[Federal Register Volume 86, Number 1 (Monday, January 4, 2021)]
[Notices]
[Pages 92-97]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29028]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is adopting a proposal to extend for three years, with revision, the
Financial Statements for Holding Companies (FR Y-9 reports; OMB Control
Number 7100-0128) and the Consolidated Report of Condition and Income
for Edge and Agreement Corporations (FR 2886b; OMB Control Number 7100-
0086). The new revisions to these reports are effective as of March 31,
2021. The Board is also finalizing the following revisions that were
previously approved on an interim basis: Revisions to the definition of
``savings deposits'' in the FR Y-9C and FR 2886b instructions
associated with the amendments to the Board's Regulation D (Reserve
Requirements of Depository Institutions), collection of two new
temporary data items on loan modifications consistent with section
4013(d)(2) of the Coronavirus Aid, Relief and Economic Security (CARES)
Act, and collection of four new temporary data items related to the an
interim final rule implementing the Paycheck Protection Program
Liquidity Facility (PPPLF). These changes became effective June 30,
2020.
FOR FURTHER INFORMATION CONTACT:
Federal Reserve Board Clearance Officer--Nuha Elmaghrabi--Office of
the Chief Data Officer, Board of Governors of the Federal Reserve
System, Washington, DC 20551, (202) 452-3829.
Office of Management and Budget (OMB) Desk Officer--Will Bestani--
Office of Information and Regulatory Affairs, 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.
SUPPLEMENTARY INFORMATION: On June 15, 1984, OMB delegated to the Board
authority under the PRA to approve and assign OMB control numbers to
collections of information conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official
OMB inventory of currently approved collections of information. The OMB
inventory, as well as copies of the PRA Submission, supporting
statements, and approved collection of information instrument(s) are
available at https://www.reginfo.gov/public/do/PRAMain. These documents
are also available on the Federal Reserve Board's public website at
https://www.federalreserve.gov/apps/reportforms/review.aspx or may be
requested from the agency clearance officer, whose name appears above.
Final Approval Under OMB Delegated Authority of the Extension for Three
Years, With Revision of the Following Information Collections:
(1) Report title: Financial Statements for Holding Companies.
Agency form numbers: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR
Y-9CS.
OMB control number: 7100-0128.
Frequency: Quarterly, semiannually, and annually.
Respondents: Bank holding companies (BHCs), savings and loan
holding companies (SLHCs), securities holding companies, and U.S.
intermediate holding companies (IHCs) (collectively, holding
companies).\1\
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\1\ An SLHC must file one or more of the FR Y-9 family of
reports unless it is: (1) A grandfathered unitary SLHC with
primarily commercial assets and thrifts that make up less than five
percent of its consolidated assets; or (2) a SLHC that primarily
holds insurance-related assets and does not otherwise submit
financial reports with the SEC pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934.
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Estimated number of respondents:
FR Y-9C (non-advanced approaches holding companies) with less than
$5 billion in total assets--124,
[[Page 93]]
FR Y-9C (non advanced approaches holding companies) with $5 billion
or more in total assets--218,
FR Y-9C (advanced approaches holding companies)--9,
FR Y-9LP--416,
FR Y-9SP--3,739,
FR Y-9ES--78,
FR Y-9CS--236.
Estimated average hours per response:
Reporting
FR Y-9C (non advanced approaches holding companies) with less than
$5 billion in total assets--35.72;
FR Y-9C (non advanced approaches holding companies) with $5 billion
or more in total assets--44.92;
FR Y-9C (advanced approaches holding companies)--50.14;
FR Y-9LP--5.27;
FR Y-9SP--5.40;
FR Y-9ES--0.50;
FR Y-9CS--0.50.
Recordkeeping
FR Y-9C--1;
FR Y-9LP--1;
FR Y-9SP--0.50;
FR Y-9ES--0.50;
FR Y-9CS--0.50.
Estimated annual burden hours:
Reporting
FR Y-9C (non advanced approaches holding companies) with less than
$5 billion in total assets--17,715;
FR Y-9C (non advanced approaches holding companies) with $5 billion
or more in total assets--39,166;
FR Y-9C (advanced approaches holding companies)--1,805;
FR Y-9LP--8,769;
FR Y-9SP--40,381;
FR Y-9ES--39;
FR Y-9CS--472.
Recordkeeping
FR Y-9C--1,404;
FR Y-9LP--1,664;
FR Y-9SP--3,739;
FR Y-9ES--39;
FR Y-9CS--472.
General description of report: The FR Y-9 family of reporting forms
continues to be the primary source of financial data on holding
companies that examiners rely on in the intervals between on-site
inspections. The Board requires holding companies to provide
standardized financial statements to fulfill the Board's statutory
obligation to supervise these organizations. Financial data from these
reporting forms are used to detect emerging financial problems, to
review performance and conduct pre-inspection analysis, to monitor and
evaluate capital adequacy, to evaluate holding company mergers and
acquisitions, and to analyze a holding company's overall financial
condition to ensure the safety and soundness of its operations. The FR
Y-9C, FR Y-9LP, and FR Y-9SP serve as standardized financial statements
for the holding companies. The FR Y-9ES is a financial statement for
holding companies that are Employee Stock Ownership Plans. The Board
uses the voluntary FR Y-9CS (a free-form supplement) to collect
additional information deemed to be critical and needed in an expedited
manner. Holding companies file the FR Y-9C on a quarterly basis, the FR
Y-9LP quarterly, the FR Y-9SP semiannually, the FR Y-9ES annually, and
the FR Y-9CS on a schedule that is determined when this supplement is
used.
Legal authorization and confidentiality: The reporting and
recordkeeping requirements associated with the FR Y-9 series of reports
are authorized for BHCs pursuant to section 5 of the Bank Holding
Company Act (``BHC Act''); \2\ for SLHCs pursuant to section 10(b)(2)
and (3) of the Home Owners' Loan Act, 12 U.S.C. 1467a(b)(2) and (3), as
amended by sections 369(8) and 604(h)(2) of the Dodd-Frank Wall Street
and Consumer Protection Act (``Dodd-Frank Act''); for IHCs pursuant to
section 5 of the BHC Act, as well as pursuant to sections 102(a)(1) and
165 of the Dodd-Frank Act; \3\ and for securities holding companies
pursuant to section 618 of the Dodd-Frank Act.\4\ Except for the FR Y-
9CS report, which is expected to be collected on a voluntary basis, the
obligation to submit the remaining reports in the FR Y-9 series of
reports and to comply with the recordkeeping requirements set forth in
the respective instructions to each of the other reports, is mandatory.
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\2\ 12 U.S.C. 1844.
\3\ 12 U.S.C. 5311(a)(1) and 5365; Section 165(b)(2) of Title I
of the Dodd-Frank Act, 12 U.S.C. 5365(b)(2), refers to ``foreign-
based bank holding company.'' Section 102(a)(1) of the Dodd-Frank
Act, 12 U.S.C. 5311(a)(1), defines ``bank holding company'' for
purposes of Title I of the Dodd-Frank Act to include foreign banking
organizations that are treated as bank holding companies under
section 8(a) of the International Banking Act, 12 U.S.C. 3106(a).
The Board has required, pursuant to section 165(b)(1)(B)(iv) of the
Dodd-Frank Act, 12 U.S.C. 5365(b)(1)(B)(iv), certain foreign banking
organizations subject to section 165 of the Dodd-Frank Act to form
U.S. intermediate holding companies. Accordingly, the parent
foreign-based organization of a U.S. IHC is treated as a BHC for
purposes of the BHC Act and section 165 of the Dodd-Frank Act.
Because section 5(c) of the BHC Act authorizes the Board to require
reports from subsidiaries of BHCs, section 5(c) provides additional
authority to require U.S. IHCs to report the information contained
in the FR Y-9 series of reports.
\4\ 12 U.S.C. 1850a(c)(1)(A).
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With respect to the FR Y-9C report, Schedule HI's Memorandum item
7.g, ``FDIC deposit insurance assessments,'' Schedule HC-P's item 7.a,
``Representation and warranty reserves for 1-4 family residential
mortgage loans sold to U.S. government agencies and government
sponsored agencies,'' and Schedule HC-P's item 7.b, ``Representation
and warranty reserves for 1-4 family residential mortgage loans sold to
other parties'' are considered confidential commercial and financial
information. Such treatment is appropriate under exemption 4 of the
Freedom of Information Act (``FOIA''),\5\ because these data items
reflect commercial and financial information that is both customarily
and actually treated as private by the submitter, and which the Board
has previously assured submitters will be treated as confidential. It
also appears that disclosing these data items may reveal confidential
examination and supervisory information, and in such instances, the
information also would be withheld pursuant to exemption 8 of the
FOIA,\6\ which protects information related to the supervision or
examination of a regulated financial institution.
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\5\ 5 U.S.C. 552(b)(4).
\6\ 5 U.S.C. 552(b)(8).
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In addition, for both the FR Y-9C report and the FR Y-9SP report,
Schedule HC's Memorandum item 2.b, the name and email address of the
external auditing firm's engagement partner, is considered confidential
commercial information and protected by exemption 4 of the FOIA,\7\ if
the identity of the engagement partner is treated as private
information by holding companies. The Board has assured respondents
that this information will be treated as confidential since the
collection of this data item was proposed in 2004.
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\7\ 5 U.S.C. 552(b)(4).
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Additionally, items on the FR Y-9C, Schedule HC-C regarding loans
modified under section 4013 of the CARES Act (Memorandum item 16.a,
``Number of Section 4013 loans outstanding'', and Memorandum item 16.b,
``Outstanding balance of Section 4013 loans'') are considered
confidential. While the Board generally makes institution-level FR Y-9C
report data publicly available, the Board believes the disclosure of
these items at the holding company level would not be in the public
interest.\8\ Such information is permitted to be collected on a
confidential basis, consistent with 5 U.S.C. 552(b)(8).\9\ Holding
companies
[[Page 94]]
may be reluctant to offer modifications under section 4013 if
information on these modifications are publicly available, as analysts,
investors, and other users of public FR Y-9C report information may
penalize an institution for using the relief provided by the CARES Act.
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\8\ See 12 U.S.C. 1464(v)(2).
\9\ Exemption 8 of the Freedom of Information Act (FOIA)
specifically exempts from disclosure information ``contained in or
related to examination, operating, or condition reports prepared by,
on behalf of, or for the use of an agency responsible for the
regulation or supervision of financial institutions.''
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Aside from the data items described above, the remaining data items
collected on the FR Y-9C report and the FR Y-9SP report are generally
not accorded confidential treatment. The data items collected on FR Y-
9LP, FR Y-9ES, and FR Y-9CS \10\ reports, are also generally not
accorded confidential treatment. As provided in the Board's Rules
Regarding Availability of Information,\11\ however, a respondent may
request confidential treatment for any data items the respondent
believes should be withheld pursuant to a FOIA exemption. The Board
will review any such request to determine if confidential treatment is
appropriate, and will inform the respondent if the request for
confidential treatment has been granted or denied.
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\10\ The FR Y-9CS is a supplemental report that may be utilized
by the Board to collect additional information that is needed in an
expedited manner from holding companies. The information collected
on this supplemental report is subject to change as needed.
Generally, the FR Y-9CS report is treated as public. However, where
appropriate, data items on the FR Y-9CS report may be withheld under
exemptions 4 or 8 of the FOIA, 5 U.S.C. 552(b)(4) and (8).
\11\ 12 CFR part 261.
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To the extent the instructions to the FR Y-9C, FR Y-9LP, FR Y-9SP,
and FR Y-9ES reports each respectively direct the financial institution
to retain the workpapers and related materials used in preparation of
each report, such material would only be obtained by the Board as part
of the examination or supervision of the financial institution.
Accordingly, such information is considered confidential pursuant to
exemption 8 of the FOIA.\12\ In addition, the workpapers and related
materials may also be protected by exemption 4 of the FOIA, to the
extent such financial information is treated as confidential by the
respondent.\13\
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\12\ 5 U.S.C. 552(b)(8).
\13\ 5 U.S.C. 552(b)(4).
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(2) Report title: Consolidated Report of Condition and Income for
Edge and Agreement Corporations.
Agency form number: FR 2886b.
OMB control number: 7100-0086.
Frequency: Quarterly and annually.
Reporters: Edge and agreement corporations.
Estimated annual reporting hours:
Banking: Edge and agreement corporations (quarterly): 586;
Banking: Edge and agreement corporations (annually): 16;
Investment: Edge and agreement corporations (quarterly): 1,034;
Investment: Edge and agreement corporations (annually): 79.
Estimated average hours per response:
Banking: Edge and agreement corporations (quarterly): 15.77;
Banking: Edge and agreement corporations (annually): 15.87;
Investment: Edge and agreement corporations (quarterly): 11.81;
Investment: Edge and agreement corporations (annually): 10.82.
Number of respondents:
Banking: Edge and agreement corporations (quarterly): 9;
Banking: Edge and agreement corporations (annually): 1;
Investment: Edge and agreement corporations (quarterly): 21;
Investment: Edge and agreement corporations (annually): 7.
General description of report: The FR 2886b reporting form is filed
quarterly and annually by banking Edge and agreement corporations and
investment (nonbanking) Edge and agreement corporations (collectively,
``Edges or Edge corporations''). The mandatory FR 2886b comprises a
balance sheet, an income statement, two schedules reconciling changes
in capital and reserve accounts, and 11 supporting schedules. The Board
uses the FR 2886b data to help plan and target the scope of
examinations of Edges and to evaluate applications from Edge
corporations. Data from the FR 2886b are also used to monitor aggregate
institutional trends, such as growth in assets and the number of
offices, changes in leverage, and the types and locations of customers
and to monitor and identify present and potential problems with Edge
corporations.
Legal authorization and confidentiality: Sections 25 and 25A of the
Federal Reserve Act authorize the Federal Reserve to collect the FR
2886b (12 U.S.C. 602, 625). The obligation to report this information
is mandatory. For Edge and Agreement corporations engaged in banking,
current Schedules RC-M (with the exception of item 3) and RC-V are held
confidential pursuant to exemption 4 of FOIA (12 U.S.C. 552(b)(4)). For
Edge and Agreement corporations not engaged in banking, only
information collected on Schedule RC-M (with the exception of item 3)
are given confidential treatment pursuant to exemption 4 of FOIA (12
U.S.C. 552(b)(4)).
Current actions: On July 7, 2020, the Board published a notice \14\
to temporarily revise the FR Y-9C to collect four new data items
related to Paycheck Protection Program (PPP) loans and the PPPLF. Also,
as part of this notice, the Board temporarily revised the FR Y-9C to
collect two new data items related to section 4013 of the CARES act.
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\14\ 85 FR 40646 (July 7, 2020).
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On October 8, 2020, the Board published a separate notice \15\ to
propose a number of revisions to the FR Y-9C, FR Y-9LP, and FR Y-9SP
related to U.S. GAAP effective for reports with a March 31, 2021, as-of
date, except for proposed revisions related to last-of-layer hedging,
which were proposed to become effective following the adoption and
implementation of a final standard by the Financial Accounting
Standards Board (FASB). For holding companies that have adopted
Accounting Standards Codification (ASC) Topic 326, Financial
Instruments--Credit Losses, the Board proposed in the October 2020
notice to add new Memorandum item 7, ``Provisions for credit losses on
off-balance sheet credit exposures,'' to Schedule HI-B, Part II,
Changes in allowances for Credit Losses. This line item would have
enhanced transparency and differentiate between the provisions
attributable to on-and off-balance sheet credit exposures reported in
item 4, ``Provisions for loan and lease losses'' on the FR Y-9C income
statement. As part of the GAAP-related changes, the Board also proposed
new Memorandum item 8 to Schedule HI-B, Part II, ``Changes in
Allowances for Credit Losses'', to the FR Y-9C report. The description
of the memorandum item would have been ``Estimated amount of expected
recoveries of amounts previously written off included within the
allowance for credit losses on loans and leases held for investment
(included in item 7, column A, `Balance end of current period,'
above).'' In proposing this reporting change, the Board noted that,
under ASC Topic 326, holding companies could in some circumstances
reduce the amount of the allowance for credit losses that would
otherwise be calculated for a pool of assets with similar risk
characteristics, which includes charged-off assets, by the estimated
amount of expected recoveries of amounts written off on these assets.
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\15\ 85 FR 63553 (October 8, 2020).
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In this same October notice, the Board proposed to finalize, on an
interim basis, revisions to the definition of ``savings deposits'' in
the FR Y-9C and FR 2886b instructions that are
[[Page 95]]
associated with the amendments to the Board's Regulation D (Reserve
Requirements of Depository Institutions) published April 28, 2020.\16\
The temporarily-approved revisions permit, but do not require,
depository institutions to immediately suspend enforcement of the six-
transfer limit on convenient transfers for savings deposits and to
allow their customers to make an unlimited number of convenient
transfers and withdrawals from their savings deposits. The General
Instructions for FR Y-9C Schedule HC-E, Deposit Liabilities, and FR
2886b Schedule RC-E, Deposit Liabilities, were revised to state that if
an institution chooses to suspend enforcement of the six-transfer limit
on a ``savings deposit,'' the institution may continue to report that
account as a ``savings deposit'' or may instead choose to report that
account as a ``transaction account'' based on an assessment of certain
characteristics of the account.
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\16\ 85 FR 23445 (April 28, 2020).
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Also as part of the October notice, the Board proposed to revise
the General Instructions for FR Y-9C Schedule HC-E and FR 2886b
Schedule RC-E to state that where the reporting institution has
suspended the enforcement of the six-transfer limit rule on an account
that otherwise meets the definition of a savings deposit, the
institution must report such deposits as a ``savings deposit'' (and as
a ``nontransaction account'') or a ``transaction account'' based on an
assessment of certain criteria.
The comment period for the July 2020 notice ended on September 8,
2020. The Board did not receive any comments on this proposal, and the
revisions will be implemented as proposed, with the new data items
being collected through December 31, 2021.
The comment period for the October 2020 notice expired on December
7, 2020. The Board received a comment from a banker's association on
this proposal. Comments were also received on a comparable proposal
involving the Consolidated Reports of Condition and Income (Call
Report) (FFIEC 031, FFIEC 041and FFIEC 051; OMB Control Number 7100-
0036).\17\ The Board has taken the comments from the proposed changes
to the Call Report into consideration in finalizing the proposed FR Y-
9C and FR 2886b changes. The revisions to the FR Y-9C and FR 2886b will
be implemented as proposed, with certain modifications described below.
The effective date of the proposed revisions to the FR Y-9C and FR
2886b instructions regarding the definition of ``savings deposits'' is
December 31, 2020. The effective date for all other changes is March
31, 2021.
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\17\ 85 FR 44361 (July 22, 2020).
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Comments Received on Provision for Credit Losses on Off-Balance Sheet
Credit Exposures
The lone commenter on the October 2020 notice noted the potential
impact on other reports beyond the FR Y-9C of the GAAP change related
to provision for credit losses on off-balance sheet credit exposures.
These other reports include the FR Y-7N (OMB Control Number 7100-0125),
FR Y-11 (OMB Control Number 7100-0244), FR 2314 (OMB Control Number
7100-0073), FR 2886b (OMB Control Number 7100-0086), and FR 2644 (OMB
Control Number 7100-0075).
The Board will consider conforming changes to the forms and
instructions for the FR 2886b, FR Y-7N, FR Y-11, and FR 2314 in the
future. Any such changes would be proposed by the Board through a
separate Federal Register notice pursuant to the Paperwork Reduction
Act. The Board does not intend to make conforming changes to the FR
2644 since this report is only comprised of balance sheet items and
this GAAP-related change only impacts income statement items.
Comments Received on Final Regulation D Reporting Revisions
The Board did not receive comments on the proposal to finalize the
temporarily-approved revisions to the FR Y-9C and FR 2886b instructions
regarding the definition of ``savings deposits'' associated with the
amendments to the Board's Regulation D. The changes were effective as
of June 30, 2020.
The commenter on the October 2020 notice raised several concerns
with the proposed changes related to the definition of ``savings
deposits'' and the assessment criteria to remove certain optional
reporting, and requested a clarification on the definition of ``retail
sweep arrangements.'' The commenter recommended that the revisions be
consistent across reports. Specifically, the commenter recommended that
savings deposits be classified consistently as transaction or
nontransaction accounts across reports. The commenter stated that the
differences in the treatment of savings deposits would require firms to
report savings deposits as nontransaction accounts on the Call Reports,
FR Y-9C, and FR 2886b, while the same deposits would be classified as a
transaction account on the Report of Transaction Accounts, Other
Deposits and Vault Cash (FR 2900; OMB Control Number 7100-0087). The
commenter recommended that the Board provide clear and consistent
definitions of ``savings deposits,'' ``transaction accounts,'' and
``nontransaction accounts.'' In response to the commenter's
recommendation, the Board will continue to maintain the requirement to
report ``savings deposits'' as a component of nontransaction accounts
on the FR Y-9C and FR 2886b in order to maintain consistency with the
Call Report. The Board will also maintain the definition of
``transaction accounts'' and ``nontransaction accounts'' as currently
stated in the FR Y-9C and FR 2886b instructions, which is consistent
with the Call Report instructions. It is important to note the Call
Report and FR Y-9C are principal sources of financial data used for
supervision and regulation of the banking industry whereas the primary
purpose of the FR 2900 report is to collect data for the construction
of the monetary aggregates.
Secondly, regarding the proposed changes to the assessment criteria
for ``savings deposits,'' the commenter recommended that a depositor's
eligibility to hold a NOW account should not be included in the
criteria assessment to determine the reporting treatment for savings
deposits for which the numeric limits on transfers and withdrawals have
been removed. The commenter noted that ``if a firm does not offer NOW
accounts, they would be required to report savings deposits as NOW
accounts, ATS accounts, or telephone and preauthorized transfer
accounts (and as transaction accounts) based on a depositor's
eligibility to hold such account'' and ``for firms that do not offer
NOW accounts, the data necessary to determine a depositor's eligibility
for NOW accounts would not be readily available.'' In addition, the
commenter noted that this reporting treatment would be inconsistent
with the Regulation D definition of savings deposits, as NOW account
eligibility is not a component of the definition. The commenter
believed that gathering the data necessary to distinguish these
depositors from other savings account holders solely for regulatory
reporting purposes would create business and systems challenges. The
Board agrees with the commenter that the depositor's eligibility to
hold a NOW account should not be included in the assessment criteria
for classification as a ``savings deposit,'' as such reporting would
not be consistent with the Regulation D definition of savings deposits.
Therefore, the Board will remove the depositor's eligibility to
[[Page 96]]
hold a NOW account from the assessment criteria. The Board and the
other federal banking agencies have proposed comparable revisions to
the Call Report.
Additionally, the commenter recommended that the effective date of
the proposed revisions to the FR Y-9C and the FR 2886b definition of
``savings deposits'' be delayed from December 31, 2020, until June 30,
2021, to better align with the proposed effective dates of the FR 2900
\18\ and the Report of Foreign (Non-U.S.) Currency Deposits (FR 2915;
OMB Control Number 7100-0087). The commenter noted that aligning the
timing of the revisions would give firms additional time to implement
any further changes made by the Board and other agencies in light of
the comments received. In response to the commenter's recommendation,
the Board has deferred the effective date of the proposed revisions
that requires a depository institution to report each account as a
``savings deposit'' or a ``transaction account'' based on the
institution's assessment of account characteristics and removes the
optionality in reporting savings deposits as either a ``savings
deposit'' or a ``transaction account'' if the institution suspended the
enforcement of the six-transfer limit until March 31, 2021. Choosing
March 31, 2021 as the proposed effective date will align the FR Y-9C
and FR 2886b Regulation D revisions with the Call Report and will
provide institutions additional time to implement any necessary
changes. The timing of the FR Y-9C changes was chosen to match the Call
Report to allow for consistent quarterly reporting.
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\18\ 85 FR 54577 (Nov. 2, 2020).
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Lastly, the commenter requested clarification on how institutions
should report the components of retail sweep arrangements on the FR Y-
9C report. Specifically, the commenter asked whether institutions
should continue to report the nontransaction components of, or savings
deposits in, retail sweep arrangements as nontransaction accounts. If
not, the commenter asked whether institutions should strictly follow
the proposed assessment criteria for the treatment of accounts where
the transfer limit has been removed. In response to the comment, the
Board has modified the description of retail sweep arrangements in the
FR Y-9C instructions to remove references to transaction and
nontransaction components. Further, the instructions will indicate that
institutions should not follow the proposed assessment criteria for the
treatment of accounts for which the transfer limit has been removed.
Instead, the instructions will note that institutions that offer valid
retail sweep programs must report each component of the retail sweep
arrangement based on the customer account agreement established by the
depository institution. The instructions will also note that two key
criteria must be met for a valid retail sweep program. These criteria
are: (1) A depository institution must establish by agreement with its
customer two distinct, legally separate accounts; and (2) the swept
funds must actually be moved between the customer's accounts on the
depository institution's official books and records as of the close of
business on the day(s) on which the depository institution intends to
report the funds as being in separate accounts. These modifications are
consistent with modifications to the Call Report instructions made in
response to a similar comment.\19\
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\19\ 85 FR 74784.
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Modifications to Proposed Memorandum Item 8 of Schedule HI-B, Part II,
``Changes in Allowances for Credit Losses''
As discussed above, the Board proposed to add a new Memorandum item
8 to Schedule HI-B, Part II, to collect the estimated amount of
expected recoveries of amounts previously written off included within
the allowance for credit losses on loans and leases held for
investment. The Board did not receive any comments on this aspect of
the proposal, and will adopt this revision. However, the Board has
decided to collect this new Memorandum item only from holding companies
with $5 billion or more in total consolidated assets. The Board decided
to limit this collection to such holding companies in order to minimize
burden, consistent with a number of other FR Y-9C items that are not
required from holding companies with less than $5 billion in total
assets.
Proposed Revisions Related to Last-of-Layer Hedging
In the October 2020 notice, the Board proposed to make certain
revisions to the FR Y-9C related to the last-of-layer method of hedge
accounting standards. This proposal would have implemented in the FR Y-
9C revisions related to a project added to the FASB agenda to expand
last-of-layer hedging to multiple layers, thereby providing more
flexibility to entities when applying hedge accounting to a closed
portfolio of prepayable assets. The Board proposed for these revisions
to become effective following the adoption and implementation of a
final standard on this matter by FASB.
Because FASB has not yet adopted a final standard regarding last-
of-layer hedging, the Board has not adopted the proposed FR Y-9C
revisions associated with this topic at this time. The Board will
consider whether to finalize the proposed revisions related to last-of-
layer hedging when FASB adopts a final standard.
Additional Instructional Matters
The agencies addressed several additional instructional matters in
the final Call Report notice. The Board will make comparable clarifying
changes to the FR Y-9 reports for consistency purposes as discussed in
detail below.
1. Uncollectible Accrued Interest Receivable Under ASC Topic 326
In April 2019, the Financial Accounting Standards Board (FASB)
issued ASU No. 2019-04, ``Codification Improvements to Topic 326,
Financial Instruments--Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments,'' which amended ASC
Topic 326 to allow an institution to make certain accounting policy
elections for accrued interest receivable balances, including a
separate policy election, at the class of financing receivable or major
security-type level, to charge off any uncollectible accrued interest
receivable by reversing interest income, recognizing credit loss
expense (i.e., provision expense), or a combination of both. The
Glossary entry for ``Accrued Interest Receivable'' in the FR Y-9C
report instructions currently references the following accounting
policy elections in ASU 2019-04:
Holding companies may elect to separately present accrued
interest receivable from the associated financial asset, and the
accrued interest receivable is presented net of an allowance for credit
losses (ACL), if any; and
Holding companies that charge off uncollectible accrued
interest receivable in a timely manner, i.e., in accordance with the
Glossary entry for ``Nonaccrual Status,'' may elect, at the class of
financing receivable or the major security-type level, not to measure
an ACL for accrued interest receivable.
Although this Glossary entry does not currently provide for the
ASU's separate accounting policy election for the charge-off of
uncollectible accrued interest receivable at the class of financing
receivable or major security-type level, this election is specifically
addressed in the Interagency Policy Statement on Allowances for Credit
[[Page 97]]
Losses issued in May 2020.\20\ Accordingly, as provided in the FR Y-9C
Supplemental Instructions for the September 30, 2020, report date,\21\
a holding company that has adopted ASC Topic 326 may make the charge-
off election for accrued interest receivable balances in ASU 2019-04
separately from the other elections for these balances in the ASU for
FR Y-9C reporting purposes. A holding company may also charge off
uncollectible accrued interest receivable against an ACL for FR Y-9C
reporting purposes.
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\20\ 85 FR 32991 (June 1, 2020).
\21\ https://www.federalreserve.gov/reportforms/supplemental/Final%20FR%20Y-9C%20September%202020%20Supplemental%20Instructions.pdf.
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The Board plans to update the FR Y-9C Glossary entry for ``Accrued
Interest Receivable'' to align the instructions in this entry with the
elections permitted under U.S. GAAP for institutions that have adopted
ASC 326, which also would achieve consistency with the discussion of
accrued interest receivable in the Interagency Policy Statement on
Allowances for Credit Losses.
2. Shared Fees and Commissions From Securities-Related and Insurance
Activities
Holding companies with $5 billion or more in total assets report
income from certain securities-related and insurance activities in FR
Y-9C report Schedule HI, Income Statement, items 5.d.(1) through (7),
while holding companies with less than $5 billion in total assets
report only items 5.d.(6) and 5.d.(7). When an institution partners
with, or otherwise joins with, a third party to conduct these
securities-related or insurance activities, and any fees and
commissions generated by these activities are shared with the third
party, the Schedule HI instructions do not currently address the
reporting treatment for these sharing arrangements. Consequently,
holding companies may have reported the gross fees and commissions from
these activities in the appropriate subitem of Schedule HI, item 5,
``Other noninterest income,'' and the third party's share of the fees
and commissions separately as expenses in Schedule HI, item 7.d,
``Other noninterest expense.'' Alternatively, holding companies may
have reported only their net share of the fees or commissions in the
appropriate subitem of Schedule HI, item 5.
The Board believes that reporting shared fees and commissions on a
net basis is preferable to gross reporting and is analogous to how
income from certain other income-generating activities is reported on
the FR Y-9C income statement, including securitization income and
servicing fee income, which are currently reported net of specified
expenses and costs.
This net approach better represents an institution's income from a
securities-related or insurance activity engaged in jointly with a
third party than when the third party's share of the fees and
commissions is separately reported as a noninterest expense in another
income statement data item. As a result, the Board has clarified the
existing Schedule HI instructions to ensure consistent reporting on a
net basis of fees and commissions from securities-related and insurance
activities that are shared with third parties. Furthermore, to avoid
including repetitive language in the instructions for the multiple
noninterest income items for income from securities-related and
insurance activities in Schedule HI, a new non-reportable item 5.d
captioned ``Income from securities-related and insurance activities''
has been added before the existing 5.d subitems on the FR Y-9C report.
The reporting treatment for arrangements involving the sharing of fees
and commissions with third parties arising from an institution's
securities brokerage, investment banking, investment advisory,
securities underwriting, insurance and annuity sales, insurance
underwriting, or any other securities-related and insurance activities
is explained once in the new item 5.d instructions.
3. Pledged Equity Securities
In January 2016, the FASB issued ASU 2016-01, ``Recognition and
Measurement of Financial Assets and Financial Liabilities.'' As one of
its main provisions, the ASU requires investments in equity securities,
except those accounted for under the equity method and those that
result in consolidation, to be measured at fair value, with changes in
fair value recognized in net income. Thus, the ASU eliminates the
existing concept of available-for-sale (AFS) equity securities, which
are measured at fair value with changes in fair value generally
recognized in other comprehensive income. As of December 31, 2020, all
holding companies will have been required to adopt ASU 2016-01 and, as
a consequence, must report equity securities with readily determinable
fair values not held for trading in Schedule HC, Balance Sheet, item
2.c, ``Equity securities with readily determinable fair values not held
for trading,'' instead of Schedule HC-B, Securities, item 7,
``Investments in mutual funds and other equity securities with readily
determinable fair values.'' Accordingly, Schedule HC-B, item 7, will be
removed effective December 31, 2020.
Holding companies report held-to-maturity and AFS securities in
Schedule HC-B, items 1 through 7, and have long reported in Schedule
HC-B, Memorandum item 1, ``Pledged securities'' the amount of such
securities that are pledged to secure deposits and for other purposes.
Considering that all institutions that previously reported their AFS
equity securities in Schedule HC-B, item 7, now report these securities
in Schedule HC, item 2.c, the Board is updating the instructions for
Schedule HC-B, Memorandum item 1, and Schedule HC, item 2.c, to
indicate that holding companies should include in Memorandum item 1 the
fair value of pledged equity securities with readily determinable fair
values not held for trading that are now reported in Schedule HC, item
2.c. The wording of existing footnote 1 to Memorandum item 1 of
Schedule HC-B on the FR Y-9C forms will be similarly updated. These
instructional clarifications would ensure that pledged equity
securities formerly reportable as AFS equity securities would continue
to be reported in Memorandum item 1 notwithstanding the change in
accounting for equity securities under U.S. GAAP. Information on
pledged securities is an important element of the agencies' analysis of
an institution's liquidity risk. The existing footnote 1 to Memorandum
item 1, Schedule HC-B on the FR Y-9C forms and the instructions for PC-
B Memoranda line item 10, ``Pledged securities'', of the FR Y-9LP and
related footnote 1 reference of this line item on the FR Y-9LP forms
will be similarly updated.
The FR Y-9C instructional clarifications to the Glossary entry for
``Accrued Interest Receivable'' and Schedule HC-B for pledged equity
securities will take effect December 31, 2020, while the instructional
clarifications to Schedule HI for shared fees and commissions from
securities-related and insurance activities will take effect March 31,
2021.
Board of Governors of the Federal Reserve System, December 28,
2020.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020-29028 Filed 12-31-20; 8:45 am]
BILLING CODE 6210-01-P