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Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices

(1980). On April 18, 1984, in Order No.
676A, the bankruptcy court authorized
MSPA to purchase the 351.50-mile
portion of the line. On April 30, 1984,
MSPA and Kyle entered into an
agreement and Kyle was authorized in
Kyle Railroad Company—Notice of
Modified Certificate of Public
Convenience and Necessity, Finance
Docket No. 30490 (ICC served June 4,
1984) to acquire from MSPA and to
operate the line. Kyle is seeking the
Board’s authority as required by the
agreement to acquire and operate the
line and to remove the potential
impediment to exercising its option to
acquire the line.
The proposed transaction is
scheduled to be consummated on June
1, 2009.
Kyle certifies that its projected annual
revenues as a result of the transaction
will not result in Kyle becoming a Class
II or Class I rail carrier. However,
because its projected annual revenues
will exceed $5 million, Kyle also has
certified to the Board that it has
complied with the employee notice
requirements of 49 CFR 1150.42(e).
Pursuant to that provision, the
exemption may not become effective
until 60 days from the January 13, 2009,
date of the revised certification to the
Board, which would be March 13, 2009.
According to Kyle, there is no
provision or agreement that may limit
future interchange with a third-party
connecting carrier.
Pursuant to the Consolidated
Appropriations Act, 2008, Public Law
110–161, § 193, 121 Stat. 1844 (2007),
nothing in this decision authorizes the
following activities at any solid waste
rail transfer facility: Collecting, storing,
or transferring solid waste outside of its
original shipping container; or
separating or processing solid waste
(including baling, crushing, compacting,
and shredding). The term ‘‘solid waste’’
is defined in section 1004 of the Solid
Waste Disposal Act, 42 U.S.C. 6903.
If the verified notice contains false or
misleading information, the exemption
is void ab initio. Petitions to revoke the
exemption under 49 U.S.C. 10502(d)
may be filed at any time. The filing of
a petition to revoke will not
automatically stay the effectiveness of
the exemption. Stay petitions must be
filed by March 6, 2009 (at least 7 days
before the exemption becomes
effective).
An original and 10 copies of all
pleadings, referring to STB Finance
Docket No. 35212, must be filed with
the Surface Transportation Board, 395 E
Street, SW., Washington, DC 20423–
0001. In addition, a copy of each
pleading must be served on applicants’

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representative, Louis E. Gitomer, Esq.,
Law Offices of Louis E. Gitomer, LLC,
600 Baltimore Avenue, Suite 301,
Towson, MD 21204.
Board decisions and notices are
available on our Web site at ‘‘http://
www.stb.dot.gov.’’
Decided: January 16, 2009.
By the Board, David M. Konschnik,
Director, Office of Proceedings.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. E9–1544 Filed 1–27–09; 8:45 am]
BILLING CODE 4915–01–P

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
Agency Information Collection
Activities: Submission for OMB
Review; Joint Comment Request
AGENCIES: 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: Notice of information collection
to be submitted to OMB for review and
approval under the Paperwork
Reduction Act of 1995.
SUMMARY: 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. On September
23, 2008, the agencies, under the
auspices of the Federal Financial
Institutions Examination Council
(FFIEC), requested public comment for
60 days on a proposal to extend, with
revision, the Consolidated Reports of
Condition and Income (Call Report),
which are currently approved
collections of information. After
considering the comments received on
the proposal, the FFIEC and the
agencies will move forward with the
most of the reporting changes, with
limited modifications in response to
certain comments, on the phased-in
basis that had been proposed. The
FFIEC and the agencies are continuing
to evaluate certain other proposed
revisions in light of the comments

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received thereon and will not
implement these revisions on their
proposed effective dates.
DATES: Comments must be submitted on
or before February 27, 2009.
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
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
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

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Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
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.
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.
Comments may be inspected at the FDIC
Public Information Center, Room E–
1002, 3501 Fairfax Drive, Arlington, VA
22226, between 9 a.m. and 5 p.m. on
business days.
Additionally, commenters may send a
copy of their comments to the OMB
desk officer for the agencies by mail to
the Office of Information and Regulatory
Affairs, U.S. Office of Management and
Budget, New Executive Office Building,
Room 10235, 725 17th Street, NW.,
Washington, DC 20503, or by fax to
(202) 395–6974.
FOR FURTHER INFORMATION CONTACT: For
further information about the revisions
discussed in this notice, please contact
any of the agency clearance officers
whose names appear below. In addition,
copies of the Call Report forms can be
obtained at the FFIEC’s Web site
(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.

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The
agencies are proposing to revise 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.
OCC:
OMB Number: 1557–0081.
Estimated Number of Respondents:
1,620 national banks.
Estimated Time per Response: 46.76
burden hours.
Estimated Total Annual Burden:
303,027 burden hours.
Board:
OMB Number: 7100–0036.
Estimated Number of Respondents:
877 state member banks.
Estimated Time per Response: 53.30
burden hours.
Estimated Total Annual Burden:
186,976 burden hours.
FDIC:
OMB Number: 3064–0052.
Estimated Number of Respondents:
5,110 insured state nonmember banks.
Estimated Time per Response: 37.36
burden hours.
Estimated Total Annual Burden:
763,638 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.

SUPPLEMENTARY INFORMATION:

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

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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
On September 23, 2008, the agencies
requested comment on proposed
revisions to the Call Report (73 FR
54807). The agencies proposed to
implement the proposed changes to the
Call Report requirements on a phasedin basis during 2009. A limited group of
changes were proposed to take effect
March 31, 2009; most revisions were
proposed to take effect June 30, 2009;
and a final group of revisions applicable
only to trust institutions that complete
the Call Report’s Fiduciary and Related
Services schedule were proposed to take
effect December 31, 2009.1
The Call Report, as it has been
proposed to be revised, will better
support the agencies’ surveillance and
supervision of individual banks and
enhance their monitoring of the
industry’s condition and performance.
The proposed revisions reflected a
thorough and careful review of the
agencies’ data needs in a variety of areas
as banks encountered the most turbulent
environment in more than a decade.
Thus, the proposed revisions included
new items that focus on areas in which
the banking industry has faced
heightened risk as a result of market
1 In addition, on November 26, 2008, OMB
approved the agencies’ emergency clearance
requests to add two items to Call Report Schedule
RC–O, Other Data for Deposit Insurance and FICO
Assessments, effective December 31, 2008, that are
applicable to all banks participating in the FDIC’s
Transaction Account Guarantee Program. A
participating bank must report the amount and
number of its noninterest-bearing transaction
accounts, as defined in the FDIC’s regulations
governing the program, of more than $250,000 in
Schedule RC–O, Memorandum items 4.a and 4.b.
The FDIC will use this information to calculate
assessments for participants in the Transaction
Account Guarantee Program. Because OMB’s
approval of the agencies’ emergency clearance
request expires on May 31, 2009, the agencies
proposed on December 23, 2008, under OMB’s
normal clearance procedures to collect these two
items each quarter until the Transaction Account
Guarantee Program ends. See 73 FR 78794.

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turmoil and illiquidity and weakening
economic and credit conditions. Where
possible, the agencies sought to
establish reporting thresholds for
proposed new items. Other proposed
new items would be relevant to only a
small percentage of banks.
The agencies collectively received
comments from seven respondents: Two
banks, one bank holding company, three
bankers’ organizations, and a bank
insurance consultant. None of these
commenters specifically addressed all of
the aspects of the proposal. Rather,
individual respondents commented
upon one or more of the proposed Call
Report changes. In two cases,
commenters brought up reporting
matters that were not addressed in the
agencies’ proposal. The following is a
summary of the general comments
received on the proposed Call Report
revisions. Sections II, III, and IV of this
notice identify the changes proposed to
take effect March 31, June 30, and
December 31, 2009, respectively;
discuss the agencies’ evaluation of the
comments received on the proposed
changes that the FFIEC and the agencies
have decided to implement, as
modified; and describe the proposed
Call Report revisions that remain under
review by the FFIEC and the agencies.
One bankers’ organization stated that
it believed that the proposed revisions
would provide additional information
that would be useful to the agencies’
assessment of risk. This organization
expressed general agreement, on
balance, with the proposed revisions,
but also offered several suggested
changes for the agencies’ consideration.2
Another bankers’ organization indicated
its understanding of the agencies’ need
for more information on certain types of
loans currently under stress, but noted
that the proposed revisions would
require many community banks to
submit significantly more data in the
Call Report. This organization hoped
that the increased staff time that would
be needed to provide the proposed Call
Report data would be offset by a
reduction in on-site examination time
through examiners’ use of these data to
better focus their examination priorities.
In this regard, the agencies’ intent in
proposing the revisions to the Call
Report was to enhance their riskfocused supervision, both from an offsite and an on-site perspective. The
third bankers’ organization commented
on the amount of lead time necessary for
2 One bank that is a member of this bankers’
organization referred to the organization’s comment
letter and appeared to concur with the
organization’s comments, but also addressed one
aspect of the agencies’ proposal on which the
bankers’ organization did not specifically comment.

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institutions to implement systems
changes to enable them to provide the
requested additional data,
recommending a minimum of three
months between the agencies’
publication of final revisions in the
Federal Register and the effective date
of the reporting changes.
Two commenters submitted
comments on reporting issues that were
not addressed in the agencies’ Call
Report proposal. One bank holding
company sent a copy of separate
correspondence that it had previously
sent to three organizations suggesting a
suspension of the accounting rules for
other-than-temporary impairments on
investment securities. By law, the
accounting principles applicable to the
Call Report must be consistent with or,
if certain conditions are met, no less
stringent than generally accepted
accounting principles.3 Therefore, the
suggested suspension of accounting
rules cannot be implemented for Call
Report purposes.
One bankers’ organization
recommended that the Call Report be
revised to require ‘‘reciprocal
deposits’’ 4 to be reported separately
from brokered deposits. This bankers’
organization also commented on the
reporting of certain sweep accounts
from other institutions, including
affiliated institutions, in the Call Report.
The impetus for the bankers’
organization’s comments about the
reporting of these two types of deposits
was a Notice of Proposed Rulemaking
(NPR) on which the FDIC was
simultaneously requesting comment
concerning amendments to its deposit
insurance assessment regulations (12
CFR part 327).5 In the NPR, the FDIC
proposed to alter the way in which it
differentiates for risk in the risk-based
assessment system; revise deposit
insurance assessment rates, including
base assessment rates; and make
technical and other changes to the rules
governing the risk-based assessment
system. In its comment letter to the
agencies on the proposed Call Report
revisions, the bankers’ organization
observed that the Call Report may need
to be revised depending on the FDIC’s
decisions on the treatment of these
accounts for deposit insurance
3 See

12 U.S.C. 1831n(a).
4 The organization also recommended that
‘‘reciprocal deposit’’ be defined as a deposit
‘‘obtained when an insured depository institution
exchanges funds, dollar-for-dollar, with members of
a network of other insured depository institutions,
where each member of the network sets the interest
rate to be paid on the entire amount of funds it
places with other network members, and all funds
placed through the network are fully insured by the
FDIC.’’
5 73 FR 61560, October 16, 2008.

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assessment purposes. Accordingly, the
FFIEC and the agencies will monitor the
outcome of the FDIC’s rulemaking for
assessments and the need for new Call
Report data items for reciprocal deposits
and certain sweep accounts to support
any modifications that the FDIC makes
in its risk-based assessment system in a
final rule. In this regard, as proposed by
the FDIC, these modifications would
take effect April 1, 2009, which means
that any new reporting requirements to
provide data for the FDIC’s risk-based
assessment system would need to be in
place June 30, 2009.
After considering the comments
received on the proposal, the FFIEC and
the agencies will move forward with
most of the reporting changes, with
limited modifications in response to
certain comments, on the phased-in
basis that had been proposed. The
FFIEC and the agencies are continuing
to evaluate certain other proposed
revisions in light of the comments
received thereon and will not
implement these revisions on their
proposed effective dates.6
The agencies recognize institutions’
need for lead time to prepare for
reporting changes, which led them to
propose the phased-in implementation
schedule for 2009. The Call Report
items that will be new or revised
effective March 31, 2009, are limited in
number and all but one are linked to
changes in generally accepted
accounting principles taking effect at
the same time. For the March 31, 2009,
report date, 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. This same policy
on the use of reasonable estimates will
apply to the reporting of other new or
revised items when they are first
implemented effective June 30 and
December 31, 2009. In addition, the
specific wording of the captions for the
new or revised Call Report data items
discussed in this notice and the
numbering of these data items should be
regarded as preliminary.
Type of Review: Revision of currently
approved collections.
II. Call Report Revisions Proposed for
March 2009
The agencies received no comments
on the following two revisions that were
proposed to take effect as of March 31,
6 See section II.C on unused commitments,
section III.D on past due and nonaccrual trading
assets, and the portion of section III.E addressing
the present value of unpaid premiums on sold
credit protection.

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2009, and therefore these revisions will
be implemented as proposed:
• Revisions to several Call Report
schedules in response to accounting
changes applicable to noncontrolling
(minority) interests in consolidated
subsidiaries; and
• The addition of a new item to be
reported annually on the bank’s fiscal
year-end date.
The agencies received one or more
comments addressing each of the
following proposed March 31, 2009,
revisions:
• 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;
• Clarifications of the definition of
the term ‘‘loan secured by real estate’’
and of the instructions for reporting
unused commitments;
• 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 comments related to each of these
proposed revisions are discussed below
along with the agencies’ response to
these comments.

sroberts on PROD1PC70 with NOTICES

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. Compared to
current accounting practice, FAS 141(R)
significantly changes the accounting for
those loans and leases acquired in
business combinations that will be held
for investment.7 In response to this
accounting change, the agencies
proposed to add new items to the Call
Report loan and lease schedule
(Schedule RC–C, part I) that would
mirror the acquisition-date disclosures
required by FAS 141(R). These new
7 This change in accounting treatment does not
apply to acquired held-for-investment 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 03–3).

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items would disclose the following
information for four categories of loans
(not subject to SOP 03–3) and leases that
were acquired in each business
combination that occurred during the
year-to-date 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.
The four categories of acquired heldfor-investment loans (not subject to SOP
03–3) and leases are:
• 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 will 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
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
acquisition date data would not be
reported in years after the year in which
the acquisition occurs.
One bankers’ organization stated that
it concurred with the agencies’ proposal
to require these additional disclosures
for loans (not subject to SOP 03–3) and
leases acquired in business
combinations that occurred during the
reporting period. No other commenter
addressed these proposed additional
disclosures. Accordingly, the agencies
will implement these items in the
March 31, 2009, Call Report, as
proposed.
In their proposal, the agencies also
stated that they were considering
whether banks that have engaged in
FAS 141(R) business combinations
should provide additional information
in the Call Report (beyond the
disclosures described above) about
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
proposal stated that the additional items
under consideration included the
outstanding balance of these acquired

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5031

loans and leases, their carrying amount,
and the amount of allowances for postacquisition credit losses on these loans
and leases. The agencies indicated that
this information would help them as
well as other Call Report users to track
management’s judgments regarding the
collectability 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-for-investment loan and
lease portfolio in periods after a
business combination. The agencies
requested comment on the merits and
availability of these post-acquisition
loan and lease data and the period of
time after a business combination that
this information should be reported.
Two bankers’ organizations
commented on these additional loan
and lease disclosures. One organization
did not specifically address the merits
of this information, stating only that if
banks were required to report these
additional data, they should report it
only through the end of the calendar
year of the business combination. The
second organization agreed with the
first organization concerning the
reporting period for these additional
data. However, this organization also
stated its belief that the post-acquisition
data on acquired loans and leases would
often not be available because acquired
performing loans and leases would tend
to be combined with, rather than
segregated from, a bank’s other
performing loans and leases.
After considering these comments, the
agencies have decided for the time being
not to add items to the Call Report for
the outstanding balance of held-forinvestment loans (not subject to SOP
03–3) and leases acquired in FAS 141(R)
business combinations, their carrying
amount, and the amount of allowances
for post-acquisition credit losses on
these loans and leases. The agencies
will continue to monitor accounting and
disclosure practices with respect to
these acquired loans and leases and
their post-acquisition allowances and
assess their data needs in this area. Any
future revisions to the Call Report to
collect data on acquired loans and
leases and post-acquisition allowances
will be subject to notice and comment.
B. 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

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schedule (Schedule RC–C) and other
schedules of the Call Report that collect
loan data. As a result, the agencies
proposed 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 would apply this clarified
definition prospectively and they need
not reevaluate and recategorize loans
that they currently report as loans
secured by real estate into other loan
categories on the Call Report loan
schedule.
One bankers’ organization stated that
it believes that the proposed definition
of a ‘‘loan secured by real estate’’ is
workable and provides additional
clarity. One bank submitted examples
involving loans with real estate as
collateral and asked how they would be
reported based on the revised definition.
The agencies will implement the
clarified definition of ‘‘loan secured by
real estate’’ as proposed but, in response
to this latter comment, they will add
examples to the definition to assist
banks in understanding how it should
be applied.
C. 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 proposed to revise the
instructions for Schedule RC–L, item 1,
‘‘Unused commitments,’’ to more clearly
and completely explain the
arrangements that should be reported in
this item.
All three bankers’ organizations
submitting comments on the proposed
Call Report revisions specifically
addressed the proposed instructional
clarification pertaining to unused

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commitments. One organization agreed
that clarification is needed, but
recommended that commitments to
issue a commitment in the future,
including those entered into even
though the related loan agreement has
not yet been signed, should be removed
from the list of types of arrangements
that the instructions would direct banks
to report as unused commitments. The
other two bankers’ organizations also
commented on the inclusion of this type
of arrangement as an unused
commitment. One organization
expressed concern about reporting
‘‘commitments that contain a relatively
high level of uncertainty until a loan
agreement has been signed or the loan
has been funded with a first advance’’
and the reliability of data on such
commitments. The other organization
stated that because some banks do not
have systems for tracking such
arrangements, the instructions should in
effect permit banks to exclude
commitment letters with an expiration
date of 90 days or less. Finally, the first
bankers’ organization also
recommended that the instructions for
reporting unused commitments should
state that amounts conveyed or
participated to others that the conveying
or participating bank is not obligated to
fund should not be reported as unused
commitments by the conveying or
participating bank.
The agencies are continuing to
evaluate these commenters’
recommendations. As a consequence,
the agencies will not revise the
instructions for Schedule RC–L, item 1,
‘‘Unused commitments,’’ effective
March 31, 2009, as proposed and the
existing instructions for this Schedule
RC–L item will remain in effect. Once
the agencies conclude their
deliberations on these recommendations
and determine whether and how to
revise the instructions for reporting
‘‘Unused commitments’’ in Schedule
RC–L, item 1, they will publish their
conclusions in a separate Federal
Register notice and submit them to
OMB for review and approval. If the
instructions to Schedule RC–L, item 1,
are revised, the clarifications to these
instructions would take effect no earlier
than December 31, 2009.
D. 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 proposed to
exempt such banks from completing the
following Call Report items effective
March 31, 2009:

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• Schedule RI, Memorandum item 2,
‘‘Income from the sale and servicing of
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; 8
• 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.’’
One commenter, a bank insurance
consultant, objected to the agencies’
proposal to exempt banks with less than
$1 billion in total assets from reporting
Schedule RI, Memorandum item 2,
‘‘Income from the sale and servicing of
mutual funds and annuities (in
domestic offices),’’ stating that this item
should be preserved in all bank Call
Reports. This commenter also stated
that the agencies had not explained how
they had determined that the collection
of this Call Report item from banks in
this size range is of lesser usefulness.
This commenter added that by
eliminating the reporting of this income
information for these banks, ‘‘we will
lose our sole window into community
banks’ mutual fund and annuity
activities.’’
Memorandum item 2 was added to
Schedule RI of the Call Report in 1994.
At that time, the agencies collected
limited information on banks’
noninterest income. However, since
2001, the agencies have significantly
expanded the amount of detailed
information they collect on noninterest
income in recognition of the increasing
importance of such income to banks’
earnings. As a result, all banks,
regardless of size, currently report the
amount of ‘‘Fees and commissions from
securities brokerage’’ and ‘‘Fees and
commissions from annuity sales’’ in
Schedule RI, items 5.d.(1) and 5.d.(3),
each quarter. Item 5.d.(1) specifically
includes a bank’s income from the sale
and servicing of mutual funds. Thus, in
general, the income that a bank reports
in Schedule RI, Memorandum item 2,
will have been included in these two
noninterest income items in the body of
Schedule RI. However, although the
bank insurance consultant stated that as
of ‘‘June 30, 2008, more banks with less
than $1 billion in assets reported mutual
fund and annuity income’’ in
Memorandum item 2 than reported
eight other types of noninterest income
in the body of Schedule RI,’’ the
consultant did not provide comparative
8 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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data for the number of such banks
reporting ‘‘Fees and commissions from
securities brokerage’’ or ‘‘Fees and
commissions from annuity sales.’’
In addition, the agencies will
continue to use the Call Report to
identify banks that sell private label or
third party mutual funds and annuities
(Schedule RC–M, item 6) as well as
banks managing assets held in
proprietary mutual funds and annuities
(Schedule RC–M, item 7). Furthermore,
Call Report users within the agencies
have indicated that Memorandum item
2 on ‘‘Income from the sale and
servicing of mutual funds and
annuities’’ is regarded as being of lesser
usefulness than the noninterest income
items with which it overlaps (items
5.d.(1) and 5.d.(3) of Schedule RI).
Accordingly, after considering the views
expressed by the bank insurance
consultant, the agencies have reaffirmed
that the existing Call Report income
statement items for ‘‘Fees and
commissions from securities brokerage’’
and ‘‘Fees and commissions from
annuity sales’’ are sufficient to meet
their ongoing needs for income data on
these types of activities from banks with
less than $1 billion in total assets and
that such banks should be exempt from
separately reporting ‘‘Income from the
sale and servicing of mutual funds and
annuities’’ beginning March 31, 2009.
The agencies received no comments
specifically addressing the other Call
Report items for which they proposed to
exempt banks with less than $1 billion
in assets from continued reporting and
will implement these exemptions as of
March 31, 2009, as proposed.
E. Quantifying Misstatements in the Call
Report
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 FASB Statement
No. 154, Accounting Changes and Error
Corrections (FAS 154). However, neither
FAS 154 nor the Glossary entry for
‘‘Accounting Changes’’ specifies the
appropriate method to quantify an error
or misstatement for purposes of
evaluating materiality.
In September 2006, the SEC staff
issued Staff Accounting Bulletin No.
108, Considering the Effects of Prior
Year Misstatements when Quantifying
Misstatements in Current Year Financial
Statements (SAB 108),9 which advises
that the impact of correcting all
9 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.

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misstatements on current year financial
statements should be accomplished by
quantifying an error under both the
‘‘rollover’’ and ‘‘iron curtain’’
approaches 10 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).11 SAB 108
observes that when the correction of an
error in 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 believe that the
guidance in SAB 108 and SAB 99
represents sound accounting practices
that all banks 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 proposed to
incorporate the guidance in these two
Staff Accounting Bulletins into the
section of the ‘‘Accounting Changes’’
Glossary entry on error corrections.
One banking organization supported
the agencies’ proposal for quantifying
misstatements in the Call Report
because it would provide a uniform
approach for dealing with
misstatements. The agencies will
implement this instructional change as
proposed.
F. 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.
10 According to SAB 108, 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.’’
11 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 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
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 their fiduciary and related services
expenses and losses annually as of yearend. 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. 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

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and related services income, expense,
and loss information because these data
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 proposed 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.
One bankers’ organization opposed
eliminating the confidential treatment of
fiduciary income, expense, and loss
data, stating that the agencies’ original
reason for according confidential
treatment to these data, i.e., that these

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data generally pertain to only a portion
of a reporting institution’s total
operations and not to the institution as
a whole, still holds true. This
commenter also cited significant
competitive concerns with the proposed
elimination of confidential treatment
because making income, expense, and
loss data publicly available ‘‘may make
it possible for competitors to deduce’’
an individual institution’s fee
schedules. In addition, the bankers’
organization believed that these
publicly disclosed data may be subject
to misinterpretation by market
participants who would lack a proper
understanding of the scope of the
income, expense, and loss data reported
in Schedule RC–T because fiduciary
income and expenses are presented
differently in institutions’ audited
financial statements prepared in
accordance with GAAP. Therefore, this
commenter believes that institutions’
financial statements can satisfy market
participants’ needs for fiduciary income,
expense, and loss data. Finally, this
commenter stated that market
participants may be confused or misled
by the fiduciary expense and loss
information because they would be
unable to determine the source or
specific fiduciary activity giving rise to
the expense or loss.
Although the fiduciary income,
expense, and loss data currently
reported in Schedule RC–T and afforded
confidential treatment apply only to a
portion of an institution rather than an
entire institution, all other income and
expense data collected in the Call
Report is publicly available, even when
the data relates only to portions of an
institution’s activities. As previously
mentioned, components of net income
attributable to foreign offices are
reported by banks with significant
foreign activities and made publicly
available. In addition, banks with
significant trading activities have
reported a publicly available year-todate breakdown of the revenues
generated by the trading portion of their
activities, which discloses the net gains
(losses) by type of exposure each
quarter. The agencies believe that the
likelihood that competing institutions
will be able to deduce an individual
institution’s fee schedule for its
fiduciary services from the fiduciary
income data reported in Schedule RC–
T is largely mitigated by the fact that, in
general, as noted above, only larger trust
institutions are required to report
fiduciary income, expense, and loss
data.12 Smaller trust institutions are not
12 Institutions with total fiduciary assets greater
than $100 million as of the preceding December 31

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required to report such data. Therefore,
smaller trust institutions whose fee
schedules for fiduciary services may
potentially be more likely to be able to
be deduced by competitors are not
subject to the risk of unintended
disclosure of their fee schedules.
The agencies also believe that the risk
of misinterpretation of the fiduciary
income, expense, and loss data is
substantially reduced by the FFIEC’s
publication of detailed instructions for
the preparation of Schedule RC–T,
which are available to users of this
schedule to assist them in
understanding the scope of the reported
fiduciary and related services data.
Moreover, possible confusion about the
source of losses is mitigated by the
currently required reporting in
Memorandum item 4 of Schedule RC–T
of a breakdown of losses by type of
fiduciary account, which is further
segregated between managed and nonmanaged accounts. Finally, the Optional
Narrative Statement section of the Call
Report affords the management of trust
institutions the ability to submit
publicly available explanatory
comments concerning their fiduciary
income, expense, and losses.
Thus, the agencies continue to believe
that the benefit of increased
transparency from the full disclosure of
fiduciary income, expense, and loss data
will improve market discipline by
enhancing the market’s ability to assess
institution-specific performance and
risks. After carefully considering the
comments on the public availability of
fiduciary income, expense, and loss data
reported in Schedule RC–T, the agencies
are adopting the proposal to eliminate
the confidential treatment of such data
beginning with the data reported as of
March 31, 2009.
III. Call Report Revisions Proposed for
June 2009
The agencies received no comments
on the following revisions that were
proposed to take effect as of June 30,
2009, and therefore these revisions will
be implemented as proposed:
• 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
and institutions with gross fiduciary and related
services income greater than 10 percent of revenue
for the preceding calendar year are required to
report fiduciary income data quarterly or annually,
depending on their assets and income, and
fiduciary expense and loss data annually in
Schedule RC–T.

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asset-backed commercial paper
conduits;
• 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);
• Investments in real estate ventures;
• Held-to-maturity and available-forsale securities in domestic offices (for
banks that have both domestic and
foreign offices); 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 agencies received one or more
comments addressing each of the
following proposed June 30, 2009,
revisions:
• Real estate construction and
development loans outstanding with
capitalized interest and the amount of
such interest included in income for the
quarter (for banks with construction and
development loan concentrations);
• 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);
• Remaining maturities of unsecured
other borrowings and subordinated
notes and debentures;
• Past due and nonaccrual trading
assets; and
• Credit derivatives by credit quality
and remaining maturity and by
regulatory capital treatment.
The comments related to each of these
proposed revisions are discussed below
along with the agencies’ response to
these comments.
A. Construction and Development Loans
With Interest Reserves
In December 2006, the agencies issued
final guidance on commercial real estate
(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).13 This guidance was
developed to reinforce sound risk
management practices for institutions
with high and increasing concentrations
of commercial real estate loans on their
13 71

FR 74580, December 12, 2006.

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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
C&D 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
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.

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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 have been 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
proposed 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.
One bank expressed agreement with
the agencies’ concerns about the
disguising of problems with a
borrower’s willingness and ability to
repay the debt consistent with the terms
and conditions of the loan agreement
through the improper use of interest
reserves on C&D loans. The bank also
acknowledged that real estate market
conditions have weakened in its market
area since the agencies issued their CRE
Guidance in December 2006. Although
the bank stated that it has a
concentration of C&D loans, as defined
above, it reported that a recent review
of its portfolio revealed that only a
modest number of its C&D loan
agreements included interest reserves.
The bank also described its lending
policies and controls over the approval
of interest reserves in the original
underwriting of a C&D loan and in the
limited cases when the original loan had
matured or was otherwise recast. It then
stated that both the bank lender and its
supervisory agency should focus their
attention—and any regulatory reporting
requirements—on situations when
interest reserves are added to a loan
after a development project is
completed or ‘‘when a project goes over
budget or otherwise has completion

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issues.’’ With respect to the two
proposed items pertaining to C&D loans
with interest reserves, the bank noted
that its loan system does not currently
capture the required data and adding
this capability to the loan system by the
proposed June 30, 2009, effective date
would likely be difficult, which would
mean that the data would have to be
compiled manually until system
changes are in place.
In its comments, the bank concurred
with the agencies’ statement that the
practice of including interest reserves as
part of the original underwriting of a
C&D loan is common. Although this
bank may have a modest number of C&D
loans with interest reserves and states
that it controls the use of such reserves,
the agencies remain concerned about
the inappropriate capitalization of
interest on C&D loans through the use
of interest reserves. Potentially
inappropriate interest capitalization is
not limited to situations where interest
reserves are added to a C&D loan after
its originally scheduled maturity date or
in connection with a restructuring of the
loan. Inappropriate interest income
recognition may also occur when
budgeted interest reserves that were
determined to be appropriate at the
inception of the loan based on a
project’s original development and sale
or lease-up plans continue to be used
after construction has been substantially
curtailed or has ceased and collection of
all principal and interest on the loan is
in doubt. In addition, a bank may loosen
its policies and controls over the
recognition of interest income on C&D
loans through the use of interest
reserves.
The agencies acknowledge that at
some banks with C&D loan
concentrations, only a limited portion of
such loans may provide for the use of
interest reserves. Nevertheless, the
agencies believe that all banks with
such concentrations should report the
proposed data on loans with interest
reserves to enable them to monitor this
lending activity and detect changes in
the extent to which such banks’ C&D
loans provide for the use of interest
reserves. As noted above, the new and
existing C&D loan data will also assist
in identifying banks whose use of
interest reserves may warrant
supervisory follow-up. Accordingly,
after considering the bank’s comment,
the agencies have decided to implement
the proposed new items for the amount
of C&D loans with interest reserves and
the amount of capitalized interest
included in income for the quarter as of
June 30, 2009, as proposed. Banks with
C&D loan concentrations are reminded
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reasonable estimates for these two
amounts in the June 30, 2009, Call
Report, which will provide them with
additional flexibility in making any
necessary systems changes. Finally,
banks with C&D loan concentrations
may choose to provide explanatory
comments about their C&D loans with
interest reserves in the Optional
Narrative Statement section of the Call
Report and these comments will be
publicly available.
B. Fair Value Measurements
Effective March 31, 2007, 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 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 proposed to expand the data
collected on Schedule RC–Q in two
material respects.
• First, the agencies proposed to
expand the detail on Schedule RC–Q to
(1) 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, (2) add
totals to capture total assets and total
liabilities for items reported on the
schedule, (3) 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 and loan
commitments), and (4) add separate
disclosures for those components of
‘‘other assets’’ and ‘‘other liabilities’’
greater than $25,000 and exceeding 25
percent of the total fair value of ‘‘other
assets’’ and ‘‘other liabilities,’’
respectively.
• Second, the agencies proposed 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 while retaining the schedule’s
current applicability to all banks that (1)

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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.
One bankers’ organization commented
that ‘‘[c]ommunity banks have long been
concerned about the application of fair
value accounting to their financial
statements’’ and urged the agencies to
use the increased data to be collected in
Schedule RC–Q ‘‘to carefully study the
impact of this controversial accounting
methodology’’ because it ‘‘often does
not reflect the reality of community
banking.’’ In proposing the revisions to
Schedule RC–Q, the agencies stated that
additional data will enable them to
more accurately assess the impact of fair
value accounting and fair value
measurements for safety and soundness
purposes. This objective is consistent
with the recommendation from this
bankers’ organization concerning the
manner in which the agencies should
use these fair value data. Thus, the
agencies will implement the revisions to
Schedule RC–Q effective June 30, 2009,
as proposed.
C. 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.
At the time the agencies issued their
proposed revisions to the Call Report in
2008, the FDIC was considering
proposing an adjustment to the riskbased assessment system so that insured
depository institutions with greater
amounts of general unsecured long-term
liabilities will be rewarded with a lower
assessment rate. The FDIC has since
issued proposed amendments to its riskbased assessment system that include an
unsecured debt adjustment that would
lower an institution’s base assessment
rate.14
Because the Call Reports lack
information regarding the remaining
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maturities of unsecured ‘‘other
borrowings’’ and subordinated notes
and debentures, the agencies proposed
to collect this information in the Call
Report so that the FDIC would be able
to implement an unsecured debt
adjustment. One bankers’ organization
expressed support for the proposed
collection of this information to
facilitate this risk-based assessment
adjustment, indicating that the reporting
of this additional data ‘‘would be
reasonable and would not be unduly
burdensome.’’ The agencies will
implement the new items for reporting
data on the remaining maturities of
unsecured other borrowings and
subordinated debt beginning June 30,
2009, as proposed.
D. Trading Assets That Are Past Due or
in Nonaccrual Status
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 proposed 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
would allow the agencies to better
assess the quality of assets held for
trading purposes, and generally enhance
surveillance and examination planning
efforts.
The agencies also proposed 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 was intended to 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.
One bankers’ organization stated that
it believed that disclosure requirements
regarding the delinquency and
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not particularly meaningful given that
these securities are marked to market
through earnings. As a consequence,
credit risk is already incorporated into
the market price of each trading
security. The organization further stated
that the nonaccrual concept
traditionally has not been applied to
trading securities, which makes the
proposed reporting of such data costly
and difficult to implement. Accordingly,
this commenter recommended against
adding the proposed disclosure
requirements regarding the delinquency
and nonaccrual status of trading
securities.
The agencies are continuing to
evaluate this commenter’s
recommendation. Therefore, the
agencies will not implement the
revisions to Schedule RC–N, item 9, and
Schedule RC–D, Memorandum item 3,
effective June 30, 2009, as had been
proposed. These items will remain in
their current form while the agencies
consider the proposed reporting changes
in light of this banking organization’s
comment. When the agencies conclude
their deliberations on these proposed
disclosure requirements and determine
whether and how to proceed with them,
they will publish their conclusions in a
separate Federal Register notice and
submit them to OMB for review and
approval. If Schedule RC–N, item 9, and
Schedule RC–D, Memorandum item 3,
are revised, these reporting changes
would take effect no earlier than
December 31, 2009.
E. 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,
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, increased
steadily through March 31, 2008, rising
to an aggregate notional amount of $16.4
trillion as of that date. The aggregate
notional amount has since declined
slightly. Call Report data further
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
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The agencies’ safety and soundness
efforts continue to place emphasis on
understanding and assessing 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
proposed 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 proposed 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 proposed 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 proposed to collect the
notional amount of sold protection and
the amount of purchased protection. For
all other credit derivatives, the agencies
proposed 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.
The agencies also proposed 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
proposed to change the scope of
Memorandum item 6, ‘‘Past due interest
rate, foreign exchange rate, and other
commodity and equity contracts,’’ to

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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
proposed 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 proposed 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
information currently reported in
Memorandum item 2.g, the agencies
proposed 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.
No comments were received on any of
the agencies’ proposed reporting
revisions pertaining to credit derivatives
described above, except for a comment
from a bankers’ organization on the
proposal to collect data on Schedule
RC–R relating to the present value of
unpaid premiums on sold credit
protection that is defined as a covered
position under the market risk capital
guidelines. Accordingly, the agencies

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will implement all of the proposed
credit derivative reporting changes—
other than the proposed new Schedule
RC–R items for present value data—as of
June 30, 2009, as proposed. With respect
to the present value data, the bankers’
organization requested that the agencies
clarify the impact of this proposed
reporting requirement on a bank’s riskbased capital calculations. The agencies
are continuing to consider this comment
and the proposed collection of present
value data for certain credit derivatives.
Therefore, the agencies will not add
Memorandum items 3.a and 3.b to
Schedule RC–R to collect this present
value information effective June 30,
2009, as had been proposed. When the
agencies conclude their deliberations on
the bankers’ organization’s comment
and the proposed present value data
items, they will publish their
conclusions in a separate Federal
Register notice and submit any new
reporting requirements to OMB for
review and approval. If Memorandum
items 3.a and 3.b are added to Schedule
RC–R, this new reporting requirement
would take effect no earlier than
December 31, 2009.
IV. Discussion of Revisions Proposed for
December 2009
Schedule RC–T, Fiduciary and
Related Services, 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.
Since its addition to the Call Report at
year-end 2001, Schedule RC–T has not
been revised. During this time period,

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significant growth has occurred in both
the assets in managed and non-managed
fiduciary accounts at trust institutions.
The agencies have monitored 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.
Accordingly, the agencies proposed to
implement revisions to Schedule RC–T
as of December 31, 2009, that would
affect the types of fiduciary accounts for
which fiduciary assets and income are
reported and the types of assets and
fiduciary accounts for which managed
assets are reported. The agencies also
proposed to collect data on debt issues
in default under corporate trusteeships.
One bankers’ organization submitted
comments on the proposed changes to
Schedule RC–T. This commenter
requested that the effective date for the
proposed changes to Schedule RC–T be
extended from December 31, 2009, to
December 31, 2010, in order to provide
vendors whose systems track the data
reported in this schedule additional
time for system programming revisions.
The bankers’ organization indicated that
vendors are currently devoting
programming resources to changes
necessitated by the joint Securities and
Exchange Commission and Federal
Reserve Board Regulation R—
Exceptions for Banks from the
Definition of Broker in the Securities
Exchange Act of 1934. This commenter
also stated that some banks use multiple
systems to track the default status of
debt issues under corporate trusteeships
and that moving to a single system of
record for tracking these debt issues
would impose significant costs and
require a longer implementation period
than proposed.
After carefully considering this
organization’s comment, the agencies
have decided to retain the December 31,
2009, effective date for the proposed
changes. The agencies are not requiring
that trust institutions change from their
use of multiple systems for corporate
trusteeships or that they develop a
single system of record for such
trusteeships. In addition, the agencies
note that banks are to start complying
with Regulation R beginning the first
day of their fiscal year commencing
after September 30, 2008 (i.e., January 1,
2009, for most institutions), which
implies that programming changes
should be complete or nearing
completion. Furthermore, as previously
stated, the agencies’ policy is to permit

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banks to provide reasonable estimates
for any new or revised Call Report item
as of the report date for which the new
or revised item is initially required to be
reported. The ability to report
reasonable estimates applies to the
Schedule RC–T revisions that will be
implemented as of December 31, 2009,
which will afford trust institutions and
their vendors additional time—either
one quarter or one year, depending on
the item and the frequency with which
a particular institution must submit
Schedule RC–T—to complete any
necessary systems changes.
The agencies received no comments
on the following revisions to Schedule
RC–T that were proposed to take effect
as of December 31, 2009, and therefore
these revisions will be implemented as
proposed:
• 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;
• Expanding the breakdown of
managed assets by type of asset to cover
all types of fiduciary accounts; and
• Adding items for the market value
of discretionary investments in
proprietary mutual funds and the
number of managed accounts holding
such investments.
The agencies received comments from
one bankers’ organization addressing
each of the following other proposed
revisions to Schedule RC–T:
• Adding items for Individual
Retirement Accounts (IRAs), Health
Savings Accounts (HSAs), and similar
accounts included in fiduciary and
related assets;
• 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 and
adding new asset types to this
breakdown of managed assets; and
• Adding items for the number and
principal amount outstanding of debt
issues in substantive default for which
the institution serves as indenture
trustee.
The comments related to each of these
proposed revisions are discussed below
along with the agencies’ response to
these comments.
A. IRAs, HSAs, and Other Similar
Accounts
IRAs, HSAs, and other similar
accounts represent a large category of
individual benefit and retirementrelated accounts administered by trust
institutions for which the agencies do
not collect specific data. At present,

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data for retirement-related accounts is
included in the totals reported for
‘‘Other retirement accounts’’ and
‘‘Custody and safekeeping accounts’’ in
the Fiduciary and Related Assets section
of Schedule RC–T (items 5.c and 10).
Significant growth in IRAs and HSAs
administered by trust institutions is
expected. IRAs, HSAs, and other similar
accounts for individuals have risk
characteristics that differ from employee
benefit plans covered by the Employee
Retirement Income Security Act. To
identify trust institutions experiencing
significant changes in the number of
and market value of assets in these types
of accounts for supervisory follow-up
and to monitor both aggregate and
individual trust institution growth
trends involving these accounts, the
agencies proposed to add a new item 13
to the Fiduciary and Related Assets
section of Schedule RC–T to capture
data on IRAs, HSAs, and other similar
accounts included in recaptioned item
5.c, ‘‘Other employee benefit and other
retirement-related accounts’’ and
renumbered item 11, ‘‘Custody and
safekeeping accounts.’’
In its comment on this change, the
bankers’ organization recommended
that the data proposed to be reported in
new item 13, ‘‘Individual Retirement
Accounts, Health Savings Accounts, and
other similar accounts,’’ should be
reported instead in a new separate
subitem of recaptioned item 5,
‘‘Employee benefit and retirementrelated trust and agency accounts,’’ in
the Fiduciary and Related Assets section
of Schedule RC–T. In addition, the
commenter requested clarification of
how IRA, HSA, and other similar
accounts held outside the trust
department and in the retail side of an
institution should be reported in
Schedule RC–T, recommending that
these accounts be excluded from
Schedule RC–T.
At present, IRAs, HSAs, and similar
accounts that are solely custody and
safekeeping accounts are reported in
existing item 10, ‘‘Custody and
safekeeping accounts.’’ Custody and
safekeeping accounts are not considered
fiduciary accounts per se and are
excluded from ‘‘Total fiduciary
accounts’’ reported in item 9 of
Schedule RC–T. For this reason, the
agencies do not believe that IRAs, HSAs,
and similar accounts should be
aggregated and reported in a new
subitem of item 5, ‘‘Employee benefit
and retirement-related trust and agency
accounts,’’ which is reserved for
fiduciary accounts. Therefore, the
agencies are implementing new item 13,
‘‘Individual Retirement Accounts,

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Health Savings Accounts, and other
similar accounts,’’ as proposed.
Regarding the reporting of IRAs,
HSAs, and other similar accounts
maintained outside the trust department
and in the retail side of the institution,
the agencies reiterate that only those
activities offered through a fiduciary
business unit should be reported in
Schedule RC–T. Therefore, IRAs, HSAs,
and other similar accounts not offered
through a fiduciary business unit of an
institution should not be reported in
Schedule RC–T.
B. Changes to the Types of Assets
Reported in the Breakdown of Managed
Assets Held in Fiduciary Accounts by
Asset Type
The agencies reviewed the types of
managed assets for which trust
institutions currently report a
breakdown of such assets by market
value in Memorandum item 1 of
Schedule RC–T. In this regard,
discretionary investments in common
trust funds (CTFs) and collective
investment funds (CIFs) are not
separately reported at present in
Memorandum item 1. Instead, trust
institutions currently 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 current method of reporting
investments in CTFs and CIFs to be
misleading, confusing, and burdensome
for trust institutions. It 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 proposed
to end the current method of reporting
these investments in Memorandum item
1 by adding a new Memorandum item
1.h for investments in CTFs and CIFs.
This new asset type would 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.
In its comment on this proposed
change, the bankers’ organization asked
whether both the accounts holding units
in CTFs and CIFs and the CTFs and CIFs
themselves should be reported in the
Fiduciary and Related Assets section of
Schedule RC–T and whether double
counting of CTF and CIF units and CTFs
and CIFs will result. The agencies note
that only the value of units in CTFs and
CIFs held in fiduciary accounts should

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be reported in the Fiduciary and Related
Assets section of RC–T. When such
units are held by a managed fiduciary
account, the value of the units will be
reported in new Memorandum item 1.h.
Look-through reporting of the
underlying assets of CTFs and CIFs in
Memorandum item 1 is being
eliminated. Double counting of CTF and
CIF assets will be avoided by limiting
the reporting of the underlying assets of
CTFs and CIFs to existing Memorandum
item 3, ‘‘Collective investment funds
and common trust funds,’’ in Schedule
RC–T.
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 proposed to add two new
subitems 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. None of
the comments the agencies received
specifically addressed the proposed new
subitems for mutual funds in
Memorandum item 1, which the
agencies will implement as proposed.
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
of investments in order to increase
portfolio returns and pursue absolute
return strategies. As mentioned above,
these types of investments are currently
reported as ‘‘common and preferred
stocks’’ in Memorandum item 1.
However, given their unique
characteristics and risks, the increasing
role such investments are having in
managed fiduciary portfolios, and the

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agencies’ need to monitor the volume of
these investments across the trust
industry and at individual trust
institutions, the agencies also proposed
to modify Memorandum item 1 by
adding a new subitem in which trust
institutions would report investments in
unregistered funds and private equity
held in managed accounts. As proposed,
these investments first would have been
reported in the subitem for investments
in common and preferred stocks, which
is a component of Memorandum item
1.o, ‘‘Total managed assets held in
fiduciary accounts,’’ but then these
investments would have been separately
disclosed in new Memorandum item 1.p
of Schedule RC–T.
In its comment letter, the bankers’
organization suggested that investments
in unregistered funds and private equity
and investments in common and
preferred stocks be reported as separate
components of ‘‘Total managed assets
held in fiduciary accounts,’’ which
would eliminate the need for the former
type of investments to be included in
two subitems of Memorandum item 1 of
Schedule RC–T. The agencies agree with
this suggestion and are revising
Memorandum item 1 to exclude
investments in unregistered funds and
private equity from the subitem for
investments in common and preferred
stocks. Instead, each type of investment
will be reported as a separate
component of ‘‘Total managed assets
held in fiduciary accounts,’’ with the
subitems within Memorandum item 1
renumbered accordingly.
The bankers’ organization also
requested that the agencies clarify the
definition of ‘‘private equity
investments’’ for purposes of reporting
such investments within Memorandum
item 1 of Schedule RC–T and explain
whether investments in closely-held
family businesses should be reported as
‘‘private equity investments.’’ In
general, for the purposes of
Memorandum item 1, private equity
investments is an asset class consisting
of purchased equity securities in
operating companies that are not
publicly traded on a stock exchange or
otherwise registered with the SEC under
federal securities laws. Investments in
closely-held family businesses,
however, would not be reported as
‘‘private equity investments’’ if such
investments represented in-kind
transfers to a fiduciary account of
securities in a closely-held family
business or an increase in a fiduciary
account’s percentage ownership of an
existing closely-held family business
whose securities are held in the
account. Such investments in closelyheld family businesses would be

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reported in the subitem for
miscellaneous assets within
Memorandum item 1 of Schedule RC–T.
C. 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, files for bankruptcy, 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. 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 proposed 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 its comment letter, the bankers’
organization suggested clarifications to
the scope of the proposed new reporting
requirements for debt securities in
substantive default for which an
institution is serving as indenture
trustee. The commenter recommended
that the term ‘‘substantive default’’
should mean that an event of default for
an issue of securities has actually been
declared by the trustee with notice to
investors. In addition, the bankers’
organization recommended that events
of default should include both technical
and payment defaults. This commenter
also proposed that issues in a cure
period should not be reported as being
in substantive default, and, in the case
of private placement leases, no
substantive default should be reported
when the trustee is required to delay or
waive the declaration of an event of
default unless requested to do so in
writing and no such request has been
made. The commenter further suggested
that, once the trustee’s duty with respect
to a defaulted issue is completed, the
issue no longer should be reported as
defaulted. Finally, the commenter
requested that the agencies confirm that
‘‘amount outstanding’’ means the
unpaid principal balance or certificate
balance.
After carefully considering these
recommendations, the agencies agree
that issues should not be reported as

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sroberts on PROD1PC70 with NOTICES

Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
being in substantive default until such
default has been declared by the trustee.
Similarly, issues should not be reported
as being in substantive default during a
cure period, provided the bond
indenture provides for a cure period.
Private placement leases where the
trustee is required to delay or waive the
declaration of an event of default, unless
requested in writing to make such
declaration, should not be reported as
being in substantive default, provided
such written request has not been made.
Once a trustee’s duties with respect to
an issue in substantive default have
been completed, the issue should no
longer be reported as being in default.
As for the meaning of the term ‘‘amount
outstanding,’’ the instructions for
Memorandum item 2 of Schedule RC–T
currently refer to the par value of
outstanding debt securities, except for
zero-coupon bonds for which ‘‘amount
outstanding’’ is described as the
maturity amount. As suggested by the
commenter, the instructions for
Memorandum item 2 will be revised to
clarify that ‘‘amount outstanding’’ for
debt instruments means the unpaid
principal balance. For trust preferred
securities, the ‘‘amount outstanding’’
would be the redemption price.
The agencies, however, have decided
not to treat events of technical default
as falling within the scope of the
proposed new Memorandum item
2.a.(1) on debt issues in default for
which the institution serves as trustee.
As previously stated, the agencies
believe that 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 intensely scrutinized by
bondholders of the defaulted issue.
Moreover, an event of substantive
default often results in the incurrence of
significant expense and the distraction
of managerial time. For these reasons,
the agencies proposed to collect data on
substantive defaults on issues for which
the reporting trust institution serves as
trustee under a bond indenture. The
agencies do not believe that events of
technical default necessarily entail the
heightened degree of risk that
substantive defaults do. Therefore, the
agencies do not consider it necessary to
monitor such events on a system-wide
basis. The agencies will continue to
monitor the occurrence of events of
technical default and an institution’s
administration of such events during
periodic on-site examinations.
In addition, the agencies proposed 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

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included in the amounts reported for
corporate and municipal trusteeships.
No comments were received on this
aspect of the corporate trust reporting
proposal and the agencies will
implement this instructional change as
proposed.
F. Instructional Clarifications
The agencies proposed to clarify the
instructions for reporting:
• The managed and non-managed
assets and number of managed and nonmanaged accounts for defined
contribution plans and defined benefit
plans in items 5.a and 5.b of Schedule
RC–T, respectively, by indicating that
employee benefit accounts for which the
trust institution serves as a directed
trustee should be reported as nonmanaged accounts; and
• The number of, and market value of
assets held in, collective investment
funds and common trust funds in
Memorandum item 3 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.
No comments were received on these
proposed instructional clarifications,
which will be implemented as
proposed.
However, the bankers’ organization
requested clarification of the term
‘‘managed assets’’ as used in Schedule
RC–T. The organization asked whether
discretionary accounts in which the
management of all or a portion of the
account is delegated to a registered
investment advisor, whether affiliated
or unaffiliated with the reporting trust
institution, should be considered
managed or non-managed assets. The
organization also sought clarification as
to whether non-discretionary accounts
that are managed by a registered
investment advisor would be reported
as custody or non-managed accounts.
The current instructions for Schedule
RC–T state that an account is considered
managed if the institution has
investment discretion over the assets of
the account. Investment discretion is
defined as the sole or shared authority
(whether or not that authority is
exercised) to determine what securities
or other assets to purchase or sell on
behalf of a fiduciary related account. An
institution that delegates its authority
over investments and an institution that
receives delegated authority over
investments are both deemed to have
investment discretion. Therefore,
whether an account where investment
discretion has been delegated to a
registered investment adviser, whether

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5041

affiliated or unaffiliated with the
reporting institution, should be reported
as a managed account depends on
whether the delegation of investment
authority to the registered investment
adviser was made pursuant to the
exercise of investment discretion by the
reporting institution. If so, the account
is deemed to be a managed account by
the reporting institution. Otherwise, the
account would be a non-managed
account for purposes of Schedule RC–T.
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,
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: January 22, 2009.
Stuart E. Feldstein,
Assistant Director, Legislative and Regulatory
Activities Division, Office of the Comptroller
of the Currency.
Board of Governors of the Federal Reserve
System, January 22, 2009.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 22nd day of
January, 2009.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9–1734 Filed 1–27–09; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P

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