WASHINGTON -- Banks will not have to implement new proposed disclosure requirements for off-balance sheet derivatives until March 31, 1995, the Federal Financial Institutions Examination Council announced yesterday.
The council, an umbrella group of regulatory agencies for financial institutions, had asked banks to begin impiementing the proposed requirements for their call reports -- reports of condition and income -- that are due at the end of next month.
But the council said yesterday that it is delaying the requirements' effective date to better coordinate disclosure efforts with the Financial Accounting Standards Board and to reduce the regulatory burdens and costs for banks.
FASB, a private-sector standards-setting group, expects to adopt final derivatives disclosure standards before the end of the year so that market participants can comply with them in their 1994 financial statements.
The council's new disclosure requirements, which were proposed in March, would enable federal regulators to determine for the first time how profitable derivatives are for banks and how successful banks are in using derivatives to manage their risks.
Under the proposed requirements, banks would have to break down notional contract amounts by type of derivative, such as swaps or forwards, and by the risk underlying the contract. They would have to disclose whether the contract is traded over the counter or on an exchange.
Banks with total assets of $100 million or more would be required to separately disclose the gross replacement cost of contracts that are marked to market or accounted for under some other basis of accounting. This information would also have to be broken down according to underlying risk exposures.
The larger banks would have to report the net credit exposure under all contracts after taking into consideration any enforceable bilateral netting arrangements.
Under an additional requirement proposed by the council, banks would have to provide certain income-related information on derivatives, but not until March 31, 1995.
Banks, commenting on the proposed requirements, complained that they had already adopted a first set of derivatives disclosure requirements imposed by the council for the first quarter of 1994. lt would be unfair and contrary to council policy to force them to comply with additional requirements this year, they said.
The council, in its announcement yesterday, said that it has been "persuaded that, in this instance, the need for additional data to be gathered on an industry-wide basis as of Sept. 30, 1994, was outweighed by the cost and other burdens that would be imposed by requiring call report changes before March 31, 1995."
The council also said it agreed that it would be less burdensome for banks if all of the changes related to their derivatives disclosures were made at the same time.