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Federal R eserve Bank
OF DALLAS
ROBERT
AND
D. M c T E E R , J R .
p re s id e n t
C H IE F E X E C U T IV E
October
22 , 1991
d a l l a s ,t e x a s
75222
O F F IC E R
Notice 91-84
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Federal Financial Institutions Examination Council
Proposed Requirement for Electronic Submission of
Bank Reports of Condition and Income
DETAILS
The Federal Financial Institutions Examination Council (FFIEC) has
requested public comment on a proposal requiring electronic submission of Bank
Reports of Condition and Income (Call Reports). Banks currently have the
option of either filing paper reports or submitting Call Reports electron
ically.
The FFIEC invites comment on all aspects of the proposal, including
a timetable under which banks would be required to submit electronic Call
Reports. Specific comments furnishing information on the costs of, and
savings realized from, the use of computer software to prepare and transmit
Call Reports would be helpful. In addition, comment is sought regarding
whether banks that meet certain criteria and that do not have personal
computers should be exempt from the electronic submission requirement or
should be permitted to request waivers of the requirement.
The FFIEC must receive comments by November 18, 1991. Comments
should be addressed to Robert J. Lawrence, Executive Secretary, Federal
Financial Institutions Examination Council, 1776 G Street, N.W., Suite 850B,
Washington, D.C. 20006.
ATTACHMENT
Attached is a copy of the FFIEC’s notice as it appears on pages
50334-37, Vol. 56, No. 193, of the Federal Register dated October 4, 1991.
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)
- 2 -
MORE INFORMATION
For more information, please contact Marion White at (214) 744-7490.
For additional copies of this Bank’s notice, please contact the Public Affairs
Department at (214) 651-6289.
Sincerely yours,
50334
Federal Register / Vol. 56, No. 193 / Friday, October 4, 1991 / Notices
FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL
Proposed Requirement for Electronic
Submission of Bank Reports of
Condition and Income
Federal Financial Institutions
Examination Council.
ACTION: Request for comment.
agency:
SUMMARY: The Federal Institutions
Examination Council ("Examination
Council”) requests public comment on a
proposed timetable under which banks
would be required to submit their
Reports of Condition and Income (“Call
Reports”) electronically. The filing of
Call Reports is required quarterly by the
Office of the Comptroller of the
Currency (“OCC”) for national banks,
the Federal Reserve Board (“FRB”) for
state member banks, and the Federal
Deposit Insurance Corporation (“FDIC”)
for insured state nonmember
commercial and savings banks. At
present, banks must submit their
completed Call Reports on the report
forms provided by the federal bank
supervisory agencies, on computer
generated facsimiles of the agencysupplied report forms, or electronically
over telephone lines to the banking
agencies’ electronic collection agent
using computer software. Except for
certain banks with foreign offices that
are required to transmit electronically,
most banks currently have the option of
either filing hard-copy (paper) reports or
submitting their Call Reports
electronically. Under the timetable
proposed herein by the Examination
Council, beginning as of March 31,1992,
banks with assets of $100 million or
more as of June 30,1991, would be
required to file electronically. One year
later, this requirement would be
extended to banks with assets of $50
million or more as of June 30,1991.
Finally, as of March 31,1994, all banks
would be required to submit their Call
Reports electronically. The proposed
timetable would not change the existing
deadlines for submitting Call Reports.
The Examination Council invites
comment on all aspects of the proposed
electronic submission requirement.
Specific comments furnishing
Federal Register / Vol. 56, No. 193 / Friday, October 4, 1991 / Notices
information on the costs of and savings
realized from the use of Call Report
software to prepare and transmit reports
would be helpful to the agencies. In
addition, the Examination Council seeks
comment on whether banks meeting
certain criteria (e.g., those with assets of
less than some specified amount) that
do not have personal computers should
either be exempt from the electronic
submission requirement or should be
permitted to request waivers from it.
DATE: Comments must be received by
November 18,1991.
ADDRESSES: Comments should be
directed to Robert J. Lawrence,
Executive Secretary, Federal Financial
Institutions Examination Council, 1776 G
Street, NW„ suite 850B, Washington, DC
20006.
FOR FURTHER INFORMATION CONTACT:
OCC: David C. Motter, Special Assistant
to the Chief National Bank Examiner,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219, (202) 874-4922.
FRB: Rhoger H Pugh, Manager, Division
of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System, 20th and
Constitution Avenue, NW.,
Washington, DC 20551, (202) 723-5883.
FDIC: Robert F. Storch, Chief,
Accounting Section, Division of
Supervision, Federal Deposit
Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429,
(202) 898-8906.
SUPPLEMENTARY INFORMATION:
Background
In the early 1980s, the growing use of
personal computers in the banking
industry led to the introduction of
software to assist banks in preparing
their Call Reports. This software was
also programmed to generate a printout
of a bank’s Call Report in a format
closely resembling that of the printed
forms supplied to all banks by the
banking agencies each quarter. Thus, in
1985, the Examination Council advised
all banks that the banking agencies
would accept computer-generated
facsimile Call Reports satisfying certain
format standards in lieu of the agencysupplied printed forms. Taking further
advantage of advancements in computer
technology, the Examination Council
authorized the electronic submission of
Call Reports to the banking agencies
starting with the March 31,1988, report
date. Through a recently conducted
competitive bidding process, the
Examination Council selected a new
collection agent to provide electronic
collection services beginning with the
Call Reports for June 30,1991. This
contract is for three years with three
one-year renewal options.
Currently, around 6,800 or 54 percent
of all banks (including 46 percent of the
9,400 banks with less than $100 million
in assets) use Call Report software
either to file computer-generated
facsimile report forms or to submit their
data electronically. Electronically
submitted reports are received from
nearly 50 percent of the banks using this
software, that is, from 27 percent of all
banks, including 19 percent of banks
with less than $100 million in assets.
Since the electronic submission of bank
Call Reports was first permitted as of
March 31,1988, the number of banks
using this filing method has grown
steadily from around 750 that quarter to
over 3,400 as of March 31,1991, and
total bank usage of Call Report software
has likewise been increasing over time.
This increasing level of bank
participation in the electronic
submission program, which has involved
institutions of all sizes, has largely been
achieved on a voluntary basis.1 This
suggests that, regardless of size, banks
that use computer software to prepare
their Call Reports, and particularly those
which choose to submit electronically,
have concluded that this automated
method of preparing and filing their
reports offers certain benefits compared
to completing hard-copy report forms
manually or in some other manner.
Costs and Benefits to Banks of Call
Report Software and Electronic
Submission
During the third quarter of 1990, the
OCC conducted separate statistically
valid surveys of three groups of national
banks: those that submit their Call
Reports on the agency-supplied forms,
those that use Call Report software to
prepare and file computer-generated
facsimile report forms, and those that
submit their reports electronically.2 The
purpose of these surveys was to
determine why the banks in each group
use that particular submission method.
According to the OCC’s surveys,
national banks find a number of
advantages to the use of Call Report
software. In particular, after an initial
learning period, the survey indicates
that the use of Call Report software
1 The only banks that are currently required to
submit electronically are a relatively small number
that have or have had more than one foreign office
(other than a “shell” branch or an International
Banking Facility) that use any of the additional 15
days they are allowed for the completion of their
reports.
2 The Examination Council believes that the
findings of the OCC’s surveys of national banks that
are discussed in this document are comparable to
the results that would have been obtained had all
banks been surveyed.
50335
saves banks, on average, more than six
hours in preparation time each quarter
compared to the time spent to complete
their Call Reports before they began
using such software. These banks also
cited the reduction in errors that they
achieve through the use of the Call
Report software because of the edits
built into the software that allow them
to correct certain types of errors before
the reports are filed. This means that
less time has to be spent by both the
banks and the banking agencies in
following up on edit exceptions
identified by the agencies during their
quarterly Call Report processing cycles.
National banks filing electronically
further noted that the electronic
submission method eliminates the need
to allow time for mailing the hard-copy
(paper) report forms to ensure that they
are received by the Call Report
submission deadline. Thus, under
current timely filing standards, a bank
transmitting its report electronically has
up to three more days in which to
complete the Call Report than a bank
that mails its report, even if the report
itself is a computer-generated facsimile.
Additionally, when reports are
transmitted electronically, the electronic
collection agent provides the
transmitting bank with immediate
confirmation (electronically) that its Call
Report has been received by the
collection agent for forwarding to the
banking agencies. Banks mailing their
Call Reports receive no indication as to
whether and, if so, when their reports
have been received by the agencies.
As for national banks that complete
and submit the agency-supplied Call
Report forms, the OCC’s survey of these
banks showed that their nonuse of Call
Report software could neither be
attributed to a lack of awareness of such
software (including the electronic
submission option) nor to a lack of
personal computers. Of the national
bank respondents in this group, 97
percent knew about Call Report
software and 90 percent stated that their
banks had personal computers on which
the software could be run. (Call Report
preparation software is also available
for use on mainframe computers.) In
explaining their reasons for not using
Call Report software to prepare their
reports, nearly two-thirds of the national
banks in this group cited the cost of the
software. However, these banks’
concern that such software would not be
cost effective to use runs counter to the
comments by national bank software
users.
As mentioned above, national bank
software users had reduced their Call
Report preparation time by an average
50336
Federal Register / Vol. 56, No. 193 / Friday, October 4, 1991 / Notices
of more than six hours per quarter or 24
hours per year. Based on the average
salary and benefits per full time
equivalent employee of slightly more
than $13 per hour at banks with less
than $100 million in assets (based on
calendar year 1990 data], the time saved
by banks using Call Report software
translates into an annual savings of
more than $300. This means that a bank,
on average, should be' able to recover a
substantial portion of its annual outlay
of $400 to $500 for Call Report
preparation software.3 The time that is
saved by a bank’s staff can then be used
for other productive activities.
Moreover, the edits built into the Call
Report software permit banks to correct
certain types of errors before submitting
their reports rather than having to do so
afterward when their reports are edited
by the banking agencies. This offers an
additional but less quantifiable cost
savings that banks not using Call Report
software may not be taking into
account. Thus, when all of these factors
are considered, the Examination Council
believes that using commerciallyavailable preparation software is an
affordable and cost-effective way to
complete a Call Report.
Nevertheless, while the majority of all
banks have chosen to use Call Report
software, only half of these banks take
advantage of the electronic submission
feature that is incorporated into their
software. As a result, some 3,400 banks
submit hard-copy (paper) report forms
that they have produced on their Call
Report software. The OCC survey of
national banks in this group revealed
that slightly more than two-thirds of
them lacked modems and therefore were
not equipped to transmit electronically.
A similar percentage of national banks
not currently using Call Report software
do not own modems. Most national
banks in the former group gave the cost
of a modem as the most important
reason for not electronically submitting
while most national banks in the latter
group also cited the cost of a modem as
a reason (but not necessarily as the
most important reason) for not filing
electronically. However, depending on
quality, a modem represents a one-time
cost of from $75 to $200. When this cost
is amortized over several quarters of
use, this price range should make the
purchase of a modem affordable to all
institutions. (Moreover, one Call Report
software vendor periodically offers a
free modem as an inducement to attract
new subscribers to its software.)
Regulatory Agencies’ Perspective on
Software and Electronic Submission
As mentioned above, a key feature of
the commercially-available Call Report
software packages is the set of edits
they contain that identify and allow
banks to correct mathematical errors in
their reports. Thus, the banking agencies
have regarded their acceptance of
computer-generated facsimile Call
Report forms and electronically
submitted reports as a means of
improving the quality of the data
received from banks. The OCC’s surveys
of national banks confirm that bankers
hold a similar view. Support for such a
conclusion is also evident from statistics
compiled by the FDIC comparing
mathematical edit exception rates for
banks that use Call Report software and
those that do not. For example, the
mathematical edit exception rate for the
6,600 national and state nonmember
banks using Call Report software to
prepare their March 31,1991, reports
was only one-third of the rate for the
5,100 national and state nonmember
banks not using such software.4 Thus,
greater usage of Call Report software
provides an opportunity for an
improvement in the quality of the data
banks submit to the agencies. Other
things being equal, this would tend to
lessen the amount of time the agencies
would need to spend on editing reports
each quarter.
Another reason for the Examination
Council’s institution of the electronic
submission program has been to
improve the timeliness with which the
quarterly Call Report data was available
for processing and use. In this regard,
hard-copy (paper) Call Reports must be
keypunched before they can be loaded
onto the agencies’ databases, a step
which is, of course, not necessary for
electronically submitted Call Reports. At
the FDIC in particular, because of the
backlog that develops when 8,600 hard
copy Call Reports needing keypunching
arrive each quarter around the filing
deadline, up to seven days can elapse
between the receipt of a hard-copy
report and the date when it has been
4 It should be noted that the types of edits in the
banking agencies' Call Report processing systems
extend beyond the mathematical edits to which the
commercially-available software edits are generally
limited. These other types of edits generally
determine whether reported information falls
outside established parameters. Edit exceptions
identified by the agencies' system s require further
agency staff review to determine whether a
reporting error has actually occurred, a process
which often involves telephone contact with the
bank which filed the rep o rt FCIC statistics on
nonmathematical edit exceptions indicate that the
3 One softw are vendor offer* a fairly b a n c stand exception rates for banks using Call Report
alone amali bank software package at an annual
software and for those that do not are about the
cost of approximately $200.
same.
keypunched and can be loaded into the
FDIC’s Call Report processing system. In
contrast, a report received electronically
can normally be loaded into the
agencies’ computer systems the day
after it has been received by the
agencies’ electronic collection agent.6
Thus, the adoption of an electronic
requirement would bring the date as of
which the Call Reports for all banks are
available on the agencies’ databases
much closer to the actual submission
deadline (which, for most banks, is 30
days after the Call Report date) than is
presently the case. This, coupled with
the lower edit exception rate for reports
prepared using Call Report software,
may ultimately enable the agencies’ edit
processing to be completed sooner than
at present. Such an outcome would also
provide banks and the public with
earlier access to Call Report data.
In addition, the cost to the agencies of
getting a bank’s Call Report data into
their databases is lower for
electronically submitted reports than for
hard-copy (paper) report forms. With
reports filed electronically, Call Report
data can be loaded directly into the
agencies’ processing systems in the form
in which it is received because
keypunching is not necessary. The data
entry and other costs for handling hard
copy Call Reports are approximately
$10.50 per report under the current
contract with the vendor who
keypunches these reports. In contrast, at
the current level of 3,400 electronically
submitted quarterly Call Reports, the
average cost to the banking agencies’
per report filed electronically under the
pricing scale contained in the
Examination Council’s current contract
with its electronic collection agent is
approximately $4.66 per report. As the
number of electronically submitted
reports increases in specified
increments, the unit cost per report
within each higher increment declines. If
all 12,800 banks were required to submit
their Call Reports electronically, the
average cost to the banking agencies for
each Call Report would decrease to
approximately $2.56 per report.
Thus, with the current combination of
both electronically submitted and hard
copy (paper) Call Reports, the agencies
are incurring an annual cost in excess of
$415,000 to get the Call Reports received
from all banks loaded into their
processing systems. In contrast, if all
banks filed their Call Reports
electronically with the banking
* Errors by the agencies in keypunching data
from Call Reports filed in hard-copy form would
also be eliminated if all Call Reports were required
to be submitted electronica'ly.
Federal Register / Vol. 56, No. 193 / Friday, October 4, 1991 / Notices
agencies’ collection agent, this annual
cost would decrease by around $300,000.
Proposal
The Examination Council recognizes
that the number of banks submitting
their Call Reports electronically has
grown steadily since banks were first
permitted to use this filing method in
1988. Nevertheless, even if this growth
continues, the Examination Council has
concluded that the achievement of a
high level of industry participation in the
electronic submission program will not
be attained in the near term as long as
participation remains voluntary. At the
same time, banks of all sizes that
purchase Call Report preparation
software and use it to transmit their
reports electronically generally have
found it advantageous to do so.
Thus after considering the costs and
the benefits to both banks and the
agencies, the Examination Council
believes that the percentage of banks
currently using Call Report preparation
software with an electronic submission
feature and the percentage of banks
already filing electronically on a
voluntary basis are sufficient to justify a
requirement that banks submit their Call
Reports electronically. The Examination
Council acknowledges, however, that
smaller banks may need longer than
larger banks to prepare themselves for
transmitting electronically.
Consequently, the Examination Council
is proposing to require that Call Reports
be submitted electronically in
accordance with the timetable set forth
below. The proposed schedule gives the
smallest banks the longest amount of
lead time before their electronic
transmissions must begin. Of course,
any bank not filing electronically could,
at its option, adopt this submission
method earlier than would otherwise be
required.
The Examination Council invites
comment on the proposed electronic
submission requirement and on the
dates as of which the requirement would
take effect. Specific comments
furnishing information on the costs of
and savings realized from the sue of Call
Report software to prepare and transit
reports would be helpful to the agencies.
In addition, the Examination Council
recognizes that some very small banks
may find it difficult or unduly
burdensome to comply with an
electronic submission requirement.
Therefore, comment is also sought on
whether banks meeting certain criteria
(e.g., those with assets of less than some
specified amount) that do not have
personal computer should either be
exempt from the electronic submission
requirement or should be permitted to
request waivers from it.
In preparing their responses,
commenters should note two factors
that may affect the content of the Call
Report forms during the proposed
timetable. The Examination Council’s
Task Force on Reports is studying the
possibility of reducing the number of
different versions of the Call Report
from the present four and the Task
Force will be attempting to develop a
common core set of regulatory report
requirements for banks and thrifts.
The proposed timetable for the
electronic submission requirement is as
follows:
(1) Beginning with the March 31,1992,
Call Reports, banks with $100 million or
more in assets as of June 30,1991, would
be required to transmit electronically.
This group of banks currently
numbers approximately 3,400, of which
48 percent are at present submitting
electronically and another 27 percent
are filing computer-generated facsimile
report forms. Around 800 of the banks in
this group currently do not use Call
Report software to prepare their reports.
(2) Beginning with the March 31,1993,
Call Reports, banks with $50 million or
more in assets as of June 30,1991, would
be required to transmit electronically.
This would extend mandatory
electronic submission to another 2,900
banks of which 30 percent are at present
submitting electronically and another 30
percent are filing computer-generated
facsimile report forms. Less than 1,200 of
the banks in this group currently do not
use Call Report software to prepare
their reports.
(3) Beginning with the March 31,1994,
Call Reports, all banks would be
required to transmit electronically.
This would extend mandatory
electronic submission to the 6,500 banks
with less than $50 million in assets, of
which 14 percent are at present
submitting electronically and another 25
percent are filing computer-generated
facsimile report forms. Around 3,900
banks with less than $50 million in
assets are not currently using Call
Report software to prepare their reports.
Dated: October 1,1991.
Robert J. Lawrence,
Executive Secretary, Federal Financial
Institutions Examination Council.
[FR Doc. 91-23941 Filed 10-3-91; 8:45 am]
BILLING CODE 6210-01-M
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@FedFRASER