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Federal R eserve Bank OF DALLAS ROBERT D. M C T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R DALLAS, TEXAS 7 5 2 2 2 September 9, 1992 Notice 92-76 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT Joint Advance Notice of Proposed Rulemaking Concerning Risk-Based Capital Standards DETAILS The Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) have issued a joint advance notice of proposed rulemaking requesting comments on revisions to their risk-based capital guidelines to take account of interest rate risk. Comments are also requested on proposals for revisions to accommodate concen tration of credit risk and the risks of nontraditional activities. These revisions are required by section 305 of the FDIC Improvement Act of 1991. The Boa r d’s comment deadline is October 9, 1992. Comments should be addressed to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. All comments should refer to Docket No. R-0764. ATTACHMENT Attached is a copy of the policy statement as it appears on pages 35507-11, Vol. 57, No. 154, of the Federal Register dated August 10, 1992. MORE INFORMATION For more information, please contact Dorsey Davis at (214) 744-7420. For additional copies of this B a n k’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Federal Register / Vol. 57, No. 154 / Monday, August 10, 1992 / Proposed Rules_______ 35507 Corporation (FDIC); Office of the Comptroller of the Currency (OCC), Treasury; and Board of Governors of the Federal Reserve System (Board). a c t i o n : Joint advance notice of proposed rulemaking. DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 3 [Docket No. 92-13] FEDERAL RESERVE SYSTEM 12 CFR Parts 208 AND 225 [D o c k e t No. R -0 7 6 4 ] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 325 RIN 3064-A A 15 Risk-Based Capital Standards a g e n c ie s: Federal Deposit Insurance s u m m a r y : The FDIC, the OCC, and the Board (the Banking Agencies) solicit comments on a proposed framework for revising their risk-based capital guidelines to take adequate account of interest rate risk. The Banking Agencies are also soliciting comments on how their r,isk-based capital guidelines may be revised to take account of concentration of credit risk and the risks of nontraditional activities. These revisions are required by section 305 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). OATES: Comments must be received on or before October 9,1992. ADDRESSES: Commenters may respond to any or all of the Banking Agencies. All comments will be shared among all the Banking Agencies. FDIC: Hoyle L. Robinson, Executive Secretary, Attention: Room F-400, Federal Deposit Insurance Corporation, 55017th Street, NW„ Washington, DC 20429. Comments may be handdelivered to room F-400,1776 F Street NW., Washington, DC, on business days between 8:30 a.m. and 5 p.m. [FAX number (202) 898-3838]. Comments will be available for inspection and photocopying in room F-400 between 8:30 a.m. and 5 p.m. on business days. OCC: Written comments should be submitted to Docket No. 92-13, Communications Division, Ninth Floor, Office of the Comptroller of the Currency, 250 E Street SW., Washington, DC 20219. Attention: Karen Carter. Comments will be available for inspection and photocopying at that address. B oard o f Governors: Comments, which should refer to Docket No. R0764, may be mailed to Mr. William Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th and Constitution Avenue, NW„ Washington, DC 20551. Comments addressed to Mr. 35508 Federal Register / Vol. 57, No. 154 / Monday, August 10, 1992 / Proposed Rules Wiles may also be delivered to the Board’s mail room between 8:45 a.m. and 5:15 p.m. and to the security control room outside of those hours. Both the mail room and control room art accessible from the courtyard entrance on 20th Street between Constitution Avenue and C Street, NW. Comments may be inspected in room B-1122 between 9 a.m. and 5 p.m., except as provided in § 261.8 of the Board's Rules Regarding Availability of Information, 12 CFR 261.8. FOR FURTHER INFORMATION CONTACT! FDIC: For issues relating to interest rate risk, William A. Stark, Assistant Director (202/898-6972) or Susan Dingilian, Capital Markets Specialist (202/898-7327), Division of Supervision; for issues relating to concentration of credit risk and the risks of nontraditional activities, Daniel M. Gautsch, Examination Specialist (202/ 898-6912), Division of Supervision; For legal issues, Claude A. Rollin, Counsel (202/898-3985), Legal Division, Federal Deposit Insurance Corporation, 55017th Street, NW., Washington, DC 20429. OCC: Christina Benson. Capital Markets Specialists (202/874-5070) or Kurt Wilhelm, National Bank Examiner (202/874-5070). Office of the Chief National Bank Examiner; Kevin Jacques, Financial Economist, Economic and Regulatory Policy Analysis (202/8745220), and Ronald Shimabukuro, Senior Attorney, Legal Advisory Services Division (202/874-5330), Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219. ensure that those standards take adequate account of (1) interest rate risk, (2) concentration of credit risk, and (3) the risks of nontraditional activities. See, 12 U.S.C. 1828 note. The agencies must pubjish final regulations implementing section 305 by June 19, 1993, and establish reasonable transition rules to facilitate compliance with those regulations. The Banking Agencies are issuing this advance notice of proposed rulemaking to seek public comment that will enable them to develop a proposed rule. The Banking Agencies solicit comments on all aspects of a proposed method for incorporating an interest rate risk (IRR) component into the current risk-based capital guidelines for banking institutions and, more generally, on ways that they may revise their riskbased capital guidelines to account for the risks created by concentration of credit and nontraditional activities. The Banking Agencies also request comment on any or all of the specific numbered questions presented below, though commenters may address any aspect of the proposal and need not confine their remarks to the numbered questions. A. Proposal on Interest R ate R isk Interest rate risk is the risk that changes in market interest rates might adversely affect a bank’s financial condition. As financial intermediaries, banks and other depository institutions accept interest rate risk as a normal part of their business. They assume this risk whenever the interest rate sensitivity of their assets does not match the Board o f Governors: James V. Houpt, sensitivity of their assets does not match Assistant Director (202/452-3358), James the sensitivity of their liabilities or offEmbersit, Supervisory Financial Analyst balance-sheet positions. (202/452-5249), Division of Banking While mismatched positions often Supervision and Regulation; Scott G. permit institutions to profit from Alvarez, Associate General Counsel favorable changes in interest rates, they (202/452-3583), Gregory A. Baer, Senior also expose a bank’s earnings and Attorney (202/452-3236), Legal Division, capital to potential losses. For a bank Board of Governors of the Federal with more interest-sensitive liabilities Reserve System. For the hearing than assets, a rise in interest rates can impaired only, Telecommunication reduce net interest income by increasing Device for the Deaf (TDD), Dorothea the institution’s cost of funds relative to Thompson (202/452-3544), Board of its yield on assets. Conversely, a bank Governors of the Federal Reserve with assets that reprice faster than System, 20th and C Streets, NW., liabilities may experience a decline in Washington, DC 20551. net interest income if interest rates decline in net interest income if interest SUPPLEMENTARY INFORMATION: rates decline. I. Background and Introduction Changes in interest rates may affect Section 305 of the Federal Deposit not only an institution’s current earnings Insurance Corporation Improvement Act but also its future earnings and the (FDICIA), Public Law 102-242, requires economic value of its capital. These the federal banking agencies to revise effects are reflected in changes in the their risk-based capital guidelines to present value of an institution’s financial instruments. For the bank with liabilities repricing faster than assets, the present value of its assets will decline by more than the present value of its liabilities should interest rates rise. Hence, the economic value of its capital will decline if rates increase. An objective of the IRR framework described herein is to ensure that banks with high levels of IRR have sufficient capital to cover their exposure. IRR exposures would be quantified using a measurement system that weights an institution's assets, liabilities and offbalance sheet positions by risk factors that approximate each instrument’s price sensitivity to changes in interest rates. The net amount of these weighted values, the “Net Risk-Weighted Position," would serve as the basis for measuring an institution's IRR exposure for capital adequacy purposes. Under the proposal, institutions with IRR exposures in excess of some "threshold” level of IRR would be required to hold capital proportional to that excess risk. A supervisory decision regarding what constitutes an acceptable absolute level of measured IRR exposure would be used in conjunction with an industry distribution of measured exposures to specify the threshold level. The proposed measurement system is designed to minimize reporting burdens while meeting regulatory needs. In view of the number of simplifying assumptions the system employs, the Banking Agencies do not intend for it to replace other, more sophisticated procedures that banks may use in their asset and liability management process. B. Issues Concerning the R isks o f Concentration o f Credit and N ontraditional A ctivities The Banking Agencies are not presenting a proposal for revising current risk-based capital guidelines to account for concentration of credit risk and the risks of nontraditional activities. Before proceeding with a proposal for these two risks, the Banking Agencies are seeking guidance on how these risks should be defined and on the factors that should be considered when incorporating these risks into capital guidelines. These comments will be considered in proposing any changes to the risk-based capital guidelines. C. Relationship o f Section 305 to the Basle A ccord Section 305 reflects an awareness by Congress that capital standards are an Federal Register / Vol. 57, No. 154 / Monday, August 10, 1992 / Proposed Rules international issue. Section 305(b)(2) requires the federal banking agencies to discuss the development of comparable standards with members of the supervisory committee of the Bank for International Settlements. In implementing section 305, the Banking Agencies seek to create a workable system for measuring the risks identified by section 305, while at the same time continuing to work with international organizations to develop consistent capital standards. The three distinctive types of risk addressed by section 305 of FDICIA are not explicitly incorporated in the Basle Accord on risk-based capital that was implemented by the three federal banking agencies in 1989.1 The Basle Accord tailors a bank’s minimum capital requirement to broad categories of credit risk embodied in its assets of offbalance-sheet instruments. Overall, the Basle Accord requires banks to have total capital equal to at least 8 percent of their risk-weighted assets by the end of 1992.2 Banks with high or inordinate levels of risk are expected to operate well above minimum capital standards. The Basle Accord makes a bank’s minimum capital requirements sensitive to the risk of its assets and off-balancesheet positions. The Basle Accord, however, focuses primarily on credit risk. It does not impose explicit capital charges tied to other factors that can affect a bank’s financial condition, including interest rate risk. With current risk-based capital guidelines based primarily on credit risk, institutions may have an incentive to substitute interest rate risk for credit risk in structuring their balance sheets. Recognizing this possibility, the Basle Committee on Bank Supervision, under 1 T he “B asie A cco rd " refers to the A greem ent on in te rn a tio n a l C o n v erg en ce of C ap ital M ea su re m en t a n d C ap ital S ta n d a rd s o f July 1936. a s re p o rte d by the B asle C om m ittee on Banking S upervision. T he B asle A cco rd h a s b e e n im plem en ted by th e tw elv e m em b er in d u stria l c o u n trie s p a rtic ip a tin g in the B asle C om m ittee on Banking S u p erv isio n u n d e r the a u sp ic e s o f th e B ank for In te rn a tio n a l Settlem en ts, in Basle, S w itz e rla n d (Belgium. C a n a d a . France. G erm any, Italy, Japan, Luxem bourg, the N e th erla n d s, Sw ed en , S w itzerlan d , th e U nited Ikingriom, a n d th e U n ited S tates) a s w ell a s o th e r c o u n trie s th a t h a v e a s s e n te d to a p p ly th e prin cip les o f the B asle A ccord. In the U nited S ta te s, the B anking A gencies im p lem en ted th e B asle A ccord through th e pro m u lg atio n o f risk -b a sed c ap ital g u idelines. See 12 CFR p a rt 3, a p p e n d ix A (n atio nal banks): 12 CFR p a rt 208, a p p e n d ix A (s ta te m em b er ban k s); 12 CFR p a rt 225. a p p e n d ix A (b a n k holding com pan ies); 12 CFR p a rt 325. a p p e n d ix A (state n o n m e m b e r ban k s); 54 FR 4188, Jan u a ry 25.1989. in terim re q u ire m e n ts b e ca m e effective at the e n d of 1990. a n d final re q u ire m e n ts w ill ta k e effect a t the e n d o f 1992. 2 A s defined, risk -w eighted a s s e ts inclu d e cred it e x p o su re s c o n ta in e d in o ff-b alan ce-sh eet in stru m ents. 35509 the aegis of the Bank for International the identification of institutions with high or significant levels of risk. Settlements (BIS), has been working to Institutions identified as having IRR address the treatment of interest rate exposure greater than a supervisorrisk. determined threshold would be required The Banking Agencies are actively to allocate additional capital to support participating in that international effort. their higher level of measured risk. However, several factors suggest the The proposal focuses on estimating need for developing a separate the effect that changes in market “domestic” approach for addressing interest rates might have on the net interest rate risk. One consideration is economic value of an institution. that the time frame involved in Exposures would be measured in terms developing and implementing an of the interest rate sensitivity of the net international standard is, as yet, present value of a bank’s on- and offuncertain. Accordingly, an international balance-sheet positions. Specifically, the standard would, most likely, not be change in an institution's net economic available to meet the deadline of June value attributable to IRR would be 19,1993 specified in section 305 of computed as the change in the present FDICIA. Moreover, an international standard that is designed for a myriad of value of its assets minus the change in the present value of its liabilities and financial instruments, often present at only the largest and most internationally off-balance sheet positions for an assumed 100 basis point parallel shift in active bank3, may be needlessly market interest rates. complex for many of the nearly 12,000 A measurement methodology using small and medium-size U.S. banks. data submitted on an expanded Finally, once an international Consolidated Report of Condition and framework emerges for the assessment Income (Call Report) schedule would be of interest rate risk, every country may used to approximate the change in the need to tailor it to the specific present value of an institution’s assets, characteristics and structure of its own liabilities and off-balance-sheet banking system. positions for the assumed change in In view of these considerations, and rates. The methodology involves pursuant to section 305 of FDICIA, the assigning risk weights to both on- and Banking Agencies will be proposing a system for incorporating an interest rate off-balance-sheet positions. The risk weights approximate the price volatility risk component into the current riskof the positions in relation to changes in based capital guidelines. The objective interest rates and would be established of this proposal is to make a bank’s by the Banking Agencies. The resulting capital requirement responsive to significant levels of IRR. The proposal is estimate of the change in net economic value for the 100 basis point shift, designed to ensure that banks with high levels of IRR have capital commensurate expressed as a percent of total assets, would be used as the primary measure with that risk, thereby reducing the of an institution’s level of IRR. exposure of the federal depository The proposed measurement system is institution insurance funds. The designed to minimize reporting burdens proposed approach uses a measure of while meeting the regulatory need for interest rate risk that is consistent identifying basic asset and liability with—although not identical to—that mismatches that can materially affect a being pursued internationally. As such, the measure should be adaptable to any bank’s financial condition. The system is not designed to derive precise international agreement that may measures of IRR exposure, but rather to emerge. provide an index that identifies relative II. Interest Rate Risk—General orders of magnitude of IRR exposure Framework of Proposal among banks. Accordingly, the proposed measurement system is not intended to An underlying principle of the replace other, more sophisticated proposal for incorporating IRR into the procedures that banks may use in their risk-basetl capital guidelines is that a asset and liability management process. certain amount of IRR is inherent and Under the proposal, an institution appropriate in commercial banking. In with IRR exposure in excess of a addition, the proposal acknowledges threshold level would be required to that the level of IRR in banks is difficult allocate additional capital equal to the to measure with a high degree of dollar amount of the estimated change confidence. Finally, the approach takes in its net economic value that is in into consideration the fact that, to date. excess of that level, This would provide IRR has not been a principal threat to complete coverage of any incremental the financial health of commercial banks. Accordingly, the proposal targets exposures above the established 35510 Federal Register / Vol. 57, No. 154 / Monday, August 10, 1992 / Proposed Rules threshold. For example, if threshold levels of IRR exposure were set at 1.00 percent of total assets, an institution with a measured exposure of 1.50 percent of assets would be required to allocate a dollar amount of capital equal to 0.50 percent of total assets. The distribution of the exposures of individual institutions across the banking industry would be used to help identify a threshold level of IRR. However, in identifying what constitutes the threshold level, the Banking Agencies will focus greater attention on what absolute level of IRR is consistent with safety and soundness. The amount of potential measurement error will also be considered. It is envisioned that the identified threshold level of IRR would remain relatively stable over time. With a stable definition of the threshold level of IRR, changing risk patterns within the industry would not cause shifts in the level of risk that would require capital coverage. Nevertheless, the Banking Agencies may need to adjust periodically the definition of the threshold level of IRR in order to account for changing market conditions, improvements in the proposed measurement system, and other factors. The amount of any additional capital required under the proposed quantitative approach would represent the minimum capital requirement for IRR assuming that adequate internal controls and management are in place. On-site reviews could lead to higher assessments for IRR than the proposed quantitative measure would suggest if an institution's specific positions differed sufficiently from those assumed by the measure. In addition, qualitative factors such as a bank's asset/liability policies, procedures, systems and management expertise would also be considered. To the extent that such qualitative factors are determined to be inadequate during the examination process, institutions may be required to hold additional capital beyond that implied by their quantitative measure and may also be required to correct any noted deficiencies. Section 305(b)(3) requires each federal banking agency to establish reasonable transition rules to facilitate compliance with regulations issued under section 305. The Banking Agencies envision that their proposed regulation will specify implementation of the IRR component in phases over a suitable transition period. Once implemented, institutions would need to meet capital requirements for IRR contemporaneously with the reporting date. A. Proposed Interest R ate Risk M easurem ent System 1. Overview The methodology for measuring an institution’s IRR exposure applies the principles of duration to a standard maturity gap report in order to approximate the net change in the economic value of the institution arising from a change in interest rates.3 Institutions would slot their assets, liabilities and off-balance-sheet positions into a maturity ladder report based upon their remaining maturities or nearest repricing dates. The positions reported in each maturity range would then be multiplied by an IRR weight that represents the interest rate sensitivity of the respective positions. The IRR weights would be established by the Banking Agencies and would be based on the modified duration of instruments with maturities, cash flows, coupons and yields that are assumed to be representative of the position being weighted. Modified duration measures the sensitivity of the present value of a financial instrument to changes in market rates. Specifically, modified duration measures the percentage change in the present value of an instrument for small changes in yields. The mathematical relationship is as follows: Percentage change in price Modified BP change in yield duration too The greater the duration of the instrument, the more sensitive is its value to changes in market rates.4 3 T h e p ro p o s e d m e a su re m e n t s y ste m w a s p re s e n te d in p re lim in ary form In "A M eth o d for E v a lu a tin g In te re s t R ate R isk in U.S. C om m ercial B an k s," F e d e ra l R e s e rv e B ulletin, A u g u st 1891, p. 625-637. 8 T h e d u ra tio n o f a n in stru m e n t is the w eig h ted a v e ra g e m a tu rity o f a n in s tru m e n t’s c a s h flow s, w h e re th e p re s e n t v a lu e s o f th e c ash flo w s serv e as th e w eig h ts. It is c a lc u la te d by first m ultiplying the tim e u n til th e re c eip t o f e a c h c a s h flow by th e ra tio o f th e p re s e n t v a lu e o f th a t c a s h flow to the in s tru m e n t's to ta l p re s e n t v alue. T h e sum o f th e se w e ig h te d tim e p e rio d s is k n o w n a s th e Mf&caulay d u ra tio n o f th e in stru m e n t. T h is m e a su re c a n b e m o d ified to e x p re ss th e p rice sen sitiv ity o f an in stru m e n t to a g iv en ch an g e in ra te s. T h is is k n o w n a s m o d ified d u ra tio n . M odified d u ra tio n is d e riv e d b y d ividing a n in s tru m e n t's M a c a u la y d u ra tio n by th e q u a n tity (1 + Y ie ld /K ) w h e re K is th e n u m b e r of tim es p e r y e a r th a t in te re s t is co m p o u n d e d . T his d iv isio n a d ju sts th e M a c a u la y d u ra tio n for th e n o n c o n tin u o u s co m p o u n d in g o f in te re s t a n d in c re a se s th e a c c u ra c y o f du ra tio n a s a m e a su re of in te re s t ra te sensitiv ity. Fo r sm all ch an g e s in ra te s, the p e rc en tag e ch an g e in th e v a lu e o f a n in s tru m e n t is e q u a l to m in u s d u ra tio n tim es th e p e rc e n ta g e p o in t ch an g e in rates. The duration-based risk weights used in the proposed measurement system are expressed in percentage terms, and the basis point change in rates is assumed to be 100 basis points. Therefore, the weighting of assets, liabilities and off-balance-sheet positions results in an approximation of the nominal change in the present value of the reported position for an assumed one percentage point change in rates. Netting these weighted positions both within and across time bands (weighted assets minus weighted liabilities plus (or minus) weighted net off-balance-sheet instruments) results in a "Net RiskWeighted Position” that serves as a rough approximation of the nominal change in an institution’s net economic value that would arise from a one percentage point change in rates. This net risk-weighted position, expressed as a percent of total assets, is the primary quantitative measure that would be used to evaluate an institution’s exposure to IRR. The Banking Agencies recognize that the proposed measurement system may not provide a precise measure of IRR and that errors may exist.5 Nevertheless, several factors argue for a relatively simple measure of IRR over other, more complex methodologies. One factor is the potential for spurious precision that can be introduced by complex models. Often, the complexity of a methodology and the precision of the data collected are dominated by the underlying assumptions used to derive an IRR exposure measure. Even the most sophisticated measures of IRR require certain assumptions that can materially affect the results. For banks, many of these assumptions relate to assets and liabilities with embedded options that make their interest rate sensitivity difficult to estimate; the interest rate sensitivity of core deposits is an important example. The overriding influence of such assumptions suggests caution in trying to estimate absolute levels of IRR across the entire industry using complex, but still generalized, measurement systems. T he m in u s sign re flects th e in v e rse re la tio n s h ip o f b o n d p rices a n d in te re s t ra te s. 5 Fo r ex am p le, th e re la tio n s h ip b e tw e e n a n in s tru m e n t’s d u ra tio n a n d c h an g e s in v a lu e is e x a c t only for in fin itesim al c h an g e s in ra te s a n d is only a p p ro x im a te for la rg e r c h an g e s in ra te s. D u ra tio n is only a lin e a r a p p ro x im a tio n of in te re s t ra te sen sitiv ity a n d its c o n v ex ity lim its d u ra tio n ’s e x p la n a to ry ab ility . M oreover, its u se w ith in th e m e a su re m e n t sy stem a ss u m e s p a ra lle l sh ifts in th e yield curve. T h e s e a n d o th e r fa c to rs c a n re su lt in e stim atio n erro rs of th e chan g e in e co n o m ic v a iu e w h e n c o m p a re d to sim ilar m e a su re s d e riv e d using m ore co m p lex tec h n iq u es. Federal Register / Vol. 57, No. 154 / Monday, August 10, 1992 / Proposed Rules_______ 35511 An additional factor supporting a relatively simple approach is the need to minimize reporting requirements while meeting regulatory needs. In general, bank supervisors do not need the same level of precision that bank management may need. The Banking Agencies also do not with to become involved in the day-to-day operations of the institutions they regulate. Rather, regulators are concerned principally with identifying significant threats to a bank’s solvency and understanding the nature of its business; they are less concerned with small changes to its earnings. By focusing supervisory attention and capital requirements on banks with high levels of IRR, supervisors hope to avoid developing and administering dateintensive models. Although some estimation errors may exist under the proposed measurement system, the imprecision of the measure and the use of some underlying assumptions are not likely to mask the exposures of banks facing the highest risk or cause truly low-risk institutions to appear as having high levels of IRR. The most significant errors are expected to be introduced by the treatment of core deposits, for which no measure is precise. Accordingly, because of its simplicity, the #proposed measurement system is not intended to replace other, more sophisticated procedures that banks use in their asset and liability management process. 2. Information Requirements Table 1 illustrates the repricing schedule that could be used in the proposed IRR measurement system. Summary instructions for compiling this information in an expanded Gall Report schedule are presented in the Appendix. Institutions would slot their interest bearing assets, interest bearing liabilities, demand deposits and offbalance-sheet items across six maturity ranges or time bands based on the instrument’s remaining maturity or next repricing date. For illustrative purposes, lines for “Other Assets” and “Other Liabilities” are included in Table 1 to allow the schedule to “foot” to an institution’s balance sheet (Call Report Schedule RC). However, only positions distributed across the time bands would be risk-weighted. All institutions would be expected to submit the proposed reporting schedule on a quarterly basis. BtU-MG CODE 4810-33-M (210-01-M S7I4-01-M