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Slimmer call reports might not reduce regulatory burden

Small banks eager for regulatory relief will soon have slimmed-downcall reports, but industry advocates do not think the changes will make much ofa difference.

The Federal Financial Institutions Examination Council on Aug.15 unveiled the simpler call reports for banks with less than $1 billion of assets,and interested participants can submit comments until Oct. 15.

As it stands, the new call reports, known as FFIEC 051 forms,will remove 950 data items and cut the number of pages to 61 from 85. Despite theseemingly large figures, the change will have little benefit to banks, said TerryJorde, senior executive vice president for the Independent Community Bankers ofAmerica.

"They've streamlined it in the terms of number of pages,but it's really lip service," Jorde said. "It didn't create substantialrelief for community banks."

Data supports the claims. While the new call report eliminated950 data fields, no banks smaller than $1 billion reported non-zero, non-negativedata for 100 fields, and only two banks of the 5,300 eligible for the new formsreported data in more than 50 fields.

Jorde is not alone in her assessment. Some bankers have let regulatorsknow the changes have made little impact. In a letterto the FDIC, Lauren Brown, assistant vice president of the Prescott, Ark.-basedBank of Prescott, saidthe new call report "would save me approximately one second of work per quarter."

Several other letters sent a similar message. "Call reportrelief for community banks for me is a joke. The lines being deleted we were alreadynot completing," said Connie Willer, executive vice president for Silex, Mo.-basedSilex Banking Co., ina letterto the Federal Reserve.

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Other letters noted that the slimmer call report was "reallyof no consequence" or "inno way will alleviate any of our current reporting burden."

The FDIC responded to a request for a comment with a statementsuggesting openness to some changes: "The FDIC is working with other regulatorsto simplify the reporting process for community banks and will consider the commentsbefore moving forward."

Amanda Garnett, a manager for CliftonLarsonAllen LLP, wrote anarticleon Sept. 6 that similarly concluded that many of the removed data items were alreadyblank for small banks.  Garnett wrote thatbankers struggle the most with coding loans for the Schedule RC-C, which had somedata items reviewed but still requires loan coding, or easing regulatory capitalcalculations on the Schedule RC-R, which is unchanged in the new report.

Included in the data that will no longer be reported is constructioncommercial and industrial loans with a U.S. address. Among the 5,300 banks withless than $1 billion in assets, the institutions reported $65.03 billion of suchloans. However, the data is not actually disappearing since the banks still needto report construction C&I loans; the only difference is there is no longera need to break out domestic and foreign C&I loans, demonstrating how regulatorscould eliminate 950 data items without significantly reducing bankers' time spenton the reports.

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For data that will be completely removed, collectively evaluatedimpaired loans and leases held for investment had the most data going dark. The5,300 banks collectively reported $7.54 billion of those loans.

Smaller banks have a tougher time absorbing the costs of regulatoryburden because they tend to have smaller revenue bases to absorb the cost. Mediannoninterest expense has trended down as regulatory relief for community banks hasbecome a focus, but small banks remain at a disadvantage. In the first half of theyear, the median ratio of noninterest expenses to average assets was 2.84% for bankswith less than $1 billion in assets, compared to 2.50% for banks with between $1billion and $10 billion of assets.

Although the comment period deadline is rapidly approaching,ICBA's Jorde said she is hopeful regulators will respond to banker concerns thatthe proposed reforms do not do enough. The ICBA has been pushing for a much simplercall report to be filed semiannually, retaining the fuller call report for year-endand mid-year reporting.

"We appreciate they're looking at this but they need todo more. This is not enough, it's not even close to enough," Jorde said. "Thisis something that's not going away."

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Click here to view a template that lists the SNL KeyFields for each data item removed from the 041 call report, as well as each data item changing to semiannual and annual reporting frequencies, according to Appendix A of the agencies' 051 call report proposal.