Board of Governors of the Federal Reserve System

Data Dictionary

Item Number 6618

Call confidentiality applies to FFIEC 031/041.

Data Description:

Includes the principal amount of assets sold with recourse to the extent such balances are not included on the balance sheet, including the sale with recourse of 1-4 family residential mortgages to U.S. government agencies or corporations. In addition, included in this item is the principal amount of the sale with recourse of 1-4 family residential mortgages to private third parties only to the extent they are not reported on the balance sheet.

A bank holding company that transfers small business loans and leases on personal property (small business obligations) with recourse in a transaction that qualifies as a sale under generally accepted accounting principles (GAAP) must maintain risk-based capital only against the amount of recourse retained, provided the institution established a recourse liability sufficient to meet its reasonably estimated liability under the recourse arrangement. Only loans and leases to businesses that meet the criteria for a small business concern established by the Small Business Administration under Section 3(c) of the Small Business Act (12 U.S.C. 631) are eligible for this favorable risk-based capital treatment. When reporting eligible transfers with recourse in this item, only the amount of retained recourse should be reported in the appropriate risk weight category. This amount will normally be accorded a 100 percent risk weight.

The Federal Reserve has amended its risk-based capital standards for assets transferred with recourse to ensure that the amount of risk-based capital that must be maintained does not exceed the maximum amount of recourse for which a bank holding company is contractually liable under the recourse agreement. This amendment applies to recourse transactions in which an institution contractually limits its recourse exposure to less than the full effective minimum risk-based capital requirement for the assets transferred -- generally, four percent for first lien residential mortgage loans and eight percent for most other assets. These types of asset transfers are referred to as low level recourse transactions.

For bank holding companies that have entered into low level recourse transactions that qualify for sale treatment in accordance with generally accepted accounting principles (GAAP), the transferred assets are removed from the balance sheet. In this situation, the maximum contractual dollar amount of the bank holding company's off-balance sheet recourse exposure as of the report date, less the balance of any associated recourse liability account established in accordance with GAAP and reported in "Other liabilities" on the balance sheet, should be multiplied by factors of 12.5, 25, and 62.5 for assets transferred in the 100 percent, 50 percent and 20 percent risk weight categories, respectively.

For example, a bank holding company has transferred $2 million in first lien residential mortgages subject to two percent recourse under a U.S. Government program and properly reports the transaction as a sale. The bank holding company has removed the $2 million in mortgages from its balance sheet and, in accordance with GAAP, has also established a recourse liability account with a balance of $10,000. The maximum amount for which the bank holding company is liable is $40,000. The mortgages are accorded a 50 percent risk weight and the bank holding company's recourse exposure is less than the $80,000 minimum risk-based capital requirement for the off-balance sheet assets transferred with recourse. The bank holding company would report $750,000 as the credit equivalent amount in item 6621, column C (BHC5) (its $30,000 maximum exposure, net of the recourse liability account balance, multiplied by 25). Because the $2 million in transferred mortgages is off the balance sheet, the difference between the $750,000 credit equivalent amount and the $2 million is not reported in Schedule HC-J.

Excludes any assets sold with recourse by the securities subsidiary.

The mnemonic prefixes for the risk weight columns represents the following:

   BHC0   = (Column A) 0%

   BHC2   = (Column B) 20%

   BHC5   = (Column C) 50%

   BHC9   = (Column D) 100%

For a detailed description of the broad categories of transactions that are assigned to each risk weight category (columns A through D) established by the Risk-Based Guidelines, see the Instructions for Preparation of Reporting Form FR Y-9C Schedule HC-I. If a bank holding company has not established the systems to determine the risk weight(s) applicable for a transaction, it has the option of risk-weighting that transaction at 100%.

NOTE:

Reported in Schedule HC-J, by bank holding companies with Section 20 Securities Affiliates for the FR Y-9C report. This schedule (Schedule HC-J) is completed in conjunction with Schedule HC-I.