Letter to the Banking Agencies on the Interagency Proposal on Call Report Revisions

To Whom It May Concern:

The American Bankers Association (ABA) welcomes the opportunity to comment on the joint Notice of Proposed Rulemaking (the Proposal) by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (Banking Agencies) on Federal Financial Institutions Examination Council's (FFIEC) revisions to modify FFIEC Forms 031, 041, and 051, commonly referred to as the Consolidated Reports of Condition and Income (the Call Report). The Call Report provides data on individual banks, allows for trend analysis of bank condition and trend information about the overall banking industry and serves as the basis for other reporting and policy analysis. Additionally, the data provided in the Call Reports serve as a foundation for other required regulatory reporting.

Executive Summary

The Proposal would make revisions to address the 2023 change in accounting that eliminated Troubled Debt Restructurings (TDRs) and added disclosure requirements to report the current period activity for certain loan refinancings and modifications when a borrower is experiencing financial difficulty (FDM) and subsequent defaults of FDMs within 12 months of the modification. The Proposal also adds an additional non-GAAP requirement to include FDMs "for a minimum period of 12 months and until an institution performs a current, well documented credit evaluation to support that the borrower is no longer experiencing financial difficulty, unless the loan is paid off, charged-off, sold, or otherwise settled" (additional non-GAAP requirement).

The purpose of the additional non-GAAP requirement appears to be isolated to the FDIC's objective of capturing "elevated credit risk [associated with restructured loans that] is not necessarily eliminated within a given time frame" to be used in the Large and Highly Complex Assessment Scorecards. While ABA supports amending the Call Report to address the elimination of TDRs and to conform to the U.S. GAAP (GAAP)-based FDM reporting, ABA opposes the Proposal's additional non-GAAP requirement. Not only is the GAAP-based FDM reporting more suited to achieve the Proposal's stated objective to better understand the level of loan modification activity, including the non-GAAP requirement will be unnecessarily costly and delay implementation, potentially confuse other users of the information, including investors, and not achieve the objective to isolate and measure restructured loans with borrowers, modified in previous periods, that continue to experience financial difficulties.

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