On June 27, 2017, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the “Agencies”) proposed revisions to their Call Report forms for insured depository institutions.  The proposed changes are intended to align Call Reports with a recent accounting change and industry reporting practices, and to reduce certain reporting burdens. Notably, streamlining Call Reports was one of the U.S. Department of the Treasury’s recommendations for financial regulatory reform in its June 12, 2017 report.

The proposal would make three types of changes to the Call Report forms.  First, the proposal would change the reporting of equity investments to reflect a change in accounting treatment under U.S. Generally Accepted Accounting Principles as set forth in the Financial Accounting Standards Board’s Accounting Standard Update 2016-01.  Presently, equity securities with readily determinable fair values are categorized as held for trading or available-for-sale. Available-for-sale securities are measured at fair value, and unrecognized gains and losses in their fair value are recognized through changes to other comprehensive income.  When ASU-2016-01 is fully implemented, the available-for-sale classification will no longer exist, and unrecognized gains and losses in the fair value of equity securities not held for trading will be recognized through changes to net income rather than to other comprehensive income.  This accounting change is expected to result in more volatility in the earnings of institutions that hold significant investments in equity securities currently classified as available-for-sale.  Conforming changes to the Call Reports would phase in on a schedule in line with the phase-in of ASU-2016-01.

Second, the proposal would change the reporting of past due assets.  Call Report instructions currently require most loans to be reported past due when a borrower is in arrears for two or more monthly payments.  This standard means that a loan is past due when the borrower has not made a required payment by the close of business on the due date of the next required payment.  However, institutions also report past due mortgages to credit bureaus and other data repositories using a different method, known as the Mortgage Bankers Association method, which considers a loan past due when the borrower has not made a required payment by the close of business of the day preceding the due date of the next required payment.  The Agencies’ proposal would adopt the Mortgage Bankers Association method for closed-end installment loans, amortizing loans secured by real estate, any other loan and lease financing receivables with monthly payments, as well as open-end credit with payments scheduled monthly (such as typical credit cards).  This change would likely result in more loans being reported as past due as of the last day of any given quarter.

Finally, the proposal would streamline the Call Report forms by (1) eliminating or consolidating certain items, (2) changing the frequency of reporting certain items, and (3) increasing or adding a threshold for reporting certain items.  These changes are intended to reduce the burden of reporting for depository institutions.

The proposed changes would take effect beginning with March 31, 2018 Call Report submissions, but the Agencies invited comment as to whether they should implement the changes for December 31, 2017 Call Reports.  Comments on the proposal are due August 28, 2017.