Proposed Regulatory Capital Reporting Changes - E

Proposed Regulatory Capital Reporting Changes
Analysis by DBI Financial Systems, Inc.
Overview and Resources
On June 23, 2014 the FFIEC published FIL31_20140623, Proposed Regulatory Capital
Reporting Changes. The primary impact of the proposal is to revise Call Report Schedule RCR, Part II, Risk-Weighted Assets. The proposed changes will take effect as of the March 31,
2015 reporting date.
Call Report Schedule RC-R is currently comprised of three parts:
Part I.A. Regulatory Capital Components and Ratios – Completed by all banks
Part I.B. Regulatory Capital Components and Ratios – Completed only by Advanced
Approaches Institutions
Part II. Risk-Weighted Assets – Completed by all banks
We encourage all banks to review the following documents to understand the impact of the
proposed changes to Schedule RC-R. Banks should not rely solely on this article in assessing
the impact to their bank of the proposed changes.
FIL31_20140623, Proposed Regulatory Capital Reporting Changes
Proposed Reporting Changes to Schedule RC-R, Part II, Risk-Weighted Assets and
Schedule RC-L, item 6
Draft – Reporting Changes to the Regulatory Capital Components and Ratios Portion of
Schedule RC-R
Draft – Instructions for the New and Revised Call Report Items for March 2014 and
March 2015
FDIC-FRB-OCC Banker Teleconference – Transcript of Conference
For most banks, especially Community Banks and banks with Total Assets under $1 Billion,
these changes are not expected to be dramatic.
Effective with the March 31, 2015 reporting date, RC-R will be comprised of two parts:
Part I. Regulatory Capital Components and Ratios – Completed by all banks (currently
Part I.B.)
Part II. Risk-Weighted Assets – Completed by all banks
Part I. Regulatory Capital Components and Ratios – Completed by all banks beginning
March 31, 2015 (currently Part I.B., completed by Advanced Approach Institution(1) only)
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Copyright 2014 by DBI Financial Systems, Inc.
Proposed Regulatory Capital Reporting Changes
Analysis by DBI Financial Systems, Inc.
Here are some excerpts from the FDIC-FRB-OCC Banker Teleconference – Transcript of
Conference which may help you focus on the impact of the proposed changes to your bank.
Page 4: “…the revised regulatory capital definitions also would begin to be reported in
March of 2015 in Part I of Schedule RC-R. The advanced approaches institutions this year
are completing new Part I.B, and all other institutions, including all community institutions,
are using the long-standing version of the regulatory capital components and ratios portion
of Schedule RC-R, which is labeled Part I.A during 2014.”
AOCI Election: Page 4: “…of interest to community institutions is the accumulated other
comprehensive income, or AOCI, election. Part I of Schedule RC-R starting in March 2015
will be where a community institution will make this election.”
AOCI Election: Page 9 – “…virtually all community institutions will elect the AOCI, or
Accumulated Other Comprehensive Income, opt-out election, which banks will make for the
initial time in the March 2015 Call Report.”
Proposed Part II Risk-Weighted Assets – Completed by all banks beginning March 31,
2015
Page 3: “All of the revisions to Schedule RC-R, Part II, that we’ll be talking about today are
intended to be consistent with the revised capital rules that the agencies have in place.
Those rules will take effect January 1, 2015, for all institutions that are not advanced
approaches institutions. For advanced approaches institutions, the revised regulatory
capital definitions took effect this year.”
Balance Sheet Assets:
Page 5: “The general structure of revised Part II will remain the same as the current
version. First, there’s a section for reporting assets and allocating them to risk weights, then
a section for reporting derivatives and off-balance-sheet items. Next is a section for
calculating totals and arriving at your total risk-weighted assets. Finally, for institutions with
derivative contracts, we continue to have memoranda data items for the derivative
contracts.”
Page 5: “…the total for total assets in Column A, will tie to the amounts reported on the Call
Report balance sheet, but with a slight change from current practice with respect to the
reporting of securitization exposures…”
Page 5: “The sum of the Column B amounts plus the risk-weighted allocations will continue
to tie back to the Column A amounts from the balance sheet.”
Derivatives and Off-Balance-Sheet Items (Excluding Securitization Exposures (2)):
Page 6: “…the sum of all the columns by risk-weight category would equal the amount of
the credit equivalent amounts in Column B, which is not a change in the practice from what
banks do today.”
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Copyright 2014 by DBI Financial Systems, Inc.
Proposed Regulatory Capital Reporting Changes
Analysis by DBI Financial Systems, Inc.
Securitization Exposures: Page 8 – “Securities such as mortgage-backed pass-through
securities would not be considered securitization exposures. Exposures guaranteed by
Fannie Mae, Freddie Mac, and Ginnie Mae would also have the same type of risk-weighting
that they do today and would not be subject to the new securitization exposure
calculations.”
Securitization Exposures: Page 10 – “…any exposures that meet the definition of a
securitization exposure that I talked about before, that is, exposures where there is a
tranching of credit risk, will be excluded from the Column A amount in Items 1 through 8 and
Items 12 through 21. These securitization exposures instead will be reported in Column A
for Items 9 and 10.”
What Stays the Same
Page 4: “…the new Schedule RC-R, Part II, has not changed from the current version of
Schedule RC-R, Part II, where risk-weighted assets are reported. For most community
institutions, I think much of the risk-weighted asset reporting you do today will be done the
same way going forward beginning in 2015, even though the appearance of the schedule is
different.”
Page 7: “…there are additional risk-weight categories compared to what you have today.
However, many of those risk-weight categories, particularly for community institutions, will
have very limited applicability.”
Page 7: “…these risk-weight categories will still be the ones that are the most commonly
used by community institutions beginning in 2015 with a few exceptions, for example, for
past due and nonaccrual loans and high volatility commercial real estate.”
Page 7: “There also is a new treatment for exposures to sovereign entities and foreign
banks. These types of exposures may be something that few community banks have…”
Page 9: “…a lot of what is in the proposed revised version of Schedule RC-R, Part II, is not
that much different than what your bank is doing currently when completing the Call Report
each quarter.”
Conclusion
We hope this article is of help to you and we encourage you to review the documents listed
above to understand the proposed changes to Call Report Schedule RC-R. Banks should not
rely solely on this article in assessing the impact to their bank of the proposed changes.
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Copyright 2014 by DBI Financial Systems, Inc.
Proposed Regulatory Capital Reporting Changes
Analysis by DBI Financial Systems, Inc.
For further information about the proposed revisions to Call Report Schedules RC-R and RC-L, state
member banks should contact their Federal Reserve District Bank; national banks and federal savings
associations should contact the OCC’s Office of the Chief Accountant in Washington, D.C., by e-mail at
[email protected]; and FDIC-supervised banks and savings associations should
contact the FDIC’s Data Collection and Analysis Section in Washington, D.C., by telephone at (800)
688-FDIC (3342) or by e-mail at [email protected].
(1)
An advanced approaches institution as defined in the federal supervisor’s revised regulatory capital
rules (i) has consolidated total assets (excluding assets held by an insurance underwriting subsidiary)
on its most recent year-end regulatory report equal to $250 billion or more; (ii) has consolidated total
on-balance sheet foreign exposure on its most recent year-end regulatory report equal to $10 billion
or more (excluding exposures held by an insurance underwriting subsidiary), as calculated in
accordance with FFIEC 009; (iii) is a subsidiary of a depository institution that uses the advanced
approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12 CFR part 217 (Board), or 12 CFR part
325 (FDIC) to calculate its total risk-weighted assets; (iv) is a subsidiary of a bank holding company
or savings and loan holding company that uses the advanced approaches pursuant to 12 CFR part
217 to calculate its total risk-weighted assets; or (v) elects to use the advanced approaches to
calculate its total risk-weighted assets. As described in section 121 of the revised regulatory capital
rules, an institution must adopt a written implementation plan no later than 6 months after the
institution meets the criteria above and work with its primary federal supervisor on implementing the
parallel run process.
(2)
Page 7: Securitization Exposures “…are both on- and off-balance-sheet exposures arising from
mortgage-backed, asset-backed, and structured securities with tranching of credit risk.”
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Copyright 2014 by DBI Financial Systems, Inc.

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