BHCs and SLHCs

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Supplemental Instructions: Interim Final Rules and Notice Issued March 2020
In March 2020, in response to the impact on the financial markets by Coronavirus Disease 2019
(also referred to as COVID-19), the Federal Deposit Insurance Corporation, the Federal Reserve
Board, and the Office of the Comptroller of the Currency (collectively, the agencies), issued
three interim final rules (IFR) and a notice that impact the reporting of regulatory capital in the
Call Report and the FFIEC 101. These revisions impact the amounts reported on Schedule RCR, Regulatory Capital, and apply to the three versions of the Call Report (FFIEC 031, FFIEC
041, and FFIEC 051) and the FFIEC 101. The IFRs have been published in the Federal Register.
The agencies have requested [and have received] emergency clearance from the Office of
Management and Budget to permit these revisions for the March 31, 2020, Call Report and the
FFIEC 101. The agencies will request public comment on these changes in reporting through the
standard Paperwork Reduction Act process on a later date.
The revisions impacting the FFIEC 101 include the following:
1) Permitting banking organizations to neutralize the effects of purchasing assets through
the Money Market Mutual Fund Liquidity Facility (MMLF) on their risk-based and
leverage capital ratios;
2) Providing banking organizations that implement Accounting Standards Update No. 201613, Financial Instruments – Credit Losses, Topic 326, Measurement of Credit Losses on
Financial Instruments (CECL) before the end of 2020 the option to delay for two years an
estimate of CECL’s effect on regulatory capital, relative to the incurred loss
methodology’s effect on capital, followed by a three-year transition period; and
3) Allowing banking organizations to implement the final rule titled Standardized Approach
for Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) for the first
quarter of 2020, on a best efforts basis.
For further information on these revisions, see the following Federal Register notices published
in March 2020: Federal Register Notice - MMLF, Regulatory Capital Rule: Revised Transition
of the Current Expected Credit losses Methodology for Allowances and Standardized Approach
for Calculating the Exposure Amount of Derivative Contracts.

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Table of Contents

Revision

Pages

1. Reporting on non-recourse exposures acquired as part of the MMLF

3-4

2. 2020 CECL Transition Provision

5

3. Early adoption of SA-CCR

6

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Interim Final Rule for Money Market Liquidity Facility
To enhance the liquidity and functioning of money markets, the Federal Reserve Bank of Boston
launched the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18, 2020. On
March 23, 2020, the agencies published an interim final rule, which permits banking
organizations to exclude from regulatory capital requirements exposures related to the MMLF.
The interim final rule modifies the agencies’ capital rule to allow banking organizations to
neutralize the effects of purchasing assets through the MMLF on their risk-based and leverage
capital ratios. This treatment extends to the community bank leverage ratio. Specifically, a
banking organization may exclude from its total leverage exposure, average total consolidated
assets, standardized total risk-weighted assets, and advanced approaches total risk-weighted
assets, as applicable, any exposure acquired pursuant to a non-recourse loan from the MMLF.
The interim final rule only applies to activities with the MMLF. The facility is scheduled to
terminate on September 30, 2020, unless the facility is extended by the Federal Reserve Board.
Consistent with generally accepted accounting principles (GAAP), the agencies would expect
banking organizations to report assets purchased through the MMLF on their balance sheets.
These assets would be reflected at the time of purchase at amortized cost or fair value. The nonrecourse nature of the transaction would impact the valuation of the liability to the Federal
Reserve. After reflecting any appropriate discounts on the assets and associated liabilities,
organizations are not expected to report any material net gains or losses (if any) at the time of
purchase. Any discounts generally would be accreted over time into income and expense.
Starting with the March 31, 2020 reporting date, banking organizations would include the
amount of assets purchased from the MMLF in Schedule RC-B and Schedule RC-R, as
appropriate.
For regulatory capital reporting, assets purchased from the MMLF should be reported in either
Schedule RC-R, Part II, item 2.a., “Held-to-maturity securities,” or Schedule RC-R, Part II, item
2.b., “Available-for-sale debt securities and equity securities with readily determinable fair
values not held for trading,” as appropriate, in both Column A (Totals) and Column C (0% riskweight category)1. The average of such assets purchased would be reported in Schedule RC-R,
part I, item 29, “LESS: Other deductions from (additions to) assets for leverage ratio purposes,”
and thus excluded from Schedule RC-R, item 30, “Total assets for the leverage ratio.”
Advanced approaches banking organizations should not include assets purchased from the
MMLF in “Total risk-weighted assets (RWAs)” reported in the FFIEC 101, Schedule A, item 60
or Schedule, RC-R, Part I, item 48.b. A banking organization, even if it is not a custodial
banking organization, should include assets purchased from the MMLF in the FFIEC 101,
Schedule A, SLR Table 1, item 1.7.c, “Adjustments for deductions of qualifying central bank
deposits for custodial banking organizations”. For banking organizations subject to the
supplementary leverage ratio requirement, assets purchased from the MMLF would receive
similar treatment as under the “leverage ratio” and should be reported in the FFIEC 101,
Schedule A, SLR Table 2, item 2.2.b, “Deductions of qualifying central bank deposits from total
1Reporting

in Schedule RC-R, Part II, only applies to non CBLR banking institutions.

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on-balance sheet exposures for custodial banking organizations,” even if a banking organization
is not a custodial banking organization. Banking organizations would report their adjusted
“Total leverage exposure” and “Supplementary leverage ratio” in Schedule RC-R, Part I, item
55.a and 55.b.
Borrowings from the Federal Reserve Bank of Boston would be included in Schedule RC, item
16, “Other borrowed money,” and included in Schedule RC-M, item 5.b.(1)(a), “Other borrowed
money with a remaining maturity of one year or less.”
Furthermore, banking organizations are encouraged to separately disclose in a “Narrative
Statement Concerning the Amounts Reported in the Reports of Condition and Income,” the
amount of assets purchased from the MMLF included in Schedule RC-R, Part II, item 2.a. or 2.b.
In addition, banking organizations are encouraged to separately disclose in a similar narrative,
the average amount of assets purchased from the MMLF that were excluded from Schedule RCR, item 30.

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2020 CECL Transition Provision
Note: The reporting instructions are based on the 2020 transition provision in section 301 of the
agencies’ regulatory capital rules and should be read in connection with those rules.
Revisions to FFIEC 101 Instructions
Schedule A
Item 2 – Retained Earnings
An institution that has elected to apply the 2020 CECL Transition provision would add the
Modified CECL Transitional Amount, as defined in section 301 of the regulatory capital rules,
when calculating this item, adjusted as follows: 100% in Years 1 and 2 of the transition period;
75% in Year 3 of the transition period; 50% in Year 4 of the transition period; and 25% in Year 5
of the transition period.
Item 21 - DTAs arising from temporary differences that could not be realized through net
operating loss carrybacks, net of related valuation allowances and net of DTLs, that exceed
the 10 percent common equity tier 1 capital deduction threshold.
An institution that has elected to apply the 2020 CECL transition would subtract the DTA
Transitional Amount, as defined in section 301 of the regulatory capital rules, from the amount
of DTAs from temporary differences used in the calculation of this item, adjusted as follows:
100% in Years 1 and 2 of the transition period; 75% in Year 3 of the transition period; 50% in
Year 4 of the transition period; and 25% in Year 5 of the transition period.
Item 50 – Eligible credit reserves includable in Tier 2 capital.
An institution that has elected to apply the 2020 CECL transition would subtract Eligible Credit
Reserves Transitional Amount, as defined in section 301 of the regulatory capital rules, when
calculating this item, adjusted as follows: 100% in Years 1 and 2 of the transition period; 75% in
Year 3 of the transition period; 50% in Year 4 of the transition period; and 25% in Year 5 of the
transition period.
Supplementary Leverage Ratio
Table 1
Item 1.8 – Total leverage exposure.
An institution that has elected to apply the 2020 CECL Transition would add the Modified CECL
Transitional Amount, as defined in section 301 of the regulatory capital rules, when calculating
this item, adjusted as follows: 100% in Years 1 and 2 of the transition period; 75% in Year 3 of
the transition period; 50% in Year 4 of the transition period; and 25% in Year 5 of the transition
period.

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Early Adoption of the Standardized Approach for Calculating the Exposure Amount of
Derivative Contracts (SA-CCR rule)
On March 23, 2020, the federal banking agencies published a notice in the Federal Register that
allows banking organizations to implement the final rule titled Standardized Approach for
Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) for the first quarter of
2020, on a best efforts basis. The instructions that were approved for the second quarter FFIEC
101 can be used by institutions who choose to adopt the SA-CCR rule for the March 31, 2020,
report date. For further information on these revisions, institutions can review the final 30-day
Paper Reduction Act Federal Register notice published on January 27, 2020.