Regulatory reporting: Revisions to Call Report and other related reports

The Federal Financial Institutions Examination Council (FFIEC) recently announced significant changes to bank regulatory reporting requirements (including the “Call Report”) that are expected to result in reduced reporting burden.  The changes originated in December 2014, when the FFIEC launched an initiative to reduce burdens associated with the Call Report. Since then, the FFIEC and its member agencies—the Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB), and National Credit Union Administration (NCUA)—have taken several actions to meet this goal, including the creation of a new streamlined Call Report for smaller institutions (FFIEC 051) that took effect with the March 31, 2017 report date.

The goals underlying this initiative coincide with a focus on simplifying, rationalizing, and recalibrating aspects of the regulatory framework, including regulatory reporting.  In support of the burden efforts, the Treasury Department urged regulators to “streamline current regulatory reporting requirements for all community financial institutions” by focusing their efforts on the applicability of each line item.1

Below is an overview of three recent developments with respect to the Call Report,2 the FFIEC 002 (Report of Assets and Liabilities of US Branches and Agencies of Foreign Banks) and FFIEC 002S (Report of Assets and Liabilities of a Non-US Branch that is Managed or Controlled by a US Branch of Agency of a Foreign (Non-US) Bank),3 and the FR Y-9C (Consolidated Financial Statements of Holding Companies), as well as the key takeaways for covered institutions.4

Summary of changes

The number of proposed and final changes—the vast majority of which the FFIEC expects would result in an overall reduction in burden—clearly demonstrate the commitment of the regulatory agencies to “right sizing” reporting requirements.  The revisions can be categorized into:  deletion of items, consolidation of items,  raising of report applicability thresholds (e.g., requiring banks with total consolidated assets $100 billion or more to file the FFIEC 031 report, regardless of whether an institution has any foreign offices), and a reduction in reporting frequency for a number of reporting items.  In addition, the final and proposed requirements address changes in US GAAP regarding the reporting of equity investments.

However, given the types of changes, each will need to be evaluated separately so that the integrity of reporting is maintained.  One size will not fit all.

The chart below provides a high-level timetable of the reports and impacted changes:

Report Status Comment deadline Effective date
FFIEC 031

FFIEC 041

FFIEC 051

Final N/A As of June 30, 2018 report date

 

(As of March 31, 2018 report date for changes involving the reporting of equity investments)

FFIEC 031

FFIEC 041

FFIEC 051

Proposed5 January 8, 2018
FFIEC 002

FFIEC 002S

Proposed February 26, 2018
FR Y-9 Series Proposed March 5, 2018

Key takeaways

The regulatory change process will need to outline the applicability, scope and magnitude of the changes.

Combining data items will not eliminate the need to source the data and maintain the quality components of an item.  However, since the most common type of regulatory reporting error is misclassification, these changes will likely reduce misclassification errors and the resources needed to perform analytics on the individual items at the aggregated level.  In addition, the change management process becomes more manageable with a decrease in data items.

In many ways, changes to frequency have the same benefits as items that are combined.  That is, fewer resources need to be applied each quarter to analyze these data at the first and second lines of defense.  However, once data is reported less frequently, there is often a tendency to have less sustained processes, consistent data sourcing, and quality assurance programs for such data.  These risks can be mitigated through strong controls, governance, and internal audit programs.

The changes to thresholds provide a more risk-focused approach to data collection, thus moving away from a “one-size-fits-all” methodology.  Threshold changes provide significant savings by eliminating reporting for data items that are not material for an organization, in turn freeing up resources to focus on critical data elements.  However, processes need to be put in place to carefully monitor thresholds on a timely basis, linked into broader business strategy and balance sheet management initiatives. The use of thresholds will necessitate the regulatory reporting function to be involved in new business initiative/product discussions and balance sheet management so that thresholds are monitored for upstream and downstream impacts. Risks can exist without careful monitoring thresholds, which can be crossed without firms being prepared to submit the necessary data.

Affected institutions should carefully review the final revisions to the Call Report, as well as the proposed changes to the FFIEC 002/002S and FR Y-9C, to understand the amendments to the instructions and reporting forms.

The changes will likely apply differently across affected institutions, and regulatory reporting functions will need to work with internal change management teams, information technology, and business data providers, as well as with regulatory reporting vendors to assess the impact and implement the changes.

In particular, banking institutions would need to revisit reporting processes for the products and line items that are impacted and put plans in place across the affected reports. Specifically, institutions should identify impacts to data governance routines, manual adjustments, critical data elements, data lineage, and underlying controls. Changes to the reporting processes and data would need to be built into awareness sessions to all affected business stakeholders.

In addition, institutions should continue to engage with the FFIEC and its member agencies as they consider additional changes to these reports in the future.

Appendix – Additional regulatory reporting changes

The charts below provide a high-level summary of additional proposed and finalized regulatory reporting changes that should be evaluated together with the Call Report revisions:

Proposed changes (public comments under review)

Report Description
FR Y-16 Combine all agencies DFAST reporting for organizations between $10-$50 billion
FR Y-15 Include Mexican pesos in total payments activity on Schedule C and removing it from the Memorandum items

Add securities brokers to the definition of financial institutions in the instructions for Schedule B

Expressly include all cleared derivative transactions in Schedule D, item 1

Specify how certain cleared derivatives transactions are reported in Schedule B, items 5(a) and 11(a)

Make clarifications to the form and instructions

FR Y-9C Addition of commodity schedule.
Bank Holding Company Family Report (FR Y-9, FR Y-11, FR 2314, FR 2886b, FR Y-7N) Align reports with the burden reducing changes on the Call Report by eliminating items, raising thresholds, and reduction in frequency.
FR 2085 New report for designated non-bank insurance companies.
FR 2314 and

FR Y 11

Changes to adopt change in disclosure for extraordinary items.
FR Y-7 Addition of items to collect information of compliance with the requirements of Regulation YY for Risk Committees and Home Country Stress Testing

Finalized changes (approved and pending implementation)

Report Description
FR 2028 Discontinuing the FR 2028A

Implementing a new business lending report (FR 2028D) that collects quarterly average data on small business loans and qualitative information on changes in terms of lending.

Bank Call Reports,

FR Y-9C, and FR Y-14

Retaining the reporting of certain capital deductions and risk weights for banks not subject to the advanced approaches
FR Y-14 Applying the global market shock (GMS) to any domestic BHC or US IHC that is subject to supervisory stress tests and that (a) has aggregate trading assets and liabilities of $50 billion or more, or aggregate trading assets and liabilities equal to 10 percent or more of total consolidated assets, and (b) is not a “large and noncomplex firm” under the FRB’s capital plan rule

Submitting attestation associated with the annual submission on the last submission date for those reports (instead of on each data schedule’s respective submission date)

Permitting the attestations for the three months of the quarter to be filed on one date (rather than each respective month) (FR Y-14M)

FR 2644 Combining the current counterparty split of federal funds sold and securities purchased under agreements to resell (asset items 3.a and 3.b) with the total of those two items, with a comparable change to the associated borrowings items (liabilities items 9.a and 9.b).

Combining the separate reporting of trading assets and trading liabilities and include them instead in all other assets and all other liabilities (item 11.b), respectively

Replacing total deposits with all other deposits

Eliminating the items on loans to small businesses (memoranda items 2.a and 2.b)

FR 2052b Discontinuation of the report
Shared National Credit Increase in threshold for reporting a loan from $20 million to $100 million
SHCA No data changes; several definition changes for the reporting of funds and direct investment

Contacts

Dmitriy Gutman
Managing Director | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Irena Gecas-McCarthy
Principal | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Marjorie Forestal
Principal | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Ken Lamar
Independent Senior Advisor to Deloitte & Touche LLP
Deloitte & Touche LLP

Chris Spoth
Managing Director | Deloitte Risk and Financial Advisory
Executive Director, Center for Regulatory Strategy, Americas
Deloitte & Touche LLP

Alex LePore
Senior Consultant | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

1US Department of the Treasury, “A Financial System That Creates Economic Opportunities: Banks and Credit Unions,” Report to President Donald J. Trump, Executive Order 13772 on Core Principles for Regulating the United States Financial System,” (June 12, 2017), available at https://www.treasury.gov/press-center/press-releases/Documents/A%20Financial%20System.pdf.
2Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, Agency Information Collection Activities; Submission for OMB Review; Joint Comment Request, 83. Fed. Reg. 939 (January 8, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-01-08/pdf/2018-00122.pdf.
3Federal Reserve System, Proposed Agency Information Collection Activities; Comment Request, 82 Fed. Reg. 61294 (December 27, 2017), available at https://www.gpo.gov/fdsys/pkg/FR-2017-12-27/pdf/2017-27942.pdf.
4Federal Reserve System, Proposed Agency Information Collection Activities; Comment Request, 83. Fed. Reg. 123 (January 2, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-01-02/pdf/2017-28290.pdf.
5In addition to the changes finalized on January 8, 2018, the agencies proposed revisions on November 8, 2017 that would remove or consolidate several data items.  The public comment period has closed, but the changes have not yet been finalized.  See Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, Proposed Agency Information Collection Activities; Comment Request, 82 Fed. Reg. 51908 (November 8, 2017), available at https://www.gpo.gov/fdsys/pkg/FR-2017-11-08/pdf/2017-24310.pdf.

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