|For immediate release|
Interim Regulatory Reporting and Capital Guidance on FAS 133, "Accounting for Derivative Instruments and Hedging Activities" |
The Reports Task Force of the Federal Financial Institutions Examination Council (FFIEC), acting under delegated authority, is announcing its decisions regarding the appropriate regulatory reporting treatment for derivatives. The Office of Thrift Supervision and the Federal Reserve Board have reached similar reporting decisions for the savings associations and bank holding companies that they supervise.
Additionally, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (the agencies) are describing the appropriate interim regulatory capital treatment of derivatives for banks, bank holding companies, and savings associations (collectively, banking organizations).
The agencies are taking these actions in response to the June 1998 issuance of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). Although FAS 133 does not become effective until fiscal years beginning after June 15, 1999, banking organizations may adopt the standard early. This new accounting standard requires that all derivatives be recorded on the balance sheet as assets or liabilities at their fair value. In addition, it significantly changes the accounting for derivatives used for hedging purposes and for financial instruments with certain types of embedded derivatives. These new accounting requirements may affect the amount of a banking organization's recorded assets, liabilities, and equity, and corresponding regulatory capital levels.
The agencies are issuing the attached interim guidance to explain how derivatives should be reported in the bank Reports of Condition and Income (Call Report), the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C), and the Thrift Financial Report (TFR), and treated under the agencies' existing capital standards after a banking organization adopts FAS 133.
The agencies are evaluating the impact of FAS 133 on regulatory reporting and capital in conjunction with other supervisory issues. However, pending the completion of that analysis, banking organizations should follow the regulatory reporting guidance and capital treatment summarized above and more fully described in the attachment.
1 In general, the effective portion of a hedge is best described as the change in fair value on the derivative that offsets the change in expected cash flows on the hedged item.
1998 Banking and consumer regulatory policy