New Call Report Proposals Do Little to Ease Community Bank Filing Requirements
On June 27, 2017, the Federal Financial Institutions Examination Council (FFEIC) published Financial Institution Letter (FIL)-24-2017 proposing further revisions to the call report effective March 31, 2018.
This proposal is a follow up to the changes made on March 31, 2017, which included the creation of the new Form 051 for banks under $1 billion in total assets and represents yet another attempt by regulators at reducing the reporting burden faced by banks. But upon detailed review, we believe the proposal still falls short of this objective.
Reduced data points may not lessen workloads
It takes the average bank 46 to 53 hours to prepare its call report each quarter.
In December 2014, the FFIEC launched an initiative to identify potential opportunities to reduce the burden associated with call report requirements. The new proposal includes the removal of an additional 54 data points for Form 051 filers, and 106 data points for Form 041 filers. It also reduces the frequency of reporting for certain items from a quarterly basis to semiannual or annual.
On the surface, this proposal sounds like much-needed relief for banks. But upon further review of the draft forms and instructions, we believe the time required by most community banks to prepare the call report will remain largely unchanged.
Items removed and combined
Under the most recent proposal, the bulk of the data points removed from Form 051 and Form 041 are areas that already have little or no applicability for community banks. Other items have been combined where the regulators have determined that the level of detail previously reported is no longer necessary.
These data points include:
|Schedule||Topic||Items removed or combined|
|RI — Income Statement||Trading revenue||Removed memorandum section reporting trading revenue from derivative contracts|
|RI-E — Explanations||Non-interest income||Removed certain prepopulated descriptions, including gains on bargain purchases|
|RC — Balance Sheet||Intangible assets||Combined the lines for goodwill and other intangible assets into a single line|
|RC-B — Securities||U.S. government agencies||Combined bonds issued by U.S. government agencies and bonds issued by U.S. sponsored agencies|
|RC-B — Securities
RC-D — Trading Assets
|Structured financial products||Eliminated the detailed types of structured financial products|
|RC-D — Trading Assets||Loans||Combined several of the loan categories|
|RC-D — Trading Assets||Assets measured at fair value||Eliminated much of the detail related to assets measured at fair value|
|RC-L — Off Balance Sheet Items||Loan commitments||Combined two loan categories|
|RC-L — Off Balance Sheet Items||Derivatives||Eliminated certain lines and columns related to derivatives and hedging activities|
|RC-M — Memoranda||Other real estate owned||Eliminated the category related to Government National Mortgage Association (GNMA) loans|
Changes include cutting back reporting frequency
In addition to the items combined or removed, certain data points on the call report have changed in reporting frequency from quarterly to annual or semiannual. These include:
- Noncash income from negative amortization on loans reported on Schedule RI
- Securities transferred from held-to-maturity to available-for-sale on Schedule SC-B
- Purchased credit-impaired loans and negative amortization loans on Schedule RC-C
- Loans and leases acquired in business combinations on Schedule RC-C
- Credit card line and merchant credit card sales information on Schedule RC-L
- Internet website information on Schedule RC-M
- Captive insurance subsidiary information on Schedule RC-M
- Additions to and sales of nonaccrual loans on Schedule RC-N
The proposals further include increasing the reporting threshold on Schedule RI-E for noninterest income and expenses and also on Schedule RC-D for trading assets and liabilities. They also incorporate changes related to implementation of ASU 2016-01 “Recognition and Measure of Financial Assets and Financial Liabilities,” which will impact how investments in equity securities are reported on the balance sheet and income statement. These changes are effective for certain public business entities beginning March 31, 2018.
Submit comments by August 28
In our opinion, this proposal does little to address the areas of the call report banks consistently indicate they struggle preparing, such as the intricacies of coding loans on Schedule RC-C and the complexity of calculating regulatory capital on Schedule RC-R. Though the new provisions will make call reports somewhat shorter and perhaps slightly easier to read, we believe the true impact of these changes in terms of the time and resources devoted by banks will likely be negligible. Though we appreciate the regulators’ attempt to reduce the burden faced by banks, we think more work is needed.
The federal regulators are accepting comments on this proposal until August 28, 2017. We encourage community banks to submit their comments.