Is it too much or not enough?
The Federal Financial Institutions Examination Council is eliminating several items from banks' call reports, including some details on assets closely associated with the financial crisis. Some of the changes will kick in on Sept. 30.
For some, the changes fall short of giving financial institutions relief from lengthy call reports. Others, however, are disappointed, claiming that some of the subtractions will shortchange investors who rely on in-depth banking data.
"We're very happy that the agencies are looking at this issue," said James Kendrick, vice president of accounting and capital policy at the Independent Community Bankers of America.
"This is a big issue for … almost all community banks," Kendrick added. "There's too much reporting going on already and we're hopeful that the FFIEC will come forward with a solution that has meaningful regulatory-burden changes."
Several details being removed have been declining in recent years.
Troubled-debt restructurings for all banks are down 12% from a year earlier and 42% from their peak in late 2011, to $117 billion at March 31, based on data from the Federal Deposit Insurance Corp. At banks with assets of less than $10 billion, restructured loans totaled $12 billion at the end of the first quarter.
Loss-share portfolios are also shrinking, decreasing by 80% from early 2011, to $18.8 billion, as a number of banks have negotiated exits from their FDIC agreements, according to BankRegData.com.
Any level of relief is welcome news to bankers since it shows regulators are at least taking a look at call reports.
"Clearly, we've been watching it given our acquisitive style and the fact we have an FDIC deal that we did five years ago," said Robert Jones, chairman and chief executive of Old National Bancorp in Evansville, Ind. The $12 billion-asset Old National, which bought the failed Integra Bank in 2011, recently worked out an end to its loss-share agreement.
"Where we're trying to get to — and I think where [the regulators] are trying to get to — is more consistency between the call report and the reported earnings as well," Jones said, though he noted that the call report moves are unlikely to meaningfully change his bank's overall workload.
Not everyone is enthralled with the decision.
While removing some call report items should reduce the burden for banks, doing so could also hurt investors, said Joshua Siegel, chief executive of Stonecastle Partners. "If it's simply getting rid of unused sections I think it's good."
"I agree we should try to remove burden — things that are simply informational — that doesn't add value to safety and soundness of a bank or the banking industry," Siegel added. "I'm not necessarily sure I agree we should be removing things, for example troubled-debt restructurings, trading assets and liabilities or past-due nonaccrual loans. Those are things that as an investor, [or] if I were a regulator, I'd want that data."
"Anything to reduce the burden on compliance is probably welcome," said Chip MacDonald, a partner at Jones Day, who noted that the FFIEC is looking to "streamline" the information it receives. "I think some of them are just good, common-sense updates."
MacDonald, however, agreed with Siegel that there are benefits to being able to follow a bank's troubled-debt restructurings. "I'd like to see more, rather than less, detail on that," he said.
Such activity "allows third-party users to look at the risk of the bank and what's going on in their loan portfolio."
The recent actions tied to call reports have industry observers optimistic that other reforms are possible.
"The FFIEC is looking at … introducing a short-form call report," Kendrick said, adding that he expects to hear more about the issue later this year. "We're looking forward to … what changes are coming in the latter half of the year."
Jackie Stewart contributed to this article