The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federal R eserve Bank
OF DALLAS
W ILL IA M
H. WALLACE
DALLAS, TEXAS 7 5 2 2 2
f i r s t v ic e p r e s id e n t
AND C H IE F O PER ATING O FFIC E R
MSTCh 17, 1989
Circular 89-15
TO:
The Chief Executive Officer of all
member banks and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Amendment to Regulation H
DETAILS
The Federal Reserve Board has amended its Regulation H (Membership of
State Banking Institutions in the Federal Reserve System) to require state
member banks to prepare annual disclosure statements that are made available
to the public upon request. The information made available pursuant to this
amendment will most likely be of particular interest to shareholders and to
persons doing business with such banks. The Board's amendment is similar to
final regulations adopted by the Federal Deposit Insurance Corporation and the
Comptroller of the Currency applicable to state non-member banks and national
banks.
The Board has structured the amendment to facilitate the disclosure
of the required information in a manner that imposes the least possible burden
on state member banks and other covered institutions. The amendment requires
that banks and U.S. branches and agencies of foreign banks make available to
shareholders and the public, upon request, one free copy of the year-end
Reports of Condition and Income ("Call Reports") for the preceding two years.
As a substitute, banks may make available other specified financial reports
that contain information equivalent to that presented in Call Reports.
The amendment takes effect April 1, 1989.
ATTACHMENTS
The Board's text of changes is attached.
For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
MORE INFORMATION
For more information, please contact Dean Pankonien at (214)
651-6662.
For additional copies of this circular, please contact the Public
Affairs Department at (214) 651-6289.
Sincerely yours,
Rules and Regulations
Federal Register
Vol. 54, No. 25
W ednesday, February 8, 1989
This section of the FEDERAL REGISTER
contains regulatory documents having
general applicability and legal effect, most
of which are keyed to and codified in
the Code of Federal Regulations, which is
published under 50 titles pursuant to 44
U.S.C. 1510.
The Code of Federal Regulations is sold
by the Superintendent of Documents.
Prices of new books are listed in the
first FEDERAL REGISTER issue of each
week.
FEDERAL RESERVE SYSTEM
12 CFR Part 208
[Regulation H; Docket No. R-0636]
Membership of State Banking
Institutions
a g e n c y : Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
The Board of Governors of
the Federal Reserve System is amending
Regulation H, 12 CFR Part 208. The
purpose of the amendment is to make
available to the public information
regarding the financial condition of state
member banks and U.S. branches and
agencies of foreign banks. The
amendment requires state member
banks to make available to shareholders
and any member of the public, upon
request, information regarding each such
bank’s financial condition in the form of
the bank’s two most recent year-end
Reports of Condition and Income (“Call
Reports”) (OMB No. 7100-0036). As
alternatives to furnishing the Call
Reports, at each bank’s option, persons
requesting such information may be
given one of the following: (1) Specified
schedules from the two most recent
year-end Call Reports; (2) in the case of
a bank required to file statements and
reports pursuant to Regulation H, a copy
of the bank’s annual report to
shareholders for meetings at which
directors are elected; (3) copies of
independently audited financial
statements (accompanied by a copy of
the certificate or report of the
independent accountant) if they contain
information comparable to that
presented in the two most recent yearend Call Report schedules specified for
alternative (1) above; or (4) in the case
of a state member bank that is the only
bank subsidiary of a bank holding
company, that is majority owned by that
su m m ary :
bank holding company, and that has
assets equal to 95 percent or more of the
bank holding company’s consolidated
total assets: (A) A copy of the annual
report of the one-bank holding company
prepared in conformity with the
regulations of the Securities and
Exchange Commission (“SEC"); or (B) if
the holding company has assets of $150
million or more, copies of those portions
of the bank holding company’s two most
recent year-end Form FR-Y-9C,
“Consolidated Financial Statements for
Bank Holding Companies with Total
Consolidated Assets of $150 Million or
More, or With More Than One
Subsidiary Bank” (OMB No. 7100-0128),
that are comparable to the Call Report
schedules specified for alternative (1)
above.
The amendment also requires state
licensed agencies of foreign banks and
state licensed branches of such banks
that are not insured by the Federal
Deposit Insurance Corporation to make
available, upon request, the following
schedules from the two most recent
year-end Reports of Assets and
Liabilities of U.S. Branches and
Agencies of Foreign Banks (“Foreign
Branch and Agency Call Reports”)
(OMB No. 7100-0032): Schedules RAL
(Assets and Liabilities), E (Deposit
Liabilities and Credit Balances), and P
(Other Borrowed Money).
DATE: This amendment shall be effective
April 1,1989.
FOR FURTHER INFORMATION CONTACT:
For further information, contact Stephen
L Siciliano, Special Assistant to the
General Counsel for Administrative
Law, Legal Division (202/452-3920),
Frederick M. Struble, Associate
Director, Division of Banking
Supervision and Regulation (202/4523794), Rhoger H. Pugh, Manager, Policy
Development Section, Division of
Banking Supervision and Regulation
(202/728-5883), Peggy S. Scarborough,
Financial Analyst, Division of Banking
Supervision and Regulation (202/4522538) or Elizabeth Thede, Attorney,
Legal Division (202/452-3274); or for the
hearing impaired only:
Telecommunication Device for the Deaf,
Earnestine Hill or Dorothea Thompson
(202/452-3544), Board of Governors of
the Federal Reserve System,
Washington, DC 20551.
SUPPLEMENTARY INFORMATION: The
amendment to Regulation H requires
state member banks to make available
annually, upon request, specified
financial information to shareholders
and members of the public.
The Federal Deposit Insurance
Corporation (“FDIC"), on December 17,
1987, adopted a final regulation
requiring state-chartered banks that are
not members of the Federal Reserve
System to prepare annual disclosure
statements that are to be made
available to the public upon request.
The Office of the Comptroller of the
Currency adopted a final regulation
similar to the FDIC’s but applicable to
national banks on February 10,1988.
The regulations of both agencies also
apply to U.S. branches and agencies of
foreign banks that are regulated by
those agencies.
This amendment to Regulation H
requires a state member bank to make
available its most recent year-end Call
Report together with its Call Report for
the prior year end. Alternatively, a state
member bank may fulfill the disclosure
requirement of the amendment by
making available: (1) Certain specified
schedules from its two most recent yearend Call Reports; (2) in the case of a
bank required to file statements and
reports pursuant to Regulation H, a copy
of the bank's annual report to
shareholders for meetings at which
directors are elected; (3) copies of
independently audited financial
statements (accompanied by a copy of
the certificate or report of the
independent accountant) if they contain
information comparable to that
presented in the two most recent yearend Call Report schedules specified for
alternative (1) above; or (4) in the case
of a state member bank that is the only
bank subsidiary of a bank holding
company, that is majority owned by that
bank holding company, and that has
assets equal to 95 percent or more of the
bank holding company's consolidated
total assets, the bank holding company’s
annual reports filed with the SEC or, if
the holding company has assets of $150
million or more, certain information
from its two most recent year-end
consolidated financial statements filed
with the Board pursuant to Regulation Y.
The amendment also requires state
licensed agencies of foreign banks and
state licensed branches of such banks
that are not insured by the FDIC to
make available, upon request, Schedules
RAL (Assets and Liabilities), E (Deposit
Liabilities and Credit Balances), and P
6116
Federal Register / Vol. 54, No, 25 / W ednesday, February 8, 1989 / Rules and Regulations
(Other Borrowed Money) from their two
most recent year-end Foreign Branch
and Agency Call Reports.
State member banks and Boardregulated U.S. branches and agencies of
foreign banks must inform persons
receiving information pursuant to the
amendment that the Federal Reserve
System is not responsible for the
accuracy or completeness of such
information. The Board notes, however,
that state member banks are required to
prepare the Call Reports by 12 U.S.C.
324 and § 208.10 of Regulation H (12 CFR
208.10), that U.S. branches and agencies
of foreign banks are subject to the
reporting requirements of 12 U.S.C.
3105(b), and that the filing of false
reports with an agency of the United
States is a federal crime (18 U.S.C. 1001,
1005). The content and accuracy of
reports to shareholders and of audited
financial statements are adequately
addressed by other federal and state
laws.
The purpose of the amendment is to
make available to the public information
regarding the financial condition of state
member banks and U.S. branches and
agencies of foreign banks. The
information made available pursuant to
this amendment will most likely be of
particular interest to shareholders and
to persons doing business with such
institutions. The amendment addresses
only the disclosure to the public of the
documents identified in § 208.17 (d) and
(e). The amendment does not address
the disclosure obligations of banks and
bank holding companies under federal
and state securities laws. The
amendment is not intended to affect the
legal rights of shareholders and other
persons under state and federal laws or
contractual obligations between banks
and other persons. The amendment is
also not intended to create a private
right of action against any institution
disclosing documents pursuant to this
provision, and the Board has added a
provision to the proposed amendment to
this effect.
On May 27,1988 (53 FR 19308), the
Board issued for comment the proposed
amendment to Regulation H. In response
to this request for comments, the Board
received 26 public comments from
interested individuals and
organizations. The comments the Board
received on the proposed amendment
were largely unfavorable. Many
commentators focused on the cost of
such additional regulation, especially to
small banks. The commentators argued
that even if the amendment is not in
itself prohibitively expensive to small
banks, the amendment, when coupled
with those requirements already in
effect or being implemented, would
create a heavy burden on small banks.
Commentators stated that the cost of
compliance will put affected banks at a
competitive disadvantage relative to
other financial institutions. One trade
association contended that financial
disclosures will not benefit depositors
since depositors know that their
deposits are FDIC-insured and that, in
any case, regulators do not allow large
banks to fail. Disclosure of troubled
finances of small banks could, however,
heighten concerns of depositors whose
deposits are not completely insured.
The Board does not believe that
increased public access to this
information will have such ill effects.
The information required to be disclosed
under the amendment is information
that is presently prepared by banks and
that is publicly available and routinely
disclosed upon request pursuant to the
Freedom of Information Act (5 U.S.C.
552) and the Board’s regulations
implementing that Act. The amendment
simply increases the ease with which
the public can access the information.
Instead of having to locate the relevant
bank regulator and ascertain the
appropriate means of filing a request for
information, the public will be able to go
directly to the bank for the information.
The Board also believes that
commentators’ concerns about the
burden that this amendment will
impose, particularly on small banks, are
unfounded. The Board has structured the
amendment to facilitate the disclosure
of information that is properly in the
public domain in a manner that imposes
the least possible burden on state
member banks and other covered
institutions. Covered institutions would
not be required to prepare new reports,
but only to make available upon request
reports or other financial information
that they already prepare. State member
banks presently are required to publish
the balance sheet portion of their Call
Reports pursuant to § 208.10 of
Regulation H.
Several commentators recommended
that banks be allowed to pass
reproduction costs on to requestors of
the information. The final rule clarifies
the Board's position on whether banks
may charge a copying fee by requiring
banks to provide one free copy to each
requestor of the document the bank has
chosen to disclose. The Board believes
that providing a free copy best comports
with the underlying principle behind the
amendment, which is to provide easy
access to financial information about
banks. The Board does not believe that
the assumption of this cost will be too
onerous a burden for banks. Limiting the
number of free copies the bank must
provide to one free copy per requestor
ensures that no requestor can abuse this
requirement by submitting requests for
multiple copies. Should the reproduction
cost prove unexpectedly burdensome on
banks, the Board would be amenable to
reconsidering its position on copying
fees.
The amendment also requires banks
and other covered institutions to notify
shareholders and the public of the
availability of these reports. In the case
of shareholders, the amendment
specifies that notification be made in the
form of a written announcement that
may be included with the notice of the
annual shareholders’ meeting. In the
case of the public, the amendment does
not specify the means to be used to
provide notification, but only requires
that the means be "reasonable.” Several
commentors asserted that the cost of
mailing notices to the general public
may be very high and urged that the
proposed amendment be revised to
indicate that banks can comply with the
requirement by making the required
information available on bank premises.
It is the Board’s intent to be flexible on
the means a bank may choose to satisfy
this notification requirement. For
example, if a bank views mailing notices
to all members of the community as too
costly, the bank may post a notification
in its lobby. If a bank finds that it has
too great a proliferation of lobby
notifications already, it may satisfy the
requirement by passing out brochures,
by leaving brochures at a convenient
place in the lobby, by publication in a
newspaper of general circulation, or by
other means. In sum, the Board will
view as reasonable any means that
transmits to the public, particularly the
public that does business with the
institution, that such information is
available. The final rule has been
modified to provide that the notification
to the public, as well as the notification
to shareholders, must state that one
copy of the information is available free
of charge upon request.
Several commentators also expressed
concern about the proposed requirement
that banks provide the information “as
soon as it becomes available." One
trade association indicated that this
language might force banks to release
information before having a chance to
prepare it for public release. The trade
association also stated that, by requiring
banks to choose which report to release
on the basis of which report was
available first, this language might
effectively preclude the choice the
amendment provides banks about which
form of information to release. Finally,
Federal Register / Vol. 54, No. 25 / Wednesday, February 8, 1989 / Rules and Regulations
the trade association argued that banks
should be permitted to mail a disclosure
statement within a reasonable time
period after the information is requested
to enable banks to utilize central
distribution centers.
The final rule has been modified to
address these concerns. The final rule
makes it clear that a bank need not
determine which information to release
on the basis of which information is
available first. A bank can release any
document satisfying one of the
amendment’s options, so long as the
bank releases the document as soon as
is reasonably possible but not later than
April 1. The Board intends the April 1
cut-off date to strike a balance between
ensuring that banks are reasonably able
to select among the disclosure options
provided in the amendment and
ensuring that the public obtains
reasonably current information
regarding the bank’s condition. Nothing
in the final rule prevents banks from
utilizing central distribution centers.
One commentator stated that banks
should be able to disclose additional
materials along with the materials the
amendment requires. The Board notes
that the amendment identifies specific
information that covered institutions
must disclose. The Board has no
objection to disclosure of additional
information so long as the information
helps the public to understand the
information that the bank or other
covered institution is required to
disclose, and does not mislead the
public as to the financial condition of
the institution. A bank could, for
example, include a narrative statement
describing the disclosed items. A bank
could also provide quarterly disclosures
along with the annual disclosures
required by this amendment. In addition,
a state licensed agency of a foreign bank
could provide information on the
financial condition of the foreign bank.
In response to a suggestion from a
commentator, the Board’s final rule
exempts bankers’ banks from the
general public disclosure requirements
on the grounds that such requirements
are unnecessary in light of the unique
purpose and function of bankers' banks.
Congress has recognized the unique
character of bankers' banks by
exempting them from the Community
Reinvestment Act’s disclosure
requirements. The final rule continues to
require bankers’ banks to comply with
the shareholder disclosure requirements.
One trade association suggested that
the amendment carry a two-year sunset
provision to ensure that the Board will
reevaluate the proposal. The Board
regards a sunset provision as
unnecessary. The Board can reexamine
6117
This section does not amend or modify
the publication requirements of § 208.10,
or any other section of this regulation.
(b) Definitions. For purposes of this
List of Subjects in 12 CFR Part 208
section, the following definitions apply:
Membership, Banks, Accounting,
(1) “Call Report” means the
Confidential business information,
Consolidated Reports of Condition and
Federal Reserve System, Reporting and
Income (OMB No. 7100-0036) filed
recordkeeping requirements, Securities,
pursuant to 12 U.S.C. 324 and § 208.10 of
Disclosures of financial information.
this regulation (12 CFR 208.10).
For the reasons set out in this notice,
(2) “State member bank” means a
and pursuant to the Board’s Authority
bank that is chartered by a State and is
under section 11 of the Federal Reserve
a member of the Federal Reserve
Act of 1913, as amended (12 U.S.C. 248],
System.
and section 7 of the International
(3) “Other covered institutions” means
Banking Act of 1978 (12 U.S.C. 3105(b)),
state licensed agencies of foreign banks,
the Board amends 12 CFR Part 208 as
or state licensed branches of foreign
follows:
banks that are not insured by the
Federal Deposit Insurance Corporation.
PART 208—MEMBERSHIP OF STATE
(c) Availability o f financial
BANKING INSTITUTIONS IN THE
information —(1) Shareholders. Each
FEDERAL RESERVE SYSTEM
state member bank shall advise its
shareholders, by a written
1. The authority citation for Part 208
announcement, which may be included
continues to read as follows:
in the notice of the annual shareholders’
Authority; Sections 9,11, and 21 of the
meeting, that one copy of certain
Federal Reserve Act (12 U.S.C. 321-338, 248,
financial information is available free of
and 486, respectively); sections 4 and 13(j) of
charge upon request. The announcement
the Federal Deposit Insurance Act (12 U.S.C.
shall include, at a minimum, an address
1814 and 18230), respectively); section 7(a) of
or telephone number to which requests
the International Banking Act of 1978 (12
may be directed.
U.S.C. 3105); sections 907-910 of the
International Lending Supervision Act of 1983
(2) General public. State member
(12 U.S.C. 3906-3909); sections 2 ,12(b), 12(g),
banks and other covered institutions
12(i), 15B(c)(5), 17,17A, and 23 of the
shall use reasonable means at their
Securities Exchange Act of 1934 (15 U.S.C.
disposal to advise the public of the
78b, 78/(b), 78/(g), 78/(i), 780-4(c)(5), 78q,
availability of information pursuant to
78q-l, and 78w, respectively); and section
this section. Bankers’ banks, as defined
5155 of the Revised Statutes (12 U.S.C. 36) as
by the Federal Reserve Act, as amended
amended by the McFadden Act of 1927.
by the Monetary Control Act of 1980
(Title I of Pub. L. 96-221), and 12 CFR
2. Section 208.17 is added to read as
204.121, are exempt from this
follows:
requirement. The notification to the
i 208.17 Disclosure of financial
public shall state that one copy of the
Information by state member banks.
information is available free of charge
(a) Purpose and scope. The purpose of upon request and state an address or
telephone number to which requests
this section is to facilitate the
may be directed.
dissemination of publicly available
information regarding the financial
(d) Financial information to be
condition of state member banks, state
provided by state member banks. The
licensed agencies of foreign banks, and
bank shall have discretion to determine
state licensed branches of foreign banks
which type of information, identified in
that are not insured by the Federal
this subsection, to release. The bank
Deposit Insurance Corporation. This
shall make the information it chooses to
section requires all state-chartered
release available as soon as is
banks that are members of the Federal
reasonably possible but not later than
Reserve System and all other covered
April 1 of the year immediately
institutions:
following the end of the year to which
the most recently available information
(1) To make year-end Call Reports or
pertains. State member banks shall
Reports of Assets and Liabilities of U.S.
Branches and Agencies of Foreign Banks fulfill the requirements of this section by
providing, upon request, at least one free
or, in the case of state member banks,
copy to each requestor of the following
other alternative financial information,
information:
available to shareholders, customers,
and the general public upon request; and
(1) Copies of their entire Call Report
for the most recent year end and the
(2) To advise shareholders and the
prior year end, excluding any
public of the availability of this
information for which confidential
information.
the amendment at any time, and
interested members of the public can
petition for reexamination at any time.
6118
Federal Register / Vol. 54, No. 25 / Wednesday, February 8, 1989 / Rules and Regulations
treatment is permitted pursuant to the
Call Report instructions; or
(2) Copies of only the following
schedules from their Call Reports for the
most recent year end and the prior year
end, excluding any information for
which confidential treatment is
permitted pursuant to the Call Report
instructions:
(i) Schedule RC (Balance Sheet);
(ii) Schedule RC-N (Past Due and
Nonaccrual Loans and Leases];
(iii) Schedule RI (Income Statement);
(iv) Schedule RI-A (Changes in Equity
Capital); and
(v) Schedule RI-B (Charge-offs and
Recoveries and Changes in Allowance
for Loan and Lease Losses)—Part I
may be omitted; or
(3) In the case of a bank required to
file statements and reports pursuant to
the Board's Regulation H, a copy of the
bank’s annual report to shareholders for
meetings at which directors are to be
elected or the bank’s annual report; or
(4) In the case of a bank with
independently audited financial
statements, copies of the audited
financial statements and the certificate
or report of the independent accountant
if such statements contain information
for the two most recent year ends
comparable to that specified in
subsection (d)(2); or
(5) In the case of a bank that is the
only bank subsidiary of a bank holding
company, that is majority owned by that
bank holding company, and that has
assets equal to 95 percent or more of the
bank holding company's consolidated
total assets, a copy of either:
(i) The annual report of the bank
holding company prepared in conformity
with the regulations of the Securities
and Exchange Commission; or
(ii) If the holding company has
consolidated assets of $150 million or
more, the sections in the bank holding
company’s consolidated financial
statements for the most recent year end
and the prior year end on Form FR-Y9C (“Consolidated Financial Statements
for Bank Holding Companies With Total
Consolidated Assets of $150 Million or
More, or With More Than One
Subsidiary Bank” (OMB No. 7100-0128))
prepared pursuant to the Board's
Regulation Y, and comparable to the
Call Report schedules enumerated in
paragraph (d)(2) of this section.
(e) Financial information to be
provided by other covered institutions.
Other covered institutions shall fulfill
the requirements of this section by
providing, upon request, at least one free
copy to each requestor of the following
schedules from the Report of Assets and
Liabilities of U.S. Branches and
Agencies of Foreign Banks (OMB No.
7100-0032) for the most recent year end
and the prior year end:
(1) Schedule RAL (Assets and
Liabilities);
(2) Schedule E (Deposit Liabilities and
Credit Balances);
(3) Schedule P (Other Borrowted Money).
The institution shall make the
information available as soon as is
reasonably possible but not later than
April 1 of the year immediately
following the end of the year to which
the most recently available information
pertains.
(f) Disclaimer. The following legend
shall be included with any financial
information provided pursuant to this
section: “This financial information has
not been reviewed, or confirmed for
accuracy or relevancy, by the Federal
Reserve System.”
(g) This section is not intended to
create a private right of action against
any institution disclosing documents
pursuant to this section.
Board of Governors of the Federal Reserve
System.
February 1,1989.
William W. Wiles,
Secretary of the Board.
[FR Doc. 89-2923 Filed 2-7-89; 8:45 am]
BILLING CODE 6210-01-M
@FedFRASER