the portions
of the consolidated net income
attributable to the noncontrolling
interests and to the parent bank.
The agencies are proposing to make
several changes to conform the Call
Report to the presentation requirements
of FAS 160. The agencies propose to
amend Schedule RC, Balance Sheet, by
replacing item 22, ‘‘Minority interest in
consolidated subsidiaries,’’ which is
currently reported outside the Equity
Capital section, with a new item 27.b in
the Equity Capital section for
‘‘Noncontrolling (minority) interests in
consolidated subsidiaries.’’ The
agencies also propose to renumber and
rename Schedule RC, items 26 through
29 in the following manner:
• Item 26.a, ‘‘Retained earnings;’’
• Item 26.b, ‘‘Accumulated other
comprehensive income;’’
• Item 26.c, ‘‘Other equity capital
components;’’
• Item 27.a, ‘‘Total bank equity
capital (sum of items 23 through 26.c);’’
• Item 27.b, ‘‘Noncontrolling
(minority) interests in consolidated
subsidiaries;’’
• Item 28, ‘‘Total equity capital (sum
of items 27.a and 27.b);’’ and
• Item 29, ‘‘Total liabilities and
equity capital (sum of items 21 and
28).’’
The agencies also propose to adjust
certain captions in Schedule RC–R,
Regulatory Capital, to reflect these
changes to the Equity Capital section of
the Call Report balance sheet and to
conform to FAS 160. Schedule RC–R,
item 1, ‘‘Total equity capital (from
Schedule RC, item 28),’’ will be
renamed ‘‘Total bank equity capital
(from Schedule RC, item 27.a).’’

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Schedule RC–R, item 6, ‘‘Qualifying
minority interest in consolidated
subsidiaries,’’ will be renamed to
‘‘Qualifying noncontrolling (minority)
interest in consolidated subsidiaries.’’
Further, the agencies propose to
amend Schedule RI, Income Statement,
and Schedule RI–A, Changes in Equity
Capital, to add or revise items to
conform to FAS 160. In Schedule RI,
new items 12, ‘‘Net income (loss)
attributable to bank and noncontrolling
(minority) interests (sum of items 10
and 11),’’ and 13, ‘‘Less: Net income
(loss) attributable to noncontrolling
(minority) interests,’’ will be added to
identify the entity’s consolidated net
income and segregate net income
attributable to noncontrolling interests.
Current Schedule RI, item 12, ‘‘Net
income (loss) (sum of items 10 and 11),’’
will be renumbered as item 14 and
renamed ‘‘Net income (loss) attributable
to bank (item 12 minus item 13).’’ The
instructions to Schedule RI, item 7.d,
‘‘Other noninterest expense,’’ will be
amended to remove net income (or loss)
attributable to noncontrolling (minority)
interests from the current list of
components of ‘‘Other noninterest
expense.’’
Schedule RI–A will be retitled
Changes in Bank Equity Capital. In
Schedule RI–A, the following changes
will be made:
• Current item 1, ‘‘Total equity
capital most recently reported for the
December 31, 20xx, [previous calendar
year-end] Reports of Condition and
Income (i.e., after adjustments from
amended Reports of Income),’’ will be
renamed ‘‘Total bank equity capital
most recently reported for the December
31, 20xx, Reports of Condition and
Income (i.e., after adjustments from
amended Reports of Income);’’
• Current item 4, ‘‘Net income (loss)
(must equal Schedule RI, item 12),’’ will
be renamed ‘‘Net income (loss)
attributable to bank (must equal
Schedule RI, item 14);’’ and
• Current item 12, ‘‘Total equity
capital end of current period (sum of
items 3 through 11) (must equal
Schedule RC, item 28),’’ will be
renamed ‘‘Total bank equity capital end
of current period (sum of items 3
through 11) (must equal Schedule RC,
item 27.a).’’
The instructions to Schedule RI–A, item
5, ‘‘Sale, conversion, acquisition, or
retirement of capital stock, net,’’ will be
amended to state that increases and
decreases in bank equity capital
resulting from changes in a bank’s
ownership interest in a subsidiary while
it retains its controlling financial
interest in the subsidiary should be
reported in item 5.

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C. Clarification of the Definition of Loan
Secured by Real Estate
The agencies have found that the
definition of a ‘‘loan secured by real
estate’’ in the Glossary section of the
Call Report instructions has been
interpreted differently by Call Report
preparers and users. This has led to
inconsistent reporting of loans
collateralized by real estate in the loan
schedule (Schedule RC–C) and other
schedules of the Call Report that collect
loan data. As a result, the agencies are
proposing to clarify the definition by
explaining that the estimated value of
the real estate collateral must be greater
than 50 percent of the principal amount
of the loan at origination in order for the
loan to be considered secured by real
estate. Banks should apply this clarified
definition prospectively and they need
not reevaluate and, if appropriate,
recategorize loans that they currently
report as loans secured by real estate
into other loan categories on the Call
Report loan schedule.
The revised definition of a ‘‘loan
secured by real estate’’ would read as
follows:
For purposes of these reports, a loan
secured by real estate is a loan secured
wholly or substantially by a lien or liens on
real property for which the lien or liens are
central to the extension of the credit—that is,
the borrower would not have been extended
credit in the same amount or on terms as
favorable without the lien or liens on real
property. To be considered wholly or
substantially secured by a lien or liens on
real property, the estimated value of the real
estate collateral (after deducting any more
senior liens) must be greater than 50 percent
of the principal amount of the loan at
origination. A loan satisfying the criteria
above, except a loan to a state or political
subdivisions in the U.S., is to be reported as
a loan secured by real estate in the Reports
of Condition and Income, (1) regardless of
whether the loan is secured by a first or a
junior lien; (2) regardless of the department
within the bank or bank subsidiary that made
the loan; (3) regardless of how the loan is
categorized in the bank’s records; (4) and
regardless of the purpose of the financing.
Only in a transaction where a lien or liens
on real property (with an estimated collateral
value greater than 50 percent of the loan’s
principal amount at origination) have been
taken as collateral solely through an
abundance of caution and where the loan
terms as a consequence have not been made
more favorable than they would have been in
the absence of the lien or liens, would the
loan not be considered a loan secured by real
estate for purposes of the Reports of
Condition and Income. In addition, when a
loan is partially secured by a lien or liens on
real property, but the estimated value of the
real estate collateral (after deducting any
more senior liens) is 50 percent or less of the
principal amount of the loan at origination,
the loan should not be categorized as a loan

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secured by real estate. Instead, the loan
should be reported in one of the other loan
categories used in these reports based on the
purpose of the loan.

D. Clarification of Instructions for
Unused Commitments
Banks report unused commitments in
Schedule RC–L, item 1. The instructions
for this item identify various
arrangements that should be reported as
unused commitments, including but not
limited to commitments for which the
bank has charged a commitment fee or
other consideration, commitments that
are legally binding, loan proceeds that
the bank is obligated to advance,
commitments to issue a commitment,
and revolving underwriting facilities.
However, the agencies have found that
some banks have not reported
commitments that they have entered
into until they have signed the loan
agreement for the financing that they
have committed to provide. Although
the agencies consider these
arrangements to be within the scope of
the existing instructions for reporting
commitments in Schedule RC–L, they
believe that these instructions may not
be sufficiently clear. Therefore, the
agencies are proposing to revise the
instructions for Schedule RC–L, item 1,
‘‘Unused commitments,’’ to read as
follows:
Report in the appropriate subitem the
unused portions of commitments. Unused
commitments are to be reported gross, i.e.,
include in the appropriate subitem the
amounts of commitments acquired from and
conveyed to others.

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

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

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mutual funds and annuities (in
domestic offices);’’
• Schedule RC–B, Memorandum
items 5.a through 5.f, ‘‘Asset-backed
securities,’’ on the FFIEC 031 report;3
• Schedule RC–L, item 2.a, ‘‘Amount
of financial standby letters of credit
conveyed to others;’’ and
• Schedule RC–L, item 3.a, ‘‘Amount
of performance standby letters of credit
conveyed to others.’’
G. Quantifying Misstatements in the
Call Report
The General Instructions section of
the Call Report instructions discusses
the filing of amended Call Reports. In
this regard, the instructions state that:
When dealing with the recognition
and measurement of events and
transactions in the Call Report,
amended reports may be required if a
bank’s primary federal bank supervisory
authority determines that the reports as
previously submitted contain errors that
are material for the reporting bank.
Materiality is a qualitative characteristic
of accounting information which is
defined in Financial Accounting
Standards Board (FASB) Concepts
Statement No. 2 as ‘‘the magnitude of an
omission or misstatement of accounting
information that, in the light of
surrounding circumstances, makes it
probable that the judgment of a
reasonable person relying on the
information would have been changed
or influenced by the omission or
misstatement.’’
FASB Statement No. 154, Accounting
Changes and Error Corrections (FAS
154), provides guidance for reporting
the correction of an error or
misstatement in previously issued
financial statements. An error or
misstatement can result from
mathematical mistakes, mistakes in the
application of generally accepted
accounting principles, or oversight or
misuse of facts that existed at the time
the financial statements were prepared,
and includes a change from an
accounting principle that is not
generally accepted to one that is
generally accepted. The Glossary entry
for ‘‘Accounting Changes’’ in the Call
Report instructions includes a section
on ‘‘Corrections of Accounting Errors’’
that provides guidance on reporting
such corrections that is consistent with
FAS 154. However, neither FAS 154 nor
the Glossary entry for ‘‘Accounting
Changes’’ specifies the appropriate
method to quantify an error or
3 On the FFIEC 041 report, banks with less than
$1 billion in assets are currently exempt from
completing these Memorandum items.

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misstatement for purposes of evaluating
materiality.
In September 2006, the SEC staff
noted in Staff Accounting Bulletin No.
108, Considering the Effects of Prior
Year Misstatements when Quantifying
Misstatements in Current Year Financial
Statements (SAB 108),4 that in
describing the concept of materiality,
FASB Concepts Statement No. 2,
Qualitative Characteristics of
Accounting Information, indicates that
materiality determinations are based on
whether ‘‘it is probable that the
judgment of a reasonable person relying
upon the report would have been
changed or influenced by the inclusion
or correction of the item’’ (emphasis
added). The staff believes registrants
must quantify the impact of correcting
all misstatements, including both the
carryover and reversing effects of prior
year misstatements, on the current year
financial statements.
SAB 108 describes two approaches,
generally referred to as ‘‘rollover’’ and
‘‘iron curtain,’’ that have been
commonly used to accumulate and
quantify misstatements. The rollover
approach ‘‘quantifies a misstatement
based on the amount of the error
originating in the current year income
statement,’’ which ‘‘ignores the
‘carryover effects’ of prior year
misstatements.’’ In contrast, the ‘‘iron
curtain approach quantifies a
misstatement based on the effects of
correcting the misstatement existing in
the balance sheet at the end of the
current year, irrespective of the
misstatement’s year(s) of origination.’’
Because each of these approaches has its
weaknesses, SAB 108 advises that the
impact of correcting all misstatements
on current year financial statements
should be accomplished by quantifying
an error under both the rollover and
iron curtain approaches and by
evaluating the error measured under
each approach. When either approach
results in a misstatement that is
material, after considering all relevant
quantitative and qualitative factors, an
adjustment to the financial statements
would be required. Guidance on the
consideration of all relevant factors
when assessing the materiality of
misstatements is provided in the SEC’s
Staff Accounting Bulletin No. 99,
Materiality (SAB 99).5 SAB 108 observes
that when the correction of an error in
4 SAB 108 can be accessed at http://www.sec.gov/
interps/account/sab108.pdf. SAB 108 has been
codified as Topic 1.N. in the SEC’s Codification of
Staff Accounting Bulletins.
5 SAB 99 can be accessed at http://www.sec.gov/
interps/account/sab99.htm. SAB 99 has been
codified as Topic 1.M. in the SEC’s Codification of
Staff Accounting Bulletins.

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the current year would materially
misstate the current year’s financial
statements because the correction
includes the effect of the prior year
misstatements, the prior year financial
statements should be corrected.
The agencies have advised banks that,
for Call Report purposes, a bank that is
a public company or a subsidiary of a
public company should apply the
guidance from SAB 108 and SAB 99
when quantifying the impact of
correcting misstatements, including
both the carryover and reversing effects
of prior year misstatements, on their
current year Call Reports.6 The agencies
believe that the guidance in SAB 108
and SAB 99 represents sound
accounting practices that all banks,
including those that are not public
companies, should follow for purposes
of quantifying misstatements and
considering all relevant factors when
assessing the materiality of
misstatements in their Call Reports.
Accordingly, the agencies are proposing
to incorporate the guidance in these two
Staff Accounting Bulletins into the
section of the ‘‘Accounting Changes’’
Glossary entry on error corrections,
thereby establishing a single approach
for quantifying misstatements in the
Call Report that would be applicable to
all banks. The Glossary entry would
explain that the impact of correcting all
misstatements on current year Call
Reports should be accomplished by
quantifying an error under both the
rollover and iron curtain approaches
and by evaluating the error measured
under each approach. When either
approach results in a misstatement that
is material, after considering all relevant
quantitative and qualitative factors,
appropriate adjustments to Call Reports
would be required.
H. Eliminating Confidential Treatment
for Fiduciary Income, Expense, and Loss
Data
An important public policy issue for
the agencies has been how to use market
discipline to complement supervisory
resources. Market discipline relies on
market participants having sufficient
appropriate information about the
financial condition and risks of banks.
The Call Report, in particular, is widely
used by securities analysts, rating
agencies, and large institutional
investors as sources of bank-specific
data. Disclosure that increases
transparency should lead to more
accurate market assessments of
6 For example, see the Call Report Supplemental
Instructions for June 2007 at http://www.ffiec.gov/
PDF/FFIEC_forms/
FFIEC031_041_suppinst_200706.pdf.

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individual banks’ performance and
risks. This, in turn, should result in
more effective market discipline on
banks.
Despite this emphasis on market
discipline, the FFIEC and the agencies
currently accord confidential treatment
to the information that certain
institutions report in Call Report
Schedule RC–T, Fiduciary and Related
Services, on fiduciary and related
services income, expenses, and losses
(items 12 through 18, items 19.a through
23, and Memorandum item 4).
Approximately 400 institutions that
exercise fiduciary powers and have
either total fiduciary assets greater than
$250 million or gross fiduciary and
related services income greater than 10
percent of revenue report their fiduciary
and related services income quarterly
and expenses and losses annually as of
year-end. Around 200 institutions that
exercise fiduciary powers, have total
fiduciary assets greater than $100
million but less than or equal to $250
million, and do not meet the fiduciary
income test mentioned above report
their fiduciary and related services
income, expenses, and losses annually
as of year-end. An additional 1,000
institutions that exercise fiduciary
powers, have total fiduciary assets of
$100 million or less, and do not meet
the fiduciary income test mentioned
above are exempt from reporting their
fiduciary and related services income,
expenses, and losses.
Data on fiduciary and related services
income, expenses, and losses (except for
gross fiduciary and related services
income, which is also reported in each
institution’s Call Report income
statement) are the only financial
information currently collected on the
Call Report that is treated as
confidential on an individual institution
basis. Nevertheless, the agencies publish
aggregate data derived from these
confidential items. The agencies have
accorded confidential treatment to the
fiduciary services income data for
individual institutions since it began to
be collected in 1997 in a separate report,
the Annual Report of Trust Assets
(FFIEC 001). Confidential treatment was
retained when the reporting of trust data
was incorporated into the Call Report
and the separate trust report was
eliminated in 2001. However, the
agencies do not preclude institutions
from publicly disclosing the fiduciary
and related services income, expense,
and loss data that the agencies treat as
confidential.
The agencies originally applied this
confidential treatment to the fiduciary
and related services income, expense,
and loss information because these data

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generally pertain to only a portion of a
reporting institution’s total operations
and not to the institution as a whole.
However, the agencies make publicly
available on an individual bank basis
the Call Report data they collect on
income and expenses from foreign
offices from banks with such offices
where foreign activities exceed certain
levels even though these data pertain to
only a portion of these banks’ total
operations.
In addition, under the Uniform
Interagency Trust Rating System, the
agencies assign a rating to the earnings
of an institution’s fiduciary activities at
those institutions with fiduciary assets
of more than $100 million, which are
also the institutions that report their
fiduciary and related services income,
expenses, and losses in Call Report
Schedule RC–T. The agencies’
evaluation of an institution’s trust
earnings considers such factors as the
profitability of fiduciary activities in
relation to the size and scope of those
activities and the institution’s overall
business, taking this into account by
functions and product lines. Although
the agencies’ ratings for individual
institutions are not publicly available,
the reason for rating the trust earnings
of institutions with more than $100
million in fiduciary assets—its effect on
the financial condition of the
institution—means that fiduciary and
related services income, expense, and
loss information for these institutions is
also relevant to market participants and
others in the public as they seek to
evaluate the financial condition and
performance of individual institutions.
Increasing the transparency of
institutions’ fiduciary activities by
making individual institutions’
fiduciary income, expense, and loss data
available to the public should improve
the market’s ability to assess these
institutions’ performance and risks and
thereby enhance market discipline.
Accordingly, the agencies are proposing
to eliminate the confidential treatment
for the data on fiduciary and related
services income, expenses, and losses
that are reported in Schedule RC–T
beginning with the amounts reported as
of March 31, 2009. Fiduciary and
related services income, expense, and
loss data reported in Schedule RC–T for
report dates prior to March 31, 2009,
would remain confidential.
III. Discussion of Revisions Proposed for
June 2009
A. Construction and Development Loans
With Interest Reserves
In December 2006, the agencies issued
final guidance on commercial real estate

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(CRE) loans, including construction,
land development, and other land (C&D)
loans, entitled Concentrations in
Commercial Real Estate Lending, Sound
Risk Management Practices (CRE
Guidance).7 This guidance was
developed to reinforce sound risk
management practices for institutions
with high and increasing concentrations
of commercial real estate loans on their
balance sheets. It provides a framework
for assessing CRE concentrations; risk
management, including board and
management oversight, portfolio
management, management information
systems, market analysis and stress
testing, underwriting and credit risk
review; and supervisory oversight,
including CRE concentration
management and an assessment of
capital adequacy.
In issuing the CRE Guidance, the
agencies noted that CRE concentrations
had been rising over the past several
years and had reached levels that could
create safety and soundness concerns in
the event of a significant economic
downturn. As a consequence, the CRE
Guidance explains that, as part of their
ongoing supervisory monitoring
processes, the agencies would use
certain criteria to identify institutions
that are potentially exposed to
significant CRE concentration risk.
Thus, the CRE Guidance states in part
that an institution whose total reported
construction, land development, and
other land loans is approaching or
exceeds 100 percent or more of the
institution’s total risk-based capital may
be identified for further supervisory
analysis of the level and nature of its
CRE concentration risk. As of March 31,
2008, approximately 28 percent of all
banks held C&D loans in excess of 100
percent of their total risk-based capital.
A practice that is common in C&D
lending is the establishment of an
interest reserve as part of the original
underwriting of a C&D loan. The interest
reserve account allows the lender to
periodically advance loan funds to pay
interest charges on the outstanding
balance of the loan. The interest is
capitalized and added to the loan
balance. Frequently, C&D loan budgets
will include an interest reserve to carry
the project from origination to
completion and may cover the project’s
anticipated sell-out or lease-up period.
Although potentially beneficial to the
lender and the borrower, the use of
interest reserves carries certain risks. Of
particular concern is the possibility that
an interest reserve could disguise
problems with a borrower’s willingness
and ability to repay the debt consistent
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with the terms and conditions of the
loan agreement. For example, a C&D
loan for a project on which construction
ceases before it has been completed or
is not completed in a timely manner
may appear to be performing if the
continued capitalization of interest
through the use of an interest reserve
keeps the troubled loan current. This
practice can erode collateral protection
and mask loans that should otherwise
be reported as delinquent or in
nonaccrual status.
Since the CRE Guidance was issued,
market conditions have weakened, most
notably in the C&D sector. As this
weakening has occurred, the agencies’
examiners are encountering C&D loans
on projects that are troubled, but where
interest has been capitalized
inappropriately, resulting in overstated
income and understated volumes of past
due and nonaccrual C&D loans.
Therefore, to assist the agencies in
monitoring C&D lending activities at
those banks with a concentration of
such loans, i.e., C&D loans (in domestic
offices) that exceeded 100 percent of
total risk-based capital as of the
previous calendar year-end, the agencies
are proposing to add two new Call
Report items. First, banks with such a
concentration would report the amount
of C&D loans (in domestic offices)
included in the Call Report loan
schedule (Schedule RC–C) on which the
use of interest reserves is provided for
in the loan agreement. Second, these
banks would report the amount of
capitalized interest included in the
interest and fee income on loans during
the quarter. These data, together with
information that banks currently report
on the amount of past due and
nonaccrual C&D loans, will assist in
identifying banks with C&D loan
concentrations that may be engaging in
questionable interest capitalization
practices for supervisory follow-up.
B. Structured Financial Products
Carried in Securities and Trading
Portfolios
Structured financial products such as
collateralized debt obligations (CDOs)
have become increasingly more complex
and the volume of these financial
products has increased substantially in
recent years. Structured financial
products generally convert a large pool
of assets and other exposures (such as
derivatives and third-party guarantees)
into tradable capital market debt
instruments. Some of the more complex
financial product structures mix asset
classes in an attempt to create
investment products that diversify risk.
In recent years, increasingly complex
structured financial products have

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become more widely held as
investments and trading assets, allowing
investors and traders to acquire
positions in a pool of assets with
varying risks and rewards depending on
the underlying collateral or reference
assets. Synthetic structured financial
products use credit derivatives and a
reference pool of assets, which has led
to the creation of hybrid products,
which are a combination of cash and
synthetic structured financial products.
Further, complex products known as
CDOs ‘‘squared,’’ which are CDOs
backed primarily by the tranches of
other CDOs, have contributed to the
opacity and inability of investors to
understand the performance of these
highly complex products.
Some holders of structured financial
products have sustained financial losses
due to defaults and losses on the
underlying assets and other exposures.
In addition, reduced market liquidity
has contributed to significant fair value
declines and lack of price transparency
for other structured financial products.
These recent market events have
demonstrated the need for the agencies
to collect more comprehensive
information on investment products
with significant market, credit,
liquidity, and valuation risks in order to
identify and monitor banks with
exposures to these products and to track
such exposures for the industry as a
whole.
Currently, banks separately report
their holdings of regular mortgagebacked securities (MBS) (such as
mortgage-backed pass-through
securities, collateralized mortgage
obligations, and real estate mortgage
investment conduits) in the Call Report
securities schedule (Schedule RC–B) or
trading schedule (Schedule RC–D), as
appropriate. All banks separately report
their holdings of held-to-maturity and
available-for-sale asset-backed securities
(ABS) in the securities schedule. Those
banks with large trading portfolios
separately report their held-for-trading
ABS in the trading schedule. Banks’
holdings of all other debt securities not
issued by governmental entities in the
U.S. are reported as ‘‘Other debt
securities’’ in either the securities or
trading schedule, as appropriate.
However, the more complex structured
financial products discussed above are
not separately reported in Schedules
RC–B and RC–D, but are currently
reported in other line items within these
two schedules.
Therefore, the agencies propose to
separately collect certain structured
financial product data in both the
securities and trading schedules of the
Call Report. First, the agencies would

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add line items to collect information on
certain structured financial products by
type of structure (cash, synthetic, and
hybrid). Each of these three new line
items would cover CDOs, collateralized
loan obligations (CLOs), collateralized
bond obligations (CBOs), CDOs squared
and cubed, and similar structured
financial products.8 These new line
items would be added to the body of the
securities schedule and the trading
schedule. In Schedule RC–B, the
amortized cost and fair value of these
three types of structures will be reported
using the current four-column format
that distinguishes between held-tomaturity and available-for-sale
securities. In Schedule RC–D, the fair
value of these three types of structures
would be reported. Since the new items
on structured financial products would
include CDOs, the agencies will delete
existing Memorandum items 5.a and 5.b
from the trading schedule (Schedule
RC–D).
Second, the agencies would collect
information on these complex
structured financial products by the
predominant type of collateral
supporting the structures in new
memorandum items in both Schedule
RC–B and Schedule RC–D. The
collateral supporting these products has
distinct risk characteristics and the new
information will provide the agencies
with greater insight into the risks
associated with the various
collateralized structured financial
products. The structured financial
products would be reported according
to the following types of collateral:
• Trust preferred securities issued by
financial institutions;
• Trust preferred securities issued by
real estate investment trusts;
• Corporate and similar loans; 9
• 1–4 family residential MBS issued
or guaranteed by U.S. governmentsponsored enterprises (GSEs);
• 1–4 family residential MBS not
issued or guaranteed by GSEs;
• Diversified (mixed) pools of
structured financial products such as
CDOs squared and cubed (also known as
‘‘pools of pools’’); and
• Other collateral.
In Schedule RC–B, amortized cost and
fair value would be reported by the
predominant type of collateral
supporting the structure based on
8 These new line items would not include
mortgage-backed and asset-backed commercial
paper, which would continue to be reported as MBS
and ABS, respectively, in Schedules RC–B and RC–
D.
9 Securities backed by commercial and industrial
loans that are commonly regarded as ABS rather
than CLOs in the marketplace would continue to be
reported as ABS in Schedules RC–B and RC–D.

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whether the products are classified as
held-to-maturity or available-for-sale. In
Schedule RC–D, the fair value of these
products would be reported by
predominant type of collateral
supporting the structure.
C. Holdings of Commercial MortgageBacked Securities
At present, all banks report
information on their holdings of held-tomaturity and available-for-sale MBS in
Schedule RC–B, Securities, without
distinguishing between residential and
commercial MBS. Banks with average
trading assets of $2 million or more in
any of the four preceding calendar
quarters provide information on MBS
held for trading in Schedule RC–D, but
only those with average trading assets of
$1 billion or more disclose the amount
of their residential and commercial
MBS.
Differences in residential mortgages
and commercial mortgages carry
through to MBS backed by these two
types of mortgages. In contrast to
residential mortgage loans, commercial
mortgage loans are normally
nonrecourse, which means that if the
borrower defaults, the creditor cannot
seize any other assets of the borrower.
As a consequence, the ability of the
underlying commercial real estate to
produce income and the value of the
property are key factors when assessing
the credit risk of commercial MBS. In
addition, the prepayment risk of
commercial MBS is lower than on
residential MBS because commercial
mortgages normally place restrictions on
prepayment that typically are not
present on residential mortgages.
Furthermore, the residential real estate
market often performs differently than
the commercial real estate market.
Given the differences between
residential and commercial MBS, the
agencies are proposing to revise the
reporting of MBS in Schedule RC–B,
Securities, and Schedule RC–D, Trading
Assets and Liabilities, in order to
separately identify and track bank
holdings of commercial MBS. In
Schedule RC–B, items 4.a, ‘‘Passthrough securities,’’ and 4.b, ‘‘Other
mortgage-backed securities,’’ would be
revised to cover only residential MBS.
New items 4.c.(1) and (2) would be
added for ‘‘Commercial pass-through
securities’’ and ‘‘Other commercial
mortgage-backed securities.’’ Similarly,
in Schedule RC–D, items 4.a through 4.c
would cover only residential MBS and
a new item 4.d would collect data on
‘‘Commercial mortgage-backed
securities.’’ These new and revised
items would replace Memorandum
items 4.a, ‘‘Residential mortgage-backed

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securities,’’ and 4.b, ‘‘Commercial
mortgage-backed securities,’’ in
Schedule RC–D, which are currently
completed only by banks with average
trading assets of $1 billion or more in
any of the four preceding calendar
quarters.

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D. Unused Eligible Liquidity Facilities
for Asset-Backed Commercial Paper
(ABCP) Conduits With an Original
Maturity of One Year or Less
Under the agencies’ risk-based capital
guidelines, banks are required to hold
capital against the unused portions of
eligible liquidity facilities that provide
support to ABCP programs. The capital
guidelines apply different risk-based
capital requirements to eligible liquidity
facilities based on the original maturity
of the facilities. Banks are currently
required to hold less capital against
eligible liquidity facilities with original
maturities of one year or less than
against liquidity facilities with original
maturities in excess of one year.
However, because of the current
structure of Schedule RC–R, Regulatory
Capital, the instructions for the
schedule direct banks to report the
credit equivalent amount of both types
of eligible liquidity facilities in item 53,
‘‘Unused commitments with an original
maturity exceeding one year.’’ The
reporting of both types of eligible
liquidity facilities in a single item has
been accomplished by having banks
adjust the credit equivalent amount of
eligible liquidity facilities with original
maturities of one year or less to produce
the effect of the lower capital charge
applicable to such liquidity facilities.
This approach does not promote
transparency with respect to the actual
credit equivalent amount of eligible
liquidity facilities with original
maturities of one year or less and does
not allow for verification of the accuracy
of the credit converting and risk
weighting of these exposures.
To address these concerns, the
agencies propose to renumber Schedule
RC–R, item 53 as item 53.a and add a
new item 53.b, ‘‘Unused commitments
with an original maturity of one year or
less to asset-backed commercial paper
conduits,’’ to Schedule RC–R. The credit
conversion factor applied to amounts
reported in item 53.b, column A, would
be 10 percent.
E. Fair Value Measurements
Effective for the March 31, 2007,
report date, the banking agencies began
collecting information on certain assets
and liabilities measured at fair value on
Call Report Schedule RC–Q, Financial
Assets and Liabilities Measured at Fair
Value. Currently, this schedule is

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completed by banks with a significant
level of trading activity or that use a fair
value option. The information collected
on Schedule RC–Q is intended to be
consistent with the fair value
disclosures and other requirements in
FASB Statement No. 157, Fair Value
Measurements (FAS 157).
Based on the banking agencies’
ongoing review of industry reporting
and disclosure practices since the
inception of this standard, and the
reporting of items at fair value on
Schedule RC, Balance Sheet, the
agencies are proposing to expand the
data collected on Schedule RC–Q in two
material respects.
First, to improve the consistency of
data collected on Schedule RC–Q with
the FAS 157 disclosure requirements
and industry disclosure practices, the
agencies are proposing to expand the
detail of the collected data. The agencies
are proposing to expand the detail on
Schedule RC–Q to collect fair value
information on all assets and liabilities
reported at fair value on a recurring
basis in a manner consistent with the
asset and liability breakdowns on
Schedule RC. Thus, the agencies are
proposing to add items to collect fair
value information on:
• Available-for-sale securities;
• Federal funds sold and securities
purchased under agreements to resell;
• Federal funds purchased and
securities sold under agreements to
repurchase;
• Other borrowed money; and
• Subordinated notes and debentures.
The agencies also are proposing to
modify the existing collection of loan
and lease data and trading asset and
liability data to collect data separately
for:
• Loans and leases held for sale;
• Loans and leases held for
investment;
• Trading derivative assets;
• Other trading assets;
• Trading derivative liabilities; and
• Other trading liabilities.
The agencies would also add totals to
capture total assets and total liabilities
for items reported on the schedule. In
addition, the agencies are proposing to
modify the existing items for ‘‘other
financial assets and servicing assets’’
and ‘‘other financial liabilities and
servicing liabilities’’ to collect
information on ‘‘other assets’’ and
‘‘other liabilities’’ reported at fair value
on a recurring basis, including
nontrading derivatives.
Components of ‘‘other assets’’ and
‘‘other liabilities’’ would be separately
reported if they are greater than $25,000
and exceed 25 percent of the total fair
value of ‘‘other assets’’ and ‘‘other

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liabilities,’’ respectively. In conjunction
with this change, the existing reporting
for loan commitments accounted for
under a fair value option would be
revised to include these instruments,
based on whether their fair values are
positive or negative, in the items for
‘‘other assets’’ and ‘‘other liabilities’’
reported at fair value on a recurring
basis, with separate disclosure of these
commitments if significant.
Second, the agencies are proposing to
modify the reporting criteria for
Schedule RC–Q. The current
instructions require all banks that have
adopted FAS 157 and (1) have elected
to account for financial instruments or
servicing assets and liabilities at fair
value under a fair value option or (2) are
required to complete Schedule RC–D,
Trading Assets and Liabilities, to
complete Schedule RC–Q. The agencies
are proposing to maintain this reporting
requirement for banks that use a fair
value option or that have significant
trading activity. In addition, the
agencies are proposing to extend the
requirement to complete Schedule
RC–Q to all banks that reported $500
million or more in total assets at the
beginning of their fiscal year, regardless
of whether they have elected to apply a
fair value option to financial or
servicing assets and liabilities. Thus,
Schedule RC–Q would be completed by
all banks that are required to obtain an
independent annual financial statement
audit pursuant to Part 363 of the FDIC’s
regulations and are therefore required to
include the FAS 157 fair value
disclosures in their financial statements.
The banking agencies have
determined that the proposed
information is necessary to more
accurately assess the impact of fair
value accounting and fair value
measurements for safety and soundness
purposes. The collection of the
information on Schedule RC–Q, as
proposed, will facilitate and enhance
the banking agencies’ ability to monitor
the extent of fair value accounting in
banks’ Reports of Condition, including
the elective use of fair value accounting
and the nature of the inputs used in the
valuation process, pursuant to the
disclosure requirements of FAS 157.
The information collected on Schedule
RC–Q is consistent with the disclosures
required by FAS 157 and consistent
with industry practice for reporting fair
value measurements and should,
therefore, not impose significant
incremental burden on banks.

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F. Pledged Loans in Loan and Trading
Portfolios and Pledged Trading
Securities
Banks have been pledging loans for
many years and the volume of these
pledges has grown considerably in
recent years. Pledging of bank loans is
the act of setting aside certain loans to
secure or collateralize bank transactions
with the bank continuing to own the
loans unless the bank defaults on the
transaction. Pledging is used for
securing public deposits, repurchase
agreements, and other bank borrowings.
Pledging affects a bank’s liquidity and
other asset and liability management
programs.
Today there are a number of
alternative funding structures used by
banks that require banks to pledge
loans. Some of these funding structures
include pledging on-balance sheet loans
to finance and support securitization
structures held by the bank that do not
meet sales treatment, pledging loans to
secure borrowings from a Federal Home
Loan Bank, and packaging of on-balance
sheet loans to collateralize bonds sold
by banks. Currently, the Call Report
does not provide information on the
volume of pledged loans. Therefore, the
banking agencies propose to collect the
total amount of held-for-sale and heldfor-investment loans and leases reported
in Schedule RC–C, Loans and Lease
Financing Receivables, that are pledged
and the total amount of pledged loans
that are carried in the trading portfolio
and reported in Schedule RC–D,
Trading Assets and Liabilities.
In addition, although the agencies
have long collected data on total amount
of held-to-maturity and available-forsale securities reported in Schedule RC–
B, Securities, that are pledged, banks
have not been required to report the
amount of securities carried in the
trading portfolio that are pledged.
Therefore, for reasons similar to those
for collecting data on pledged loans, the
agencies are proposing to add an item to
Schedule RC–D to capture the amount
of pledged trading securities.

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G. Collateral for OTC Derivative
Exposures and Distribution of Credit
Exposures
The growth in banks’ OTC derivatives
and the related counterparty credit
exposures has been significant in recent
years. For some major dealer banks, the
counterparty credit risk from OTC
derivatives rivals or exceeds their
commercial and industrial loans
outstanding. Despite the magnitude of
these derivative exposures, there is
virtually no information on OTC
derivative counterparty credit exposures

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and associated risk mitigation in the
Call Report.
Given the size of OTC derivative
counterparty credit exposures, and the
important risk mitigation provided by
collateral held to offset or mitigate such
exposures, information on the
distribution of each would assist the
agencies in their oversight and
supervision of banks engaging in OTC
derivative activities. Therefore, the
agencies propose to collect data in
Schedule RC–L, Derivatives and OffBalance Sheet Items, that will provide a
breakdown of the fair value of collateral
posted for OTC derivative exposures by
type of collateral and type of derivative
counterparty and a separate breakdown
of the current credit exposure on OTC
derivatives by type of counterparty. This
information would give the agencies
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.
Since a majority of OTC derivative
transactions are conducted in larger
banks, only banks with total assets of
$10 billion or more would be required
to report the proposed new data. These
banks would report, using a matrix, the
collateral’s fair value allocated by type
of counterparty and type of collateral as
well as the current credit exposure
associated with each type of
counterparty. The proposed types of
collateral for which the fair value would
be reported are (a) cash—U.S. dollar; (b)
cash—Other currencies; (c) U.S.
Treasury securities; (d) U.S.
Government agency and U.S.
Government-sponsored agency debt
securities; (e) corporate bonds; (f) equity
securities; and (g) all other collateral.10
The fair value of the collateral would be
reported according to the following
types of counterparties: (a) Banks and
securities firms; (b) monoline financial
guarantors; (c) hedge funds; (d)
sovereign governments; and (e)
corporations and all other
counterparties. The current credit
exposure (after considering the effect of
master netting agreements with OTC
derivative counterparties) would also be
reported for these five types of
counterparties. The total current credit
exposure from OTC derivative
exposures that would be reported for
these counterparties in Schedule RC–L
would not necessarily equal the current
10 All other collateral would include, but not be
limited to, mortgage-backed securities, asset-backed
securities, and structured financial products.

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credit exposure in the Call Report’s
regulatory capital schedule (Schedule
RC–R) because the amount reported in
Schedule RC–R excludes derivatives not
covered by the risk-based capital
standards.
H. Maturity Distributions of Unsecured
Other Borrowings and Subordinated
Debt
As part of the Omnibus Budget
Reconciliation Act of 1993, Congress
enacted depositor preference legislation
that elevated the claims of depositors in
domestic offices (and in insured
branches in Puerto Rico and U.S.
territories and possessions) over the
claims of general unsecured creditors in
a bank failure. When a bank fails, the
claims of general unsecured creditors
provide a cushion that lowers the cost
of the failure to the Deposit Insurance
Fund (DIF) administered by the FDIC.
The greater the amount of general
unsecured creditor claims, the greater
the cushion and the lower the cost of
the failure to the DIF.
The FDIC is considering proposing an
adjustment to the risk-based assessment
system so that insured depository
institutions with greater amounts of
general unsecured long-term liabilities
will be rewarded with a lower
assessment rate. Currently, the Call
Reports lacks information regarding the
remaining maturities of unsecured
‘‘other borrowings’’ and subordinated
notes and debentures. Therefore, the
agencies are proposing to collect this
information in the Call Report so that
the FDIC would be able to implement
such an adjustment. More specifically,
banks would report separate maturity
distributions for ‘‘other borrowings’’ (as
defined for Schedule RC–M, item 5.b)
that are unsecured and for subordinated
notes and debentures (as defined for
Schedule RC, item 19) in Schedule
RC–O, Other Data for Deposit Insurance
and FICO Assessments. The maturity
distributions would include remaining
maturities of one year or less, over one
year through three years, over three
years through five years, and over five
years.
I. Investments in Real Estate Ventures
At present, a bank with investments
in real estate ventures reports real estate
(other than bank premises) owned or
controlled by the bank and its
consolidated subsidiaries that is held for
investment purposes as a component of
‘‘Other real estate owned’’ in Schedule
RC–M, item 3.a. If a bank has
investments in real estate ventures in
the form of investments in subsidiaries
that have not been consolidated;
associated companies; and corporate

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joint ventures, unincorporated joint
ventures, general partnerships, and
limited partnerships over which the
bank exercises significant influence that
are engaged in the holding of real estate
for investment purposes, these
investments are reported as a
component of ‘‘Investments in
unconsolidated subsidiaries and
associated companies’’ in Schedule
RC–M, item 4.a. To better distinguish a
bank’s investments in real estate
ventures from these other categories of
assets, particularly because ‘‘Other real
estate owned’’ also includes real estate
acquired either through foreclosure or in
any other manner for debts previously
contracted, which presents different
supervisory considerations than real
estate investments, the agencies are
proposing to add a new asset category
to the Call Report balance sheet
(Schedule RC) for investments in real
estate ventures. This new balance sheet
category would include those
investments in real estate ventures that
are currently reported as part of ‘‘Other
real estate owned’’ and ‘‘Investments in
unconsolidated subsidiaries and
associated companies.’’ By making this
change, the agencies would be able to
eliminate item 3.a and items 4.a through
4.c from Schedule RC–M.
J. Revisions to Schedule RC–H for
Securities Held in Domestic Offices
Information reported by banks with
foreign offices on Schedule RC–H,
Selected Balance Sheet Items for
Domestic Offices, on the FFIEC 031
report form is fundamental for public
policy purposes in the measurement
and analysis of the domestic (U.S.)
banking system. The agencies have used
estimates of certain domestic office
measures to facilitate these public
policy efforts. However, the agencies
have determined that enhanced
information on available-for-sale and
held-to-maturity securities in domestic
offices is necessary to accomplish these
public policy efforts.
At present, banks with foreign offices
report the combined amortized
(historical) cost of available-for-sale and
held-to-maturity securities by type of
security in items 10 through 17 of
Schedule RC–H. The agencies propose
to replace this combined reporting with
two columns to collect information
separately on the fair value of availablefor-sale securities and the amortized
cost of held-to-maturity securities held
in the domestic offices of banks with
foreign offices.
After the transition to this Schedule
RC–H revision, this proposed change
should not result in significant
additional ongoing reporting burden

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because banks are required to designate
securities as either available-for-sale,
held-to-maturity, or held for trading per
FASB Statement No. 115, Accounting
for Certain Investments in Debt and
Equity Securities, and to report the fair
value and amortized cost of all
available-for-sale and held-to-maturity
securities by type of security in Call
Report Schedule RC–B, Securities.
K. Trading Assets That Are Past Due or
in Nonaccrual Status
The agencies have observed that
banks are holding assets in the trading
category for longer periods of time due
to market and other factors. Some of
these assets are exhibiting delinquency
patterns similar to assets held outside of
the trading account. Currently, the
agencies do not distinguish past due
and nonaccrual trading assets from
other assets on Schedule RC–N, Past
Due and Nonaccrual Loans, Leases, and
Other Assets. The agencies propose to
replace Schedule RC–N, item 9, for
‘‘Debt securities and other assets’’ that
are past due 30 days or more or in
nonaccrual status with two separate
items: item 9.a, ‘‘Trading assets,’’ and
item 9.b, ‘‘All other assets (including
available-for-sale and held-to-maturity
securities).’’ These items would follow
the existing three-column breakdown on
Schedule RC–N that banks utilize to
report assets past due 30 through 89
days and still accruing, past due 90 days
or more and still accruing, and in
nonaccrual status. Item 9.a would
include all assets held for trading
purposes, including loans held for
trading. Collection of this information
will allow the agencies to better assess
the quality of assets held for trading
purposes, and generally enhance
surveillance and examination planning
efforts.
Also, the agencies propose to expand
the scope of Schedule RC–D, Trading
Assets, Memorandum item 3, ‘‘Loans
measured at fair value that are past due
90 days or more,’’ to include loans held
for trading and measured at fair value
that are in nonaccrual status. This
change would provide for more
consistent treatment with the
information that would be collected on
Schedule RC–N and with the disclosure
requirements in FASB Statement No.
159, The Fair Value Option for
Financial Assets and Financial
Liabilities.
L. Enhanced Information on Credit
Derivatives
Effective for the March 2006 Call
Report, the agencies revised the
information collected on credit
derivatives in Schedules RC–L,

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Derivatives and Off-Balance Sheet
Items, and RC–R, Regulatory Capital, to
gain a better understanding of the nature
and trends of banks’ credit derivative
activities. Since that time, the volume of
credit derivative activity in the banking
industry, as measured by the notional
amount of these contracts, has increased
steadily, rising to an aggregate notional
amount of $16.4 trillion as of March 31,
2008. The Call Report data indicate that
the credit derivative activity in the
industry is highly concentrated in banks
with total assets in excess of $10 billion.
For these banks, credit derivatives
function as a risk mitigation tool for
credit exposures in their operations as
well as a financial product that is sold
to third parties for risk management and
other purposes.
The agencies’ safety and soundness
efforts continue to place emphasis on
the role of credit derivatives in bank risk
management practices. In addition, the
agencies’ monitoring of credit derivative
activities at certain banks has identified
differences in interpretation as to how
credit derivatives are treated under the
agencies’ risk-based capital standards.
To further the agencies’ safety and
soundness efforts concerning credit
derivatives and to improve transparency
in the treatment of credit derivatives for
regulatory capital purposes, the agencies
propose to revise the information
pertaining to credit derivatives that is
collected on Schedules RC–L, RC–N
(Past Due and Nonaccrual Loans,
Leases, and Other Assets), and RC–R.
In Schedule RC–L, item 7, ‘‘Credit
derivatives,’’ the agencies propose to
change the caption of column A from
‘‘Guarantor’’ to ‘‘Sold Protection’’ and
the caption of column B from
‘‘Beneficiary’’ to ‘‘Purchased Protection’’
to eliminate confusion surrounding the
meaning of ‘‘Guarantor’’ and
‘‘Beneficiary’’ that commonly occurs
between the users and preparers of these
data. The agencies also propose to add
a new item 7.c to Schedule RC–L to
collect information on the notional
amount of credit derivatives by
regulatory capital treatment. For credit
derivatives that are subject to the
agencies’ market risk capital standards,
the agencies propose to collect the
notional amount of sold protection and
the amount of purchased protection. For
all other credit derivatives, the agencies
propose to collect the notional amount
of sold protection, the notional amount
of purchased protection that is
recognized as a guarantee under the
risk-based capital guidelines, and the
notional amount of purchased
protection that is not recognized as a
guarantee under the risk-based capital
standards.

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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
The agencies also propose to add a
new item 7.d to Schedule RC–L to
collect information on the notional
amount of credit derivatives by credit
rating and remaining maturity. The item
would collect the notional amount of
sold protection broken down by credit
ratings of investment grade and
subinvestment grade for the underlying
reference asset and by remaining
maturities of one year or less, over one
year through five years, and over five
years. The same information would be
collected for purchased protection.
In Schedule RC–N, the agencies
propose to change the scope of
Memorandum item 6, ‘‘Past due interest
rate, foreign exchange rate, and other
commodity and equity contracts,’’ to
include credit derivatives. The fair
value of credit derivatives where the
bank has purchased protection
increased significantly to over $500
billion at March 31, 2008, as compared
to a negative $10 billion at March 31,
2007. Thus, the performance of credit
derivative counterparties has increased
in importance. The expanded scope of
Memorandum item 6 on Schedule RC–
N would include the fair value of credit
derivatives carried as assets that are past
due 30 through 89 days and past due 90
days or more.
In Schedule RC–R, the agencies
propose to change the scope of the
information collected in Memorandum
items 2.g.(1) and (2) on the notional
principal amounts of ‘‘Credit derivative
contracts’’ that are subject to risk-based
capital requirements to include only (a)
the notional principal amount of
purchased protection that is defined as
a covered position under the market risk
capital guidelines and (b) the notional
principal amount of purchased
protection that is not a covered position
under the market risk capital guidelines
and is not recognized as a guarantee for
risk-based capital purposes. The scope
of Memorandum item 1, ‘‘Current credit
exposure across all derivative contracts
covered by the risk-based capital
standards,’’ would be similarly revised
to include the current credit exposure
arising from credit derivative contracts
that represent (a) purchased protection
that is defined as a covered position
under the market risk capital guidelines
and (b) purchased protection that is not
a covered position under the market risk
capital guidelines and is not recognized
as a guarantee for risk-based capital
purposes. The agencies also propose to
add new Memorandum items 3.a and
3.b to Schedule RC–R to collect the
present value of unpaid premiums on
sold credit protection that is defined as
a covered position under the market risk
capital guidelines. Consistent with the

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information currently reported in
Memorandum item 2.g, the agencies
propose to collect this present value
information with a breakdown between
investment grade and subinvestment
grade for the rating of the underlying
reference asset and with the same three
remaining maturity breakouts.
M. Questions Concerning Certain Trust,
Custodial, Safekeeping, and Other
Services
Under certain circumstances, banks
can serve as trustee or custodian for
Individual Retirement Accounts (IRAs),
Health Savings Accounts (HSAs), and
other similar accounts without
obtaining trust powers. Banks may also
provide custody, safekeeping, or other
services involving the acceptance of
orders for the sale or purchase of
securities regardless of whether they
have trust powers. Under the Board’s
and the SEC’s recently adopted
Regulation R—Exceptions for Banks
from the Definition of Broker in the
Securities Exchange Act of 1934 (12
CFR part 218), a bank will only be able
to effect securities transactions for
customers if the bank meets one of the
exceptions from the broker definition in
section 3(a)(4) of the Securities
Exchange Act of 1934. Under the trust
and fiduciary exception, the securities
transactions must be effected in a trust
department or other department of a
bank that is regularly examined for
compliance with fiduciary standards.
Accordingly, the agencies must be
able to identify banks that serve as
trustee or custodian for IRAs, HSAs, and
other similar accounts or provide
custody, safekeeping, or other services
involving the acceptance of securities
sale or purchase orders. Depending on
whether such banks exercise trust
powers, these activities will need to be
examined during trust examinations or
other examinations, as appropriate, in
order to ensure that the activities are
conducted in a satisfactory manner and
in compliance with the requirements for
the exception from the broker
definition. Therefore, the agencies are
proposing to add two yes/no questions
to Schedule RC–M, one of which would
ask each bank whether it acts as trustee
or custodian for IRAs, HSAs, and other
similar accounts and the other of which
would ask whether the bank provides
custody, safekeeping, or other services
involving the acceptance of securities
sale and purchase orders.
IV. Discussion of Revisions Proposed for
December 2009
Schedule RC–T, Fiduciary and
Related Services, was added to the Call
Report effective December 31, 2001,

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replacing two separate reports, the
Annual Report of Trust Assets (FFIEC
001) and the Annual Report of
International Fiduciary Activities
(FFIEC 006). Schedule RC–T collects
data on:
• Fiduciary and related assets by type
of fiduciary account, with the amount of
assets and number of accounts reported
separately for managed and nonmanaged accounts;
• Fiduciary and related services
income by type of fiduciary account and
expenses, including fiduciary
settlements, surcharges, and other losses
by type of fiduciary account;
• Managed assets held in personal
trust and agency accounts by type of
asset;
• Corporate trust and agency
accounts; and
• The number of collective
investment funds and common trust
funds and the market value of fund
assets by type of fund.
FDIC-insured banks that exercise
fiduciary powers and have fiduciary
assets or accounts and uninsured
limited-purpose national trust banks
(trust institutions) must complete
specified sections of Schedule RC–T
either quarterly or annually (as of
December 31) depending on the amount
of their total fiduciary assets as of the
preceding calendar year-end and their
gross fiduciary and related services
income for the preceding calendar year.
Approximately 400 trust institutions
with total fiduciary assets greater than
$250 million or with gross fiduciary and
related services income greater than 10
percent of net interest income plus
noninterest income report their
fiduciary and related assets and their
fiduciary and related services income
quarterly and the remaining data items
on Schedule RC–T annually. Around
200 trust institutions with total
fiduciary assets greater than $100
million but less than or equal to $250
million that do not meet the fiduciary
income test mentioned above complete
all of Schedule RC–T annually. About
1,000 trust institutions with total
fiduciary assets of $100 million or less
that do not meet the fiduciary income
test mentioned above must complete all
of Schedule RC–T annually except the
sections on fiduciary income and losses
from which they are exempt.
Since its addition to the Call Report
at year-end 2001, Schedule RC–T has
not been revised. During this time
period, significant growth has occurred
in both the assets in managed and nonmanaged fiduciary accounts at trust
institutions. For the five year period
ending December 31, 2007, managed
assets increased from $3.3 trillion to

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$5.6 trillion while non-managed assets
climbed from $8.2 trillion to $17.7
trillion. Assets held in custody and
safekeeping accounts grew from $21.4
trillion to $57.9 trillion over this same
period. The number of corporate and
municipal debt issues for which trust
institutions serve as trustee has also
increased over the past five years, rising
from 237 thousand to 339 thousand, and
the total par value of these debt issues
has increased from $6.4 trillion to $15.7
trillion. The total market value of the
assets held in collective investment
funds and common trust funds operated
by trust institutions grew from $1.6
trillion at year-end 2002 to $3.0 trillion
at year-end 2007.
The agencies have been monitoring
the growth in fiduciary activities and
trends in this area, both from data
collected in Schedule RC–T and through
the examination process, and have
determined that certain data should be
added to Schedule RC–T to enable the
agencies to better evaluate the trust
activities of individual trust institutions
and the industry as a whole. The
agencies are proposing to implement the
following revisions to Schedule RC–T as
of December 31, 2009.

jlentini on PROD1PC65 with NOTICES

A. Institutional Foundations and
Endowments
In both the Fiduciary and Related
Assets section of Schedule RC–T and
the Fiduciary and Related Services
Income section of the schedule,
information on the assets, number of
accounts, and income from fiduciary
accounts of institutional foundations
and endowments is currently reported
as part of the total amounts reported for
‘‘Other fiduciary accounts.’’ Internal
Revenue Service (IRS) statistics for
2004, the most recent year for which
data are available, indicated that
foundations and charitable trusts treated
as foundations by the IRS held assets
with a total book value of $451 billion.11
The agencies believe that trust
institutions administer a substantial
amount of these assets and that
foundations and endowments are a
major type of fiduciary account being
aggregated as a component of ‘‘Other
fiduciary accounts.’’ Given the volume
of assets administered in accounts for
foundations and endowments, separate
reporting in Schedule RC–T of data for
such a significant type of fiduciary
account is warranted.
11 http://www.irs.gov/taxstats/charitablestats/
article/0,,id=96996,00.html.

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B. Investment Advisory Agency
Accounts
Investment advisory agency accounts
are accounts for which a trust
institution provides investment advice
for a fee, but where the ultimate
investment decision rests with the
customer. At present, the instructions
for reporting in both the Fiduciary and
Related Assets section of Schedule RC–
T and the Fiduciary and Related
Services Income section of the schedule
do not identify the type of fiduciary
account in which information on the
assets, number of accounts, and income
from investment advisory agency
accounts should be reported. As a
result, there is diversity in how trust
institutions report this information in
these two sections of Schedule RC–T.
Investment management agency
accounts share a common characteristic
with investment advisory agency
accounts in that both involve the
provision of investment advice to a
customer for the purpose of determining
which securities to buy, sell, or hold.
However, the former is a type of
managed account while the latter is a
type of non-managed account. In order
to clarify where investment advisory
agency accounts should be reported in
Schedule RC–T and include them with
the most appropriate type of fiduciary
account given their characteristics, the
agencies are proposing that investment
advisory agency accounts be reported
with investment management agency
accounts in the Fiduciary and Related
Assets and the Fiduciary and Related
Services Income sections of Schedule
RC–T. The line item captions in these
two sections for ‘‘Investment
management agency accounts’’ would
be revised to read ‘‘Investment
management and investment advisory
agency accounts.’’ In addition, given the
non-managed nature of investment
advisory agency accounts, the currently
blocked items for non-managed assets
and number of non-managed accounts
in the line for investment management
agency accounts in the Fiduciary and
Related Assets section of Schedule RC–
T would be opened to enable trust
institutions to report on these advisory
accounts.
C. IRAs, HSAs, and Other Similar
Accounts
IRAs, HSAs, and other similar
accounts represent a large category of
individual benefit and other retirementrelated accounts administered by trust
institutions for which the agencies do
not collect specific data. At present,
data for these accounts is included in
the totals reported for ‘‘Other employee

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benefit and other retirement-related
accounts’’ and ‘‘Custody and
safekeeping accounts’’ in the Fiduciary
and Related Assets section of Schedule
RC–T (items 7.c and 13). As of year-end
2007, assets held in IRAs were
estimated to be $4.7 trillion.12
Significant growth in IRAs
administered by trust institutions is
expected as retiring individuals roll
assets held in 401(k) plans over into
IRAs. Significant growth in HSAs is also
anticipated as these accounts gain
increased popularity with the public.
IRAs, HSAs, and other similar accounts
for individuals have risk characteristics
that differ from employee benefit plans
that are covered by the Employee
Retirement Income Security Act. In
particular, the risks of these accounts for
individuals tend to center on
compliance with the relevant provisions
of the Internal Revenue Code and the
potential penalties for violations
thereof. To identify trust institutions
experiencing significant changes in the
number and market value of assets of
these types of accounts for supervisory
follow-up and to monitor both aggregate
and individual trust institution growth
trends involving these accounts, the
agencies are proposing to add a line
item to the Fiduciary and Related Assets
section of Schedule RC–T for data on
IRAs, HSAs, and other similar accounts
included in ‘‘Other employee benefit
and other retirement-related accounts’’
and ‘‘Custody and safekeeping
accounts.’’
D. Managed Assets Held in Fiduciary
Accounts
Trust institutions currently report a
breakdown of the market value of
managed assets held in personal trust
and agency accounts by type of asset in
Memorandum item 1 of Schedule RC–T.
The agencies do not collect a similar
breakdown of the managed assets for
other types of fiduciary accounts. The
exercise of investment discretion adds a
significant element of risk to the
administration of managed fiduciary
accounts. Therefore, it is essential that
the agencies be able to monitor trends,
both on a trust industry-wide basis and
an individual trust institution basis, in
how discretionary fiduciaries are
investing the assets of managed
accounts. The current scope of managed
assets reporting is inadequate for
monitoring and measuring risk
exposures and provides inadequate
information for examiners’ examination
planning activities.
Despite the importance of such data,
managed personal trust and agency
12 http://www.icifactbook.org/fb_sec7.html.

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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
accounts comprised just 20 percent of
the number of total managed accounts
and the assets of managed personal trust
and agency accounts represented 18
percent of total managed assets as of
December 31, 2007. By comparison, as
of the same date, investment
management agency accounts comprise
66 percent of the number of total
managed accounts and the assets of
investment management agency
accounts represented 36 percent of total
managed assets, while the assets of
employee benefit and other retirement
accounts comprised 41 percent of total
managed assets.
In order to close the significant data
gap in current reporting, the agencies
are proposing to expand Memorandum
item 1 of Schedule RC-T to collect a
three-way breakdown of the market
value of all managed assets held in
fiduciary accounts by type of asset. The
market values for the various asset types
would be reported separately for three
categories of managed fiduciary
accounts: (1) Personal trust and agency
and investment management agency
accounts, (2) employee benefit and other
retirement accounts, and (3) all other
accounts. The various types of fiduciary
accounts have been combined into these
three categories since each category is
subject to unique regulatory and
fiduciary standards. Data reported in
this manner will assist in monitoring
and measuring risk at trust institutions
and in pre-examination planning by
examiners.
The agencies have also reviewed the
types of assets for which trust
institutions currently provide a
breakdown in Memorandum item 1. In
this regard, discretionary investments in
common trust funds (CTFs) and
collective investment funds (CIFs) are
not separately reported in this
Memorandum item. Instead, trust
institutions are required to allocate the
underlying assets of each CTF and CIF
attributable to managed accounts to the
individual line items for the various
types of assets reported in
Memorandum item 1.
The agencies have found this method
of reporting investments in CTFs and
CIFs to be misleading, confusing, and
burdensome for trust institutions. It is
misleading because an investment in a
CTF or CIF that invests in common
stocks is very different in nature than a
direct investment in an individual
common stock, but these investments
are reported as if the institution were
investing in a specific asset, rather than
in a fund. It is confusing and
burdensome to reporting institutions
that often do not understand the
allocation process currently required for

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reporting the value of the underlying
assets of the CTFs and CIFs.
This allocation process requires
institutions to segregate the underlying
assets of each CTF and CIF by asset
type, rather than following the more
straightforward approach of reporting
the total value of managed accounts’
holdings of investments in CTFs and
CIFs. Therefore, the agencies are
proposing to end the current method of
reporting investments in CTFs and CIFs
in Memorandum item 1 by adding a
separate line item for investments in
CTFs and CIFs. This new asset type will
enable the agencies to collect data that
actually reflects the investment choices
of discretionary fiduciaries, i.e.,
investing in a fund rather than an
individual asset, while simplifying the
reporting of these investments by
eliminating the requirement to report
each type of asset held by a fund.
At present, the asset type for
‘‘common and preferred stocks’’ in
Memorandum item 1 includes not only
these stocks, but also all investments in
mutual funds (other than money market
mutual funds, which are reported
separately), private equity investments,
and investments in unregistered and
hedge funds. Investments in mutual
funds (other than money market mutual
funds) have long been reported with
common and preferred stocks. However,
over time, these investments have gone
from being a relatively minor
investment option for managed
fiduciary accounts to being one of the
most significant asset types for managed
fiduciary accounts.
As a consequence, the agencies lack
specific data on discretionary
investments in mutual funds (other than
money market mutual funds) despite
their distinctive differences from
investments in individual common
stocks. Given these differences and the
growth in mutual fund holdings in
managed fiduciary accounts, the
agencies are proposing to add two new
items to Memorandum item 1 to collect
data on investments in equity mutual
funds and in other (non-money market)
mutual funds separately from common
and preferred stocks.
Investments in hedge funds and
private equity have grown rapidly since
the implementation of Schedule RC–T
in 2001, with large institutional
investors, e.g., large pension plans,
increasing their allocation to these types
on investments in order to increase
portfolio returns and pursue absolute
return strategies. As mentioned above,
these types of investments are currently
reported in the ‘‘common and preferred
stocks’’ asset type in Memorandum item
1. However, given their unique

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characteristics and risks and the
increasing role such investments are
having in managed fiduciary portfolios,
the agencies believe there is a need to
identify the volume of these
investments to monitor both aggregate
trust industry exposure and trust
institution-specific exposure. Therefore,
the agencies are also proposing to
modify Memorandum item 1 by adding
a new item in which trust institutions
would report investments in
unregistered funds and private equity
investments held in managed accounts
separately from common and preferred
stocks.
Finally, since their inception in 1994,
mutual funds for which the reporting
trust institution or its subsidiary or
affiliate is the sponsor or serves as an
investment advisor (also referred to as
proprietary mutual funds) have posed a
significant fiduciary risk when the
institution makes investments in such
mutual funds for the fiduciary accounts
it manages. In this situation, the
institution’s dual roles present a conflict
of interest, which has given rise to
litigation on a number of occasions.
Therefore, to supplement the proposed
expanded information on mutual funds
held in managed fiduciary accounts, the
agencies are proposing to add items to
Memorandum item 1 for the reporting of
the market value of discretionary
investments in proprietary mutual funds
and the number of managed accounts
holding such investments. This
information will assist the agencies in
measuring and monitoring the risk
exposure of the trust industry and
individual trust institutions with
respect to the conflicts of interest
inherent in discretionary investments in
proprietary mutual funds.
E. Corporate Trust and Agency
Accounts
Trust institutions currently report the
number of corporate and municipal debt
issues for which the institution serves as
trustee and the outstanding principal
amount of these debt issues in
Memorandum item 2.a of Schedule RC–
T. One of the major risks in the area of
corporate trust administration involves
debt issues that are in substantive
default. A substantive default occurs
when the issuer fails to make a required
payment of interest or principal,
defaults on a required payment into a
sinking fund, or is declared bankrupt or
insolvent.
The occurrence of a substantive
default significantly raises the risk
profile for an indenture trustee of a
defaulted issue. In such cases, every
action or failure to act by the trustee is
scrutinized intensely by the holders of

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the defaulted issue, which brings about
a heightened risk of being sued. In
addition, the administrative demands in
such a situation can result in the
incurrence of significant expenses and
the distraction of managerial time and
attention from other areas of the trust
department. Thus, to monitor and better
understand the risk profile of trust
institutions serving as an indenture
trustee for debt securities and changes
therein, the agencies are proposing to
require trust institutions to report the
number of such issues that are in
substantive default and the principal
amount outstanding for these issues.
In addition, the agencies are
proposing to revise the instructions for
reporting on corporate trust accounts to
state that issues of trust preferred stock
for which the institution is trustee
should be included in the amounts
reported for corporate and municipal
trusteeships.

jlentini on PROD1PC65 with NOTICES

F. Instructional Clarifications
The instructions for reporting the
managed and non-managed assets and
number of managed and non-managed
accounts for defined contribution plans
and defined benefit plans in items 5.a
and 5.b of Schedule RC–T, respectively,
would be revised to indicate that
employee benefit accounts for which the
trust institution serves as a directed
trustee should be reported as nonmanaged accounts.
The instructions for reporting on the
number of and market value of assets
held in collective investment funds and
common trust funds in Memorandum
item 3 would be clarified by stating that
the number of funds should be reported,
not the number of assets held by these
funds, the number of participants, or the
number of accounts invested in the
funds.
V. Request for Comment
Public comment is requested on all
aspects of this joint notice. Comments
are invited on:
(a) Whether the proposed revisions to
the Call Report collections of
information 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,

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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 and will be summarized or
included in the agencies’ requests for
OMB approval. All comments will
become a matter of public record.
Dated: September 17, 2008.
Michele Meyer,
Assistant Director, Legislative and Regulatory
Activities Division, Office of the Comptroller
of the Currency.
Board of Governors of the Federal Reserve
System, September 17, 2008.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 16th day of
September 2008.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8–22258 Filed 9–22–08; 8:45 am]
BILLING CODE 4810–33–P, 6210–01–P, 6714–01–P

FEDERAL DEPOSIT INSURANCE
CORPORATION
Guidelines for Appeals of Material
Supervisory Determinations
Federal Deposit Insurance
Corporation.
ACTION: Notice of guidelines.
AGENCY:

On September 16, 2008, the
Federal Deposit Insurance Corporation
(FDIC) Board of Directors (Board)
adopted revised Guidelines for Appeals
of Material Supervisory Determinations
(Guidelines). The revisions to the
Guidelines were adopted to better align
the FDIC’s Supervisory Appeals Review
Committee (SARC) process with the
material supervisory determinations
appeals procedures at the other Federal
banking agencies. The amendments
modify the supervisory determinations
eligible for appeal to eliminate the
ability of an FDIC-supervised institution
to file an appeal with the SARC with
respect to determinations or the facts
and circumstances underlying a
recommended or pending formal
enforcement-related action or decision,
including the initiation of an
investigation and the referral to the
Attorney General or a notice to the
Secretary of Housing and Urban
Development for apparent violations of
the Equal Credit Opportunity Act or the
Fair Housing Act. The amendments also
include limited technical amendments.

SUMMARY:

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The revised Guidelines are effective
upon adoption.
DATES: The Guidelines became effective
on September 16, 2008.
FOR FURTHER INFORMATION CONTACT:
Frank Gray, Section Chief, FDIC, 550
17th Street, NW., Washington, DC 20429
[F–4054]; on detail; telephone: (678)
916–2200; or electronic mail:
[email protected]; Patricia A. Colohan,
Section Chief, FDIC, 550 17th Street,
NW., Washington, DC 20429 [F–4080];
telephone: (202) 898–7283; or electronic
mail: [email protected]; or Richard
Bogue, Counsel, FDIC, 550 17th Street,
NW., Washington, DC 20429 [MB–
3014]; telephone: (202) 898–3726;
facsimile: (202) 898–3658; or electronic
mail: [email protected].
SUPPLEMENTARY INFORMATION: On May
27, 2008, the FDIC published in the
Federal Register, for a 60-day comment
period, a notice and request for
comments respecting the proposed
revisions to the Guidelines for Appeals
of Material Supervisory Determinations.
(73 FR 30393). The comment period
closed July 28, 2008. The FDIC
considered it desirable in this instance
to garner comments regarding the
Guidelines, although notice and
comment rulemaking was not required
and need not be employed should the
FDIC make future amendments.
The FDIC received five comment
letters in total from one depository
institution, three banking associations,
and one lawyer on behalf of interested
clients, all of whom opposed the
proposed revisions. The comments
received, and FDIC’s responses, are
summarized below.
Background
Section 309(a) of the Riegle
Community Development and
Regulatory Improvement Act of 1994
(Pub. L. 103–325, 108 Stat. 2160) (Riegle
Act), required the FDIC (as well as the
other Federal banking agencies and the
National Credit Union Administration
Board (NCUA)) to establish an
independent intra-agency appellate
process to review material supervisory
determinations. The Riegle Act defines
the term ‘‘independent appellate
process’’ to mean a review by an agency
official who does not directly or
indirectly report to the agency official
who made the material supervisory
determination under review. In the
appeals process, the FDIC is required to
ensure that (1) an appeal of a material
supervisory determination by an
insured depository institution is heard
and decided expeditiously; and (2)
appropriate safeguards exist for

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