Community banks that are highly rated and well capitalized should be permitted to file abbreviated, short-form call reports with only key financial information for the first and third quarters of the calendar year. At mid-year and year-end, these banks would file the full form call report.
The agencies’ call report relief for community banks as required S. 2155 fails to provide adequate relief and falls well short of congressional intent.
Recent expanded use of the community bank call report as an information gathering tool for consumer protection regulation damages the effectiveness of the information provided and diminishes the use of the call report as an effective safety and soundness measurement metric.
Efforts by the Federal Financial Institution Examination Council (FFIEC) to streamline the call reporting process by community banks, while appreciated and supported, will not provide meaningful regulatory relief without the elimination of entire reporting schedules.
Prudential banking regulators should tailor quarterly reporting requirements to the risk of the individual institution to the safety and soundness of the domestic banking system.
Community banks with less than $1 billion in assets must complete 51 pages of call report forms each quarter. Banks above this threshold must complete 80 pages of forms each quarter. Ever-expanding schedules fail to support the utility of the call report as a vital safety and soundness metric for prudential regulators. ICBA’s call report survey found that the annual cost of preparing the call report has increased for 86 percent of survey respondents over ten years. The call report now represents a significant regulatory burden that diverts critical staff from completing other important tasks within the institution.
With the passage of S. 2155, Congress recognized the unreasonable burden the call report places on community banks and directed the banking agencies to provide relief. Unfortunately, the agencies’ implementation of S. 2155 call report relief failed to meet congressional intent and was a significant disappointment to community banks.
The most effective short-term solution to this problem is to permit highly rated and well-capitalized community banks to file a short-form call report for the first and third quarters of each calendar year with full call reports filed at mid-year and year end. The short-form call report would include the income statement, balance sheet, and statement of changes in shareholders’ equity, which provides the information needed by regulators to provide prudent oversight over such short reporting intervals.
In 2019, the FFIEC implemented a community bank call report, the 051 reporting form, that includes the elimination of certain reporting elements generally not applicable to community banks. Additionally, the Council indicated that it would continue to consider the removal of data items that the banking agencies do not need to maintain their safety and soundness supervisory activities. While such endeavors are appreciated and supported by ICBA, the regulators should also focus their attention on the frequency of items reported by community banks and whether the reporting of certain schedules on a quarterly basis adds meaningful value in the determination of the safety and soundness characteristics of a community bank. Regulators must provide real relief for community banks by adopting a true short-form call report.
ICBA continues to believe that regulatory reporting through the call reporting process should be tailored to the size and complexity of the financial institution. Smaller banking organizations like community banks should require very little quantitative reporting requirements simply because their community-driven business models keep them from taking excessive risk or acquiring leverage exposure that is difficult to unwind in a financial downturn. Regulators should continue their efforts to shrink call reporting items for smaller community banks to ensure that the call report does not burden these banks. The FFIEC should ensure that bank size is not the sole criterion of the call reporting framework. Community banks that increase in size but are not engaging in new business activities should be permitted to file abbreviated call reports.
Staff Contact: James Kendrick