Agencies Seek More Granular Data on Banks' Lending to Nonbank Financial Institutions
Proposed call report changes
A Federal Register notice made available for public inspection this morning describes proposed revisions to the information reported publicly by banks on their call reports.
Among the proposed changes1 are revisions to reporting of loans to nondepository financial institutions (NDFIs), a category the release describes as including “a wide range of counterparties” such as “insurance companies, mortgage companies, private equity funds, hedge funds, broker-dealers, real estate investment trusts (REITs), marketplace lenders, special purpose entities, and other financial vehicles.”2
Loans to NDFIs have been reported on Item 9.a of the call report since 2010. The agencies say that, since then, this type of lending has increased significantly:
In March 2010, loans to NDFIs reported in this item totaled approximately $56 billion and represented only 0.8 percent of gross loans reported by respondents. However, in June 2023, the reported amount of loans to NDFIs increased significantly to almost $786 billion and represented 6.4 percent of respondents’ total loan exposure
Given this increase in lending to NDFIs, the agencies believe that additional granularity in reporting would be helpful. The agencies also note that there is “diversity in practice” in how banks currently report NDFI exposures, leading to “observed inconsistency” across call reports.
Thus, the agencies are proposing changes to how NDFI lending would be defined and reported.3 Further, in addition to reporting overall lending to NDFIs (as clarified), banks with at least $10 billion in total assets would be required to report subitems setting out:
loans to mortgage credit intermediaries;
loans to business credit intermediaries;
loans to private equity funds;
loans to consumer credit intermediaries; and
other loans to NDFIs.
Banks would also be required to report more granular data on certain off-balance sheet items. Specifically, rather than reporting loans to financial institutions as a single subitem under unused commitments, banks would report a subitem for loans to depository financial institutions and, separately, a subitem for loans to NDFIs. The subitem for loans to NDFIs would, in turn, have further subitems with the five categories of loans to NDFIs as set out above. This requirement to report unused commitments to NDFIs by subitem would apply only to banks with at least $10 billion in total assets
Comments are due 60 days after publication. The revisions, if adopted as proposed, would first apply to call reports filed for the quarter ended June 30, 2024.
Not discussed in this post, but another set of proposed revisions in this release include changes intended to facilitate reporting by covered IDIs of their long-term debt. These changes would take effect if and when the agencies’ long-term debt proposal is finalized.
Separately, the release also includes a discussion of standards for electronic signatures that is too exciting to discuss here.
See the full current definition on page RC-C-17 of the call report instructions.
For instance, the agencies say:
[T]o ensure consistent reporting on loans to NDFIs, the instructions for item 9.a, “Loans to nondepository financial institutions” would be updated to include additional detail on the types of loans that should be reported in this line item. In addition, the instructions would be revised to include in the amounts reported in this item all loans to brokers and dealers in securities and loans to investment firms and mutual funds. […]
On the FFIEC 051, item 9.b, “Other loans,” and on the FFIEC 031 and FFIEC 041, item 9.b.(1), “Loans for purchasing or carrying securities (secured and unsecured),” the instructions would be revised to exclude from the amounts reported in this item all loans to brokers and dealers in securities and loans to investment firms and mutual funds. These loans would be reported under the new NDFI definition in item 9.a, “Loans to nondepository financial institutions.”