Proposed FFIEC Call Report Updates May Not Save Community Banks Time
On August 15, 2016, the Federal Financial Institutions Examination Council (FFIEC) published Financial Institution Letter (FIL)-53-2016 proposing new call report forms (FFIEC 051) for most banks under $1 billion in total assets.
These proposed changes, effective March 31, 2017, represent the FFIEC’s most recent attempt to reduce the regulatory reporting burden faced by many community banks. Though these new provisions will make call reports shorter, I believe the true impact of these changes in terms of the time and resources banks devote to reporting will likely be negligible.
Time spent on call reports may not decrease
The proposal estimates that banks spend an average of 44 hours per quarter preparing their call reports, which in recent years have ballooned to 85 pages in length, creating a significant burden for banks already stretched thin by regulatory mandates. The FIL purports to reduce the length of these call reports to 62 pages and the data points gathered by roughly 40 percent.
On the surface, this proposal sounds like much needed relief for banks, but as I reviewed the draft forms and instructions further, it seems likely that the amount of time community banks need to prepare their call reports will remain largely unchanged.
Some schedules and data points are no longer required
The decreased page count in the call report comes from the elimination of several schedules that already have little or no applicability for community banks. These schedules will be partially replaced with a series of new questions included in the proposed Schedule SU – Supplemental Information. The schedules that will be removed include:
- Schedule RI-C – Disaggregated Data on the Allowance for Loan Losses
- Schedule RC-D – Trading Assets
- Schedule RC-P – Mortgage Banking Activities
- Schedule RC-Q – Assets and Liabilities Measured at Fair Value
- Schedule RC-S – Servicing Activities
- Schedule RC-V – Variable Interest Entities
Most of the remaining data points that are removed on the new Form 051, compared to the existing Form 041, represent areas largely inapplicable for the average bank under $1 billion in assets. These include:
- References to foreign loans on Schedule RC-C and elsewhere
- References to loans measured at fair value on Schedule RC-C
- References to derivatives on Schedule RC-L and elsewhere
- References to assets covered by FDIC loss share arrangements on Schedules RC-M and RC-N
In addition to the items removed, there are several call report line items and schedules that will be completed semi-annually or annually rather than quarterly.
Impact on the typical community bank
As I reviewed the call reports for several typical community banks, I noted a limited number of circumstances where the bank has been completing a call report line that will no longer be required, or be required less frequently under the new standards, as seen in the table below.
|Schedule name||Impact to reporting under new standard|
|Schedule RC-A, Cash and Balances due From Banks||For banks over $300 million, this will now be completed semi-annually instead of quarterly.|
|Schedule RC-C, Loans and Leases||The balance of adjustable rate 1-to-4 family mortgages will be completed semi-annually instead of quarterly for all banks.|
|Schedule RC-C Part II, Loans to Small Business and Small Farms||Institutions with less than $50 million in total assets will have to complete this schedule semi-annually instead of quarterly.|
|Schedule RC-F and RC-G, Other Assets and Liabilities||The detailed breakout of certain other assets and other liabilities will be reported semi-annually instead of quarterly by all banks.|
|Schedule RC-M, Memoranda||Certain yes and no questions will be completed annually instead of quarterly.|
|Schedule RC-S, Servicing Assets||Certain line items for loans serviced for third parties will no longer need to be completed, as the schedule has been eliminated; however, a series of questions has been added to the new Schedule SU regarding these activities.|
Preparing for the proposed changes
Upon review, this proposal does not appear to revise areas of the call report that I have seen banks consistently struggle to prepare, such as the intricacies of coding loans on Schedule RC-C or the complexity of calculating regulatory capital on Schedule RC-R. Though the FFIEC issued FIL-53-2016 to tailor its regulations to better fit institutions less than $1 billion in total assets, I believe more work will be needed if the FFIEC is going to reduce the call report burden faced by community banks.
The federal regulators are accepting comments on this proposal until October 14, 2016. I encourage community banks to review FIL-53-2016 and submit comments on these proposed changes for consideration.