[Federal Register Volume 85, Number 201 (Friday, October 16, 2020)]
[Rules and Regulations]
[Pages 66108-66143]
[FR Doc No: 2020-20655]

Vol. 85

Friday,

No. 201

October 16, 2020

Part V

 Securities and Exchange Commission

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17 CFR Parts 210, 229, and 249

Update of Statistical Disclosures for Bank and Savings and Loan
Registrants; Final Rule

Federal Register / Vol. 85 , No. 201 / Friday, October 16, 2020 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 229, and 249

[Release No. 33-10835; 34-89835; File No. S7-02-17]
RIN 3235-AL79

Update of Statistical Disclosures for Bank and Savings and Loan
Registrants

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting rules to update our statistical disclosure
requirements for banking registrants. These registrants currently
provide many disclosures in response to the items set forth in Industry
Guide 3 (``Guide 3''), Statistical Disclosure by Bank Holding
Companies, which are not Commission rules. The amendments update and
expand the disclosures that registrants are required to provide, codify
certain Guide 3 disclosure items and eliminate other Guide 3 disclosure
items that overlap with Commission rules, U.S. Generally Accepted
Accounting Principles (``U.S. GAAP''), or International Financial
Reporting Standards (``IFRS''). In addition, we are relocating the
codified disclosure requirements to a new subpart of Regulation S-K and
rescinding Guide 3.

DATES:
    Effective date: These final rules are effective November 16, 2020,
except for the amendments to 17 CFR 229.801(c) and 229.802(c), which
are effective on January 1, 2023.
    Compliance date: See Section V for further information on
transitioning to the final rules.

FOR FURTHER INFORMATION CONTACT: Stephanie Sullivan, Associate Chief
Accountant, Division of Corporation Finance, at<PHONE_NUMBER>, U.S.
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.

SUPPLEMENTARY INFORMATION:

    The Commission is amending 17 CFR 229.404 (``Item 404 of Regulation
S-K'') under the Securities Act of 1933 (``Securities Act'') \1\ and
the Securities Exchange Act of 1934 (``Exchange Act''); \2\ 17 CFR
210.9-01 (``Rule 9-01 of Regulation S-X'') and 17 CFR 210.9-03 (``Rule
9-03 of Regulation S-X'') under the Securities Act and the Exchange
Act; and 17 CFR 249.220f (``Form 20-F'') under the Exchange Act. In
addition, the Commission is adding a new subpart, 17 CFR 229.1400
(``Item 1400 of Regulation S-K''), which will include 17 CFR 229.1401
through 17 CFR 229.1406, and rescinding 17CFR 229.801(c) and 229.802(c)
under the Securities Act and Exchange Act.
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
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Table of Contents

I. Introduction
II. New Subpart 1400 of Regulation S-K
    A. Codification
    B. Location of Codification Requirements and XBRL
    C. Scope
    D. Applicability to Domestic Registrants and Foreign Registrants
    E. Reporting Periods
    F. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rate and Interest Differential (Average Balance, Interest
and Yield/Rate Analysis and Rate/Volume Analysis)
    G. Investment Portfolio
    H. Loan Portfolio
    I. Allowance for Credit Losses
    J. Deposits
III. Certain Existing Guide 3 Disclosures That Would Not Be Codified
in Proposed Subpart 1400 of Regulation S-K
    A. Return on Equity and Assets
    B. Short-Term Borrowings
IV. Changes to Article 9 of Regulation S-X
V. Compliance Date
VI. Other Matters
VII. Economic Analysis
    A. Introduction
    B. Baseline
    C. Economic Effects
    D. Effects on Efficiency, Competition, and Capital Formation
VIII. Paperwork Reduction Act
    A. Summary of the Collections of Information
    B. Burden and Cost Estimates Related to the Proposed Rules
IX. Regulatory Flexibility Act Certification
X. Statutory Authority
Text of the Amendments

I. Introduction

    On September 17, 2019, we proposed rules \3\ to update the
disclosure of information that banks, bank holding companies
(``BHCs''), savings and loan associations, and savings and loan holding
companies (together, ``bank and savings and loan registrants'') provide
in response to the items set forth in Guide 3.\4\ By its terms, Guide 3
applies to BHCs. However, the disclosures called for by Guide 3 are
also provided by other registrants with material lending and deposit
activities, including savings and loan holding companies.\5\ Guide 3
calls for disclosure in seven areas: (1) Distribution of assets,
liabilities and stockholders' equity; interest rates and interest
differential, (2) investment portfolios, (3) loan portfolios, (4)
summary of loan loss experience, (5) deposits, (6) return on equity and
assets, and (7) short-term borrowings. We proposed to include within
the rules' scope the registrants that under existing practice provide
the disclosures called for by Guide 3: Banks, savings and loan
associations, and savings and loan holding companies. We also proposed
to update the disclosures that bank and savings and loan registrants
must provide to investors, including the elimination of disclosure
items that overlap with Commission rules, U.S. GAAP, or IFRS.\6\
Finally, we proposed to codify the updated disclosure requirements in a
new Subpart 1400 of Regulation S-K and to rescind Guide 3.
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    \3\ Update of Statistical Disclosures for Bank and Savings and
Loan Registrants, Release No. 33-10688 (Sept. 17, 2019) [84 FR 52936
(Oct. 3, 2019)] (``Proposing Release'').
    \4\ Guides for Statistical Disclosure by Bank Holding Companies,
Release No. 33-5735 (Aug. 31, 1976) [41 FR 39007 (Sept. 14, 1976)]
(``Guide 3 Release''). When it published the Guide 3 Release, the
Commission stated that ``[t]he Guides are not Commission rules nor
do they bear the Commission's official approval; they represent
policies and practices followed by the Commission's Division of
Corporation Finance in administering the disclosure requirements of
the federal securities laws.'' Guide 3 was originally published as
Securities Act Guide 61 and Exchange Act Guide 3. In 1982,
Securities Act Guide 61 and Exchange Act Guide 3 were redesignated
as Securities Act Industry Guide 3 and Exchange Act Industry Guide
3. See Rescission of Guides and Redesignation of Industry Guides,
Release No. 33-6384 (Mar. 3, 1982) [47 FR 11476 (Mar. 16, 1982)].
    \5\ Many registrants refer to Staff Accounting Bulletin Topic
11:K--Application of Article 9 and Guide 3 (``SAB 11:K''), which
states that ``[t]he SEC staff believes [Guide 3 information] would
be material to a description of business of [non-BHC] registrants
with material lending and deposit activities . . .'' The Industry
Guides and SAB 11:K are not rules, regulations or statements of the
Commission. In light of the adoption of these amendments, the staff
intends to rescind SAB 11:K.
    \6\ References to IFRS throughout are to IFRS as issued by the
International Accounting Standards Board (``IASB'').
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    We received a number of comment letters in response to the
Proposing Release.\7\ Many of the commenters generally supported the
Commission's efforts to revise existing Guide 3

disclosure items.\8\ Several of the commenters who supported the
proposed rules also suggested certain revisions to the proposed
disclosure requirements.\9\ We have reviewed and considered all of the
comments that we received on the proposed rules. After taking into
consideration the public comments, we are adopting rules substantially
as proposed.
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    \7\ See, e.g., letters from Aimee Heilig (Nov. 9, 2019) (``A.
Heilig''); American Bankers Association (Dec. 23, 2019) (``ABA'');
Bank of America Corporation (Dec. 2, 2019) (``BAC''); Bank Policy
Institute and Securities Industry and Financial Markets Association
(Dec. 2, 2019) (``BPI/SIFMA''); Center for Audit Quality (Nov. 25,
2019) (``CAQ''); CFA Institute (Jan. 9, 2020) (``CFA''); Crowe LLP
(Nov. 25, 2019) (``Crowe''); Deloitte & Touche LLP (Nov. 25, 2019)
(``Deloitte''); Ernst & Young LLP (Nov. 27, 2019) (``EY''); KPMG LLP
(Dec. 2, 2019) (``KPMG''); Maria Deering (Nov. 10, 2019) (``M.
Deering''); PricewaterhouseCoopers LLP (Nov. 21, 2019) (``PwC'');
Qing Burke, Assistant Professor of Accounting, et al., Miami
University (Oct. 3, 2019) (``Prof. Burke''); XBRL US, Inc. (Dec. 2,
2019) (``XBRL''). The comments on the Proposing Release are
available at: https://www.sec.gov/comments/s7/-02/-17/s70217.htm.
    \8\ See, e.g., letters from A. Heilig; ABA; BAC; BPI/SIFMA; CAQ;
Crowe; Deloitte; EY; KPMG; and PwC.
    \9\ See, e.g., letters from ABA; BAC; BPI/SIFMA; CAQ; Crowe;
Deloitte; EY; KPMG; and PwC.
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II. New Subpart 1400 of Regulation S-K

A. Codification

    We proposed to update and codify certain Guide 3 disclosure items
in a new Subpart 1400 of Regulation S-K, consistent with the approach
the Commission has taken when it modernized other Industry Guides. A
number of commenters agreed with this proposal,\10\ and no commenters
opposed codification. Accordingly, the final rules codify the updated
disclosure requirements in a new Subpart 1400 of Regulation S-K.
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    \10\ (One hour x 0.75) x $400 = $300.
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B. Location of Disclosure Requirements and XBRL

    Consistent with existing Guide 3, we did not propose to require the
disclosures required by new Subpart 1400 of Regulation S-K to be
presented in the notes to the financial statements. Therefore, if
disclosures are provided outside the financial statements, the
disclosures would not be required to be audited, nor would they be
subject to the Commission's requirement to file financial statements in
a machine-readable format using XBRL. The Proposing Release requested
comment as to whether we should require the proposed disclosures to be
included in the notes to the financial statements, as well as whether
we should require the proposed disclosures to be provided in a
structured format.\11\
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    \11\ Registrants subject to the financial disclosure
requirements of Regulation S-K are either currently required or will
be required to file their financial statements and filing cover page
disclosures in the Inline XBRL format. See [17 CFR 229.601(b)(101)];
[17 CFR 229.601(b)(104)]. See also Inline XBRL Filing of Tagged
Data, Securities Act Release No. 10514 (June 28, 2018) [83 FR 40846
(Aug. 16, 2018), at 40851] (``Inline XBRL Adopting Release'').
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    A number of commenters observed that the existing Guide 3
disclosures are typically included within Management's Discussion &
Analysis (``MD&A''), the Business section, or the notes to the
financial statements.\12\ Several of these commenters agreed that the
proposed disclosure items should not be required to be presented in the
notes to the financial statements, thus retaining the existing
flexibility for registrants to determine where the disclosures are
provided.\13\ One commenter stated that allowing registrants to decide
where best to present each disclosure will result in ``superior
disclosures,'' with related disclosures being grouped together.\14\ A
few commenters encouraged the Commission to consider input from
investors and others as to whether the disclosures should be included
in the audited financial statements before mandating such an
approach.\15\ Several commenters observed that if we were to require
the disclosures in the notes to the financial statements, the note
disclosures would be subject to audit procedures, and registrants would
need to file them in an XBRL format.\16\ Two of these commenters
specifically noted that mandating footnote disclosure of specified data
would likely increase audit costs.\17\ However, these commenters also
noted that footnote disclosures are subject to XBRL tagging and are
more likely to be uniform in their content and location compared to
information outside the financial statements, which would reduce search
costs for users.
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    \12\ See e.g., letters from BAC; BPI/SIFMA; CAQ; Crowe; and EY.
    \13\ See letters from ABA; BAC; BPI/SIFMA; and EY.
    \14\ See letter from BPI/SIFMA.
    \15\ See letters from CAQ; EY; and PWC.
    \16\ See letters from CAQ; Deloitte; and EY.
    \17\ See letters from CAQ and EY.
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    Several commenters stated that the proposed disclosures should not
be subject to the Commission's requirements to file financial
statements in a machine-readable format using XBRL.\18\ Two of these
commenters noted that requiring a structured format could be difficult
for registrants or confusing for investors because registrants may
provide the disclosures in MD&A, which would result in some MD&A
disclosures being provided in an XBRL format while other MD&A
disclosures would not be.\19\ For example, one of these commenters
stated that the cost of selectively providing these disclosures in XBRL
format in MD&A could be significant to registrants.\20\
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    \18\ See letters from ABA; BAC; and BPI/SIFMA.
    \19\ See letters from BAC and BPI/SIFMA.
    \20\ See letter from BPI/SIFMA.
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    A few commenters supported the use of a machine-readable format for
the disclosure items that would be codified in Subpart 1400 of
Regulation S-K.\21\ These commenters recommended requiring registrants
to tag all Subpart 1400 data in XBRL, regardless of location, to ensure
that a machine-readable format of these disclosures is consistently
available across all registrants providing them. Furthermore, these
commenters recommended that Inline XBRL be used for Subpart 1400 data
because it is already supported in the marketplace for other required
disclosures, specifically the financial statements and data on the
cover page of certain filings.\22\ These commenters stated that data
provided in a machine-readable format improves the productivity of the
data collection process, which reduces the cost of analysis and
encourages more robust and in-depth analysis. These commenters also
stated that the costs for XBRL preparation have declined and that they
do not believe that the additional tags required for Subpart 1400 data
would pose a significant burden.\23\
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    \21\ See letters from CFA and XBRL.
    \22\ See letters from CFA and XBRL.
    \23\ See id. (citing the pricing study for small reporting
companies conducted by the AICPA and XBRL, available at: https://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/XBRL/DownloadableDocuments/XBRL%20Costs%20for%20Small%20Companies.pdf).
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    The final rules do not require bank and savings and loan
registrants to include Item 1400 of Regulation S-K disclosures in a
specified location. We agree with commenters that retaining flexibility
as to where to provide the disclosures is important and will allow
registrants to use their judgment to determine where the disclosures
can best be included to maximize the readability and usefulness of the
disclosure. We are cognizant of the additional costs that would be
incurred if the disclosures were required to be included in the notes
to the financial statements, and we believe investors are accustomed to
locating this information in different locations within SEC filings
given the current flexibility as to where to include the disclosures.
    As discussed above, we received mixed comments regarding the
benefits, costs and practical challenges of requiring the proposed
disclosures in a machine readable format. Therefore, like the proposed
rules, the final rules do not require a registrant to present new
Subpart 1400 of Regulation S-K in a machine-readable format unless the
registrant elects to include the disclosures within the financial
statements.

C. Scope

i. Proposal
    We proposed that Subpart 1400 of Regulation S-K would apply to bank
and savings and loan registrants. In the Proposing Release, we
expressed the view that identifying and codifying the types of
registrants within the scope of the proposed rules would clarify the
existing practice of providing Guide 3 disclosures when registrants
have material lending and deposit-taking activities.\24\ We also
indicated that the proposed scope would capture the majority of
registrants that predominantly engage in the activities covered by
existing Guide 3 and for which these activities are material.\25\
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    \24\ See supra note 5.
    \25\ See note 44 of the Proposing Release observing that there
were only four registrants with loans and bank deposits on their
balance sheets that would not have been within the scope of the
proposed rules. However, as discussed in note 169, we estimate that
the final rules will capture all of the registrants that we have
identified in Section VII.B.ii as currently being covered by
existing Guide 3. See infra note 169 for a description of
methodology used to determine this set of registrants.
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ii. Comments on Proposal
    One commenter stated that the scope of the proposed rules would
largely capture the majority of registrants who currently provide the
disclosures called for by Guide 3.\26\ Another commenter recommended
expanding the scope of the proposed rules to cover any institution that
performs the services under the scope of the proposed rules, even if it
is not their primary role or sole function, provided it does not place
undue burden on the institution.\27\ One commenter encouraged the
Commission to consider input from investors and others regarding the
scope of registrant applicability.\28\
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    \26\ See letter from BAC.
    \27\ See letter from M. Deering.
    \28\ See letter from PwC.
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iii. Final Rules
    After considering the comments, we are adopting rules related to
the scope as proposed. Subpart 1400 of Regulation S-K applies to bank
and savings and loan registrants. We received limited feedback
suggesting that the scope should be expanded to include other
registrants in the financial services industry, and we did not receive
any feedback from investors or others explaining how the proposed
disclosures would be valuable for assessing registrants outside of the
proposed scope. We continue to believe there is not a large population
of non-bank and savings and loan registrants that are providing Guide 3
disclosures today that will be outside the scope of Subpart 1400 of
Regulation S-K. This is because those registrants likely engage in only
one or a few of the activities addressed by Guide 3 (e.g., lending and
deposit-taking). We also continue to believe that registrants should be
able to ascertain easily whether they are a bank or savings and loan
registrant for purposes of these rules, reducing any potential
confusion regarding the applicability of the disclosure requirements to
non-bank and savings and loan registrants.

D. Applicability to Domestic Registrants and Foreign Registrants

i. Proposal
    Consistent with existing Guide 3, we proposed that the rules would
apply to both domestic registrants, including Regulation A issuers, and
foreign registrants, notwithstanding the differences between U.S. GAAP
and IFRS in some of the items called for by Guide 3, such as the
measurement of credit losses and disclosures of financial instruments,
among other areas.\29\ The proposed rules would explicitly exempt
foreign private issuers applying IFRS (``IFRS registrants'') from
certain of the disclosure requirements that are not applicable under
IFRS in order to address certain challenges foreign private issuers may
face in providing the proposed disclosures.\30\
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    \29\ See note 56 in the Proposing Release.
    \30\ Foreign private issuers are a subset of foreign
registrants, and include any foreign issuer other than a foreign
government, except for an issuer that has more than 50% of its
outstanding voting securities held of record by U.S. residents and
any of the following: A majority of its officers or directors are
citizens or residents of the United States; more than 50% of its
assets are located in the United States; or its business is
principally administered in the United States. See Rule 405 of
Regulation C [17 CFR 230.405] and Exchange Act Rule 3b-4(c) [17 CFR
240.3b-4(c)].
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    We also proposed not to codify the undue burden or expense
accommodation for foreign registrants in Guide 3's General Instruction
6, which states that the disclosure items also apply to foreign
registrants to the extent the information is available or can be
compiled without unwarranted or undue burden and expense. In doing so,
we noted that all registrants, not just foreign registrants, can avail
themselves of relief from providing information that is ``unknown and
not reasonably available to the registrant'' under 17 CFR 230.409
(``Securities Act Rule 409'') and 17 CFR 240.12b-21 (``Exchange Act
Rule 12b-21'').\31\
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    \31\ Securities Act Rule 409 and Exchange Act Rule 12b-21 state
that information required need be given only insofar as it is known
or reasonably available to the registrant. If any required
information is unknown and not reasonably available to the
registrant, either because the obtaining thereof would involve
unreasonable effort or expense, or because it rests peculiarly
within the knowledge of another person not affiliated with the
registrant, the information may be omitted. The rule provides two
additional conditions. The first is that the registrant must give
such information on the subject that it possesses or can acquire
without unreasonable effort or expense, together with the sources of
that information. The second is that the registrant must include a
statement either showing that unreasonable effort or expense would
be involved or indicating the absence of any affiliation with the
person within whose knowledge the information rests and stating the
result of a request made to such person for the information.
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ii. Comments on Proposal
    One commenter stated that the proposed rules should apply to both
domestic and foreign registrants, but asked the Commission to consider
carve-outs and add other exceptions that align with the registrant's
applicable accounting standards in their domicile countries.\32\ This
commenter did not provide any examples of exceptions in accounting
standards that were not addressed in the proposed rules.
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    \32\ See letter from BAC.
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    Another commenter stated that the proposed rules would modify
certain of the requirements for foreign registrants filing Form 20-F
using IFRS and supported those changes.\33\ However, this commenter
also noted that many foreign registrants currently report Guide 3
information on a modified basis as a result of prior consultations with
Commission staff and asked the Commission to confirm in the adopting
release that the proposed amendments are not intended to change
existing interpretations of hardship or prior staff guidance to foreign
registrants with respect to the disclosure requirements. This commenter
also stated the Commission should codify the undue burden or expense
accommodation in General Instruction 6.\34\ Other commenters noted that
they had seen limited use of the accommodation in Rules 409 and 12b-21
and therefore surmised that it may be rare for a registrant to be able
to demonstrate that the required information is not reasonably
available or that obtaining it may require unreasonable effort or
expense.\35\ These commenters asked the Commission to provide guidance
on factors the registrant should consider when evaluating whether the
requested information is unknown or that obtaining it would require
unreasonable effort or expense. Several commenters stated it is unclear
whether registrants

would be required to discuss an accommodation or alternative
presentation with the staff if they relied on the guidance in Rules 409
and 12b-21 and suggested clarifying any expectations.\36\ One commenter
recommended using language based on Item 3.A.1 of Form 20-F,\37\ which
they stated provides a similar hardship accommodation for foreign
private issuers.\38\
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    \33\ See letter from BPI/SIFMA.
    \34\ See id.
    \35\ See, e.g., letters from CAQ; Crowe; Deloitte; and KPMG.
    \36\ See letters from CAQ; Crowe; and Deloitte.
    \37\ Item 3.A.1 of Form 20-F states, in part, that selected
financial data for either or both of the earliest two years of the
five-year period may be omitted if the company represents that such
information cannot be provided, or cannot be provided on a restated
basis, without unreasonable effort or expense. The Commission
recently proposed to delete this Item and the related instructions.
See Management's Discussion & Analysis, Selected Financial Data, and
Supplementary Financial Information, Release No. 33-10750 (Jan. 30,
2020) (the ``2020 MD&A Proposing Release'').
    \38\ See letter from CAQ.
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iii. Final Rules
    After considering the comments, we are adopting the rules as
proposed. The rules apply to domestic registrants, including Regulation
A issuers,\39\ and to foreign registrants.\40\ In considering whether
to codify the undue burden or expense accommodation for foreign
registrants in General Instruction 6, we note that no commenters
provided examples of disclosures that would involve an undue hardship
to provide. We also note that the staff has not received any requests
for accommodation during the past ten years and that prior
accommodation requests tended to request relief with respect to
reporting periods or categories or classes of financial instruments
that were different from those called for by Guide 3. We believe the
final rules address these matters by linking the disclosure
requirements to categories or classes of financial instruments
disclosed in the registrant's U.S. GAAP or IFRS financial statements,
aligning the reporting period requirements with those required to be
presented in the financial statements, and explicitly exempting IFRS
registrants from certain of the disclosure requirements. We also
acknowledge commenter feedback that requested that we consider carve-
outs and add other exceptions that align with the foreign registrants'
applicable accounting standards in their domicile countries. However, a
foreign registrant that presents financial statements prepared in
accordance with its home-country accounting standards is required to
reconcile the financial statements to U.S. GAAP and to provide all
other information required by U.S. GAAP and Regulation S-X, unless the
requirements specifically do not apply to the foreign registrant.\41\
Therefore, the information required to be disclosed under Item 1400 of
Regulation S-K would always be in accordance with U.S. GAAP or IFRS,
which eliminates the need for an exception for the accounting standards
in the registrant's domicile country for the purpose of these
disclosures. For the reasons discussed above, we do not believe
codifying the accommodation in General Instruction 6 is necessary.
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    \39\ Item 7(c) of Form 1-A [17 CFR 239.90] states that the
disclosure guidelines in all Securities Act Industry Guides must be
followed, and to the extent that the industry guides are codified
into Regulation S-K, the Regulation S-K industry disclosure items
must be followed. Therefore, issuers in Tier 1 and Tier 2 offerings
are required to comply with the final rules in Regulation A offering
statements. Additionally, issuers in Tier 2 offerings are required
to file annual reports on Form 1-K [17 CFR 239.91]. Item 1 of Form
1-K requires the information required by Item 7 of Form 1-A to be
included in annual reports.
    \40\ We have added an Instruction to Item 4 of Form 20-F to
state that if a registrant is a bank, BHC, savings and loan
association, or savings and loan holding company, it must provide
the information specified in Subpart 1400 of Regulation S-K.
    \41\ See Item 18 of Form 20-F.
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    Securities Act Rule 409 and Exchange Act Rule 12b-21, however,
remain applicable to all registrants, including foreign registrants.
Although several commenters requested guidance related to the
application of Securities Act Rule 409 and Exchange Act Rule 12b-21 by
foreign registrants, we do not believe it is necessary to do so because
registrants have applied these rules for many years in a variety of
other contexts without the need for additional guidance. Additionally,
we believe the application of Rule 409 or Rule 12b-21 is dependent on
the registrant's specific facts and circumstances. To the extent that a
registrant believes Rule 409 or Rule 12b-21 applies to its facts and
circumstances for any of the disclosures required by Item 1400 of
Regulation S-K, there is no requirement to discuss such application or
analysis in advance with the staff.

E. Reporting Periods

i. Proposal
    We proposed defining the term ``reported period'' for purposes of
Subpart 1400 of Regulation S-K to mean each annual period for which
Commission rules require a registrant to provide financial statements.
Commission rules generally require two years of balance sheets and
three years of income statements,\42\ except that smaller reporting
companies (``SRCs'') \43\ may present only two years of income
statements,\44\ and emerging growth companies (``EGCs'') \45\ may
present only two years of financial statements in initial public
offerings of common equity securities.\46\ Lastly, Commission rules for
Regulation A issuers generally require two years of annual financial
statements for Tier 1 and Tier 2 offerings.\47\
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    \42\ 17 CFR 210.3 (``Article 3 of Regulation S-X'').
    \43\ An SRC is an issuer (other than an investment company, an
asset-backed issuer, or a majority-owned subsidiary of a parent that
is not an SRC) that had a public float of less than $250 million as
of the last business day of its most recently completed second
fiscal quarter; or had annual revenues of less than $100 million
during its most recently completed fiscal year, and no public float
or a public float of less than $700 million as of the last business
day of its most recently completed second fiscal quarter. See Rule
405 of Regulation C, Rule 12b-2 of the Exchange Act [17 CFR 240.12b-
2], and Item 10(f) of Regulation S-K [17 CFR 229.10(f)].
    \44\ 17 CFR 210.8 (``Article 8 of Regulation S-X'').
    \45\ An EGC is an issuer with less than $1.07 billion in total
annual gross revenues during its most recently completed fiscal
year. If an issuer qualifies as an EGC as of the first day of its
most recently completed fiscal year it maintains that status until
the earliest of: (1) The last day of the fiscal year of the issuer
during which it has total annual gross revenues of $1.07 billion or
more; (2) the last day of its fiscal year following the fifth
anniversary of the first sale of its common equity securities
pursuant to an effective registration statement; (3) the date on
which the issuer has, during the previous 3-year period, issued more
than $1 billion in non-convertible debt; or (4) the date on which
the issuer is deemed to be a ``large accelerated filer'' (as defined
in Exchange Act Rule 12b-2). See Rule 405 of Regulation C under the
Securities Act and Rule 12b-2 of the Exchange Act.
    \46\ Securities Act Sec.  7(a)(2)(A), 15 U.S.C. 77g(a)(2)(A).
    \47\ Part F/S(b) of Form 1-A requires two years of annual
financial statements for Tier 1 offerings, which need not be on an
audited basis, and Part F/S(c)(ii) of Form 1-A requires two years of
audited annual financial statements for Tier 2 offerings. Issuers in
Tier 2 offerings are required to file an annual report on Form 1-K
containing two years of audited financial statements.
---------------------------------------------------------------------------

    We also proposed requiring interim period disclosures if there is a
material change in the information or the trend evidenced thereby.
Lastly, we proposed to require new bank and savings and loan
registrants to disclose certain credit ratios for each of their last
five fiscal years in initial registration statements and Regulation A
offering statements.\48\ Consistent with Securities Act Rule 409 and
Exchange Act Rule 12b-21, the information would be required only
insofar as it is known or reasonably available to the registrant.
---------------------------------------------------------------------------

    \48\ See discussion of credit ratios disclosure in Section
II.I.iv of the Proposing Release.
---------------------------------------------------------------------------

ii. Comments on Proposal
    One commenter agreed with each of the proposed changes to reporting
periods.\49\ A number of commenters agreed with the proposal to reduce
the number of reporting periods and align them with the annual periods
for which

Commission rules require financial statements to be presented.\50\ One
of these commenters supported the proposal to modify the current
interim period instruction to clarify that the threshold to include an
additional interim period is based on whether there is a material
change in the information or the trend evidenced thereby, stating that
this is consistent with other Commission guidance and FASB
guidance.\51\ However, another commenter stated that the Commission
should align the threshold for interim reporting to the threshold in
Rule 10-01(a)(5) of Regulation S-X,\52\ which only requires disclosure
of information to the extent sufficient to keep the interim disclosures
from being misleading.\53\
---------------------------------------------------------------------------

    \49\ See letter from M. Deering.
    \50\ See letters from ABA; BAC; BPI/SIFMA; and EY.
    \51\ See letter from BPI/SIFMA.
    \52\ See 17 CFR 210.10-01(a)(5).
    \53\ See letter from BAC.
---------------------------------------------------------------------------

    A few commenters were supportive of the proposed credit ratio
disclosures for each of the last five fiscal years in initial
registration statements and initial Regulation A offering
statements.\54\ One of these commenters cited the lack of publicly
available prior period information for these reporting periods as
reason for its support.\55\ Another commenter stated it was supportive
only if the information is known or reasonably available to the
registrant.\56\ This commenter indicated that the use of Rules 409 and
12b-21 is very limited, and observed that registrants generally have
omitted information that could not be produced without unreasonable
effort or expense only when the exception is codified in the specific
disclosure requirement (e.g., Item 3 of Form 20-F \57\ as it relates to
Selected Financial Data for the earliest two years).
---------------------------------------------------------------------------

    \54\ See letters from BAC and EY.
    \55\ See letter from BAC.
    \56\ See letter from EY.
    \57\ See supra note 37.
---------------------------------------------------------------------------

    Several other commenters encouraged the Commission to consider
requiring the credit ratio disclosure for only the number of years
presented in the financial statements in the initial registration
statement.\58\ One of these commenters questioned whether the five-year
requirement was consistent with disclosure effectiveness and investor
protection.\59\ All of these commenters requested that the Commission,
at a minimum, align the reporting periods to the financial statement
periods for EGCs in order for the requirement to be consistent with the
underlying principles and objectives of the Jumpstart Our Business
Startups Act \60\ (``JOBS Act'').\61\ Two of these commenters also
recommended that the Commission consider this revised approach for
Regulation A issuers that would otherwise qualify as EGCs.\62\
---------------------------------------------------------------------------

    \58\ See letters from CAQ; Crowe; and Deloitte.
    \59\ See letter from Crowe.
    \60\ Public Law 112-106, Sec. 102, 126 Stat. 309 (2012).
    \61\ See letters from CAQ; Crowe; and Deloitte.
    \62\ See letters from CAQ and Crowe.
---------------------------------------------------------------------------

iii. Final Rules
    After considering the comments, we are adopting the rules as
proposed for the annual and interim reporting period definitions. We
continue to believe it is appropriate to align the required reporting
periods with the relevant annual periods for which Commission rules
require a registrant to provide financial statements because the
Subpart 1400 of Regulation S-K disclosures are integrally related to
the financial statements. There have been changes in technology since
Guide 3 was originally issued, particularly the availability of past
financial statements and other disclosure made in filings on the
Commission's Electronic Data Gathering, Analysis, and Retrieval system
(``EDGAR''). As such, the historical information provided pursuant to
Guide 3 that is not required by Subpart 1400 of Regulation S-K will
generally be accessible through the registrant's prior filings on
EDGAR. Furthermore, the elimination of repetitive disclosures,
reduction in costs and burdens to registrants, and availability of
technology reflected in the final rules is in line with the 2015 Fixing
America's Surface Transportation Act (``FAST Act'') mandate \63\ and
the related Commission rulemaking.\64\ Finally, we do not believe it is
necessary to align the threshold for interim reporting with the
threshold in Rule 10-01(a)(5) of Regulation S-X. Investors and bank and
savings and loan registrants are familiar with the interim period
threshold we are codifying, and we believe that threshold strikes the
appropriate balance for when additional information would be material
to an investment decision.
---------------------------------------------------------------------------

    \63\ Public Law 114-94, Sec. 72003, 129 Stat. 1312 (2015).
    \64\ FAST Act Modernization and Simplification of Regulation S-
K. Release No. 33-10618 (Mar. 20, 2019) [84 FR 12674 (Apr. 2,
2019)].
---------------------------------------------------------------------------

    After considering commenter feedback, we are not adopting the
proposed rules that would have required certain credit ratio
disclosures for each of the registrant's last five fiscal years in
initial registration statements and in initial Regulation A offering
statements of bank and savings and loan registrants. Instead, the final
rules limit the required credit ratio disclosures to the periods for
which financial statements are required, consistent with the
requirements for periodic reports and other registration statements. As
commenters indicated, the JOBS Act provided scaled disclosure
requirements for EGCs, including reducing the maximum number of years
for which financial statements are required from three to two. As
raised by a commenter, the proposed five-year requirement is
inconsistent with the staff practice to accept only two years of
summary financial data \65\ in an EGC's initial registration statement
instead of the five years required in non-EGCs' registration
statements.\66\ We agree that EGCs and Regulation A issuers should be
able to align the credit ratio reporting periods with the periods for
which they provide financial statements, similar to other financial
reporting requirements. Additionally, after consideration of commenter
feedback and additional staff analysis as to the frequency of initial
registration statements filed by EGCs and Regulation A bank and savings
and loan registrants relative to all initial registration statements
filed by bank and savings and loan registrants, we do not believe it is
necessary to require a different reporting requirement for the limited
non-EGC bank and savings and loan registrants filing initial
registration statements. There was only one initial registration
statement in the last two years that was filed by a non-EGC bank and
savings and loan registrant.\67\ Therefore, all registrants and
Regulation A issuers will be required to provide the ratios for the
same periods for which they provide financial statements. After further
consideration and analysis, we believe this approach is appropriate
because it is unclear how useful the limited credit ratio information
would be without the additional context of other financial statement
information for those additional periods. Additionally, we note that
our existing rules already

require a discussion of known trends,\68\ and the Commission has issued
guidance emphasizing the requirement to provide trend disclosure in
MD&A.\69\ Therefore to the extent that additional historical
information is necessary to discuss those trends, such as information
outside the financial statement periods included in the filing,
registrants will continue to be required to provide that information.
---------------------------------------------------------------------------

    \65\ Item 301 of Regulation S-K [17 CFR 229.301]. The Commission
recently proposed to eliminate Item 301 of Regulation S-K. See 2020
MD&A Proposing Release at supra note 37.
    \66\ See the JOBS Act Frequently Asked Questions document issued
by the Division of Corporation Finance addressing generally
applicable questions on Title 1 of the JOBS Act available at:
https://www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-title-i-general.htm.
    \67\ Based on staff analysis, the total number of bank and
savings and loan registrants' initial registration statements that
went effective from May 1, 2018 to May 1, 2020 was 32. Based on XBRL
data, 31 were EGCs. No bank and savings and loan registrants'
offering statements were qualified during this period.
    \68\ Item 303 of Regulation S-K [17 CFR 229.303] requires a
registrant to discuss its financial condition, changes in financial
condition, and results of operations. Instruction 3 to paragraph
303(a) states that the discussion shall focus on the material events
and uncertainties known to management that would cause reported
financial information not to be necessarily indicative of future
operating results or of future financial condition. The instruction
further states that this would include descriptions and amounts of
matters that: (A) Would have an impact on future operations and have
not had an impact in the past, and (B) have had an impact on
reported operations and are not expected to have an impact on future
operations.
     Similarly, for foreign private issuers, Item 5.D. of Form 20-F
requires a foreign private issuer to discuss, for at least the
current financial year, any known trends, uncertainties, demands,
commitments or events that are reasonably likely to have a material
effect on the company's net sales or revenues income from continuing
operations, profitability, liquidity, or capital resources, or that
would cause reported financial information not necessarily to be
indicative of future operating results or financial condition.
    \69\ See, e.g., Management's Discussion and Analysis of
Financial Condition and Results of Operations; Certain Investment
Company Disclosures, Release No. 33-6835 (May 18, 1989) [54 FR 22427
(May 24, 1989)] and Commission Guidance Regarding Management's
Discussion and Analysis of Financial Condition and Results of
Operation, Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec.
29, 2003)] (the ``2003 MD&A Interpretive Release'').
---------------------------------------------------------------------------

F. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rate and Interest Differential (Average Balance, Interest and
Yield/Rate Analysis and Rate/Volume Analysis)

i. Proposal
    We proposed to codify in proposed Item 1402 of Regulation S-K all
of the average balance sheet, interest and yield/rate analysis, and
rate/volume analysis disclosure items currently in Item I of Guide 3.
We also proposed to further disaggregate the categories of interest-
earning assets and interest-bearing liabilities required to be
disclosed. Specifically, we proposed to require registrants to separate
(1) federal funds sold \70\ from securities purchased with agreements
to resell and (2) federal funds purchased from securities sold under
agreements to repurchase \71\ and to disaggregate commercial paper.\72\
Finally, we proposed to codify the instructions related to foreign
activities contained in General Instruction 7 \73\ and Instruction 5 of
Item I \74\ of Guide 3.
---------------------------------------------------------------------------

    \70\ Federal funds sold are reserves of a banking institution
that are lent to other institutions overnight.
    \71\ ASC 860-10 defines a repurchase agreement as an arrangement
under which a transferor (repo party) transfers a security to a
transferee (repo counterparty or reverse party) in exchange for cash
and concurrently agrees to reacquire the security at a future date
for an amount equal to the cash exchanged plus a stipulated interest
factor.
    \72\ Commercial paper consists of short-term promissory notes
issued primarily by corporations. Maturities of commercial paper
range up to 270 days but average about 30 days.
    \73\ General Instruction 7 of Guide 3 clarifies that foreign
data need not be presented if the registrant is not required to make
separate disclosures concerning its foreign activities pursuant to
the test set forth in Rule 9-05 of Regulation S-X [17 CFR 210.9-05].
Rule 9-05 requires disclosure when foreign activities, which include
loans and other revenue producing assets, exceed 10% of (1) assets,
(2) revenue, (3) income (loss) before income tax expense, or (4) net
income (loss).
    \74\ Instruction 5 to Item I of Guide 3 states that if
disclosure regarding foreign activities is required pursuant to
General Instruction 7 of Guide 3, the information required by
paragraphs A, B and C of Item I should be further segregated between
domestic and foreign activities for each significant category of
assets and liabilities disclosed pursuant to Item I.A, as well as
disclosure of the percentage of total assets and total liabilities
attributable to foreign activities.
---------------------------------------------------------------------------

ii. Comments on Proposal
    One commenter supported the proposal to codify the average balance
and rate section of Guide 3, stating that the disclosures are unique to
Guide 3 and that users of its financial statements find the information
useful.\75\ In contrast, another commenter stated that the additional
disaggregation that would be required by the proposal appears to remove
any element of professional judgment based on quantitative or
qualitative materiality assessments, and therefore may result in
disaggregation that will be of little value to users.\76\ A different
commenter stated that the required disaggregation is more granular than
current practice and financial statement requirements.\77\ This
commenter noted that, for example, federal funds sold and securities
purchased with agreements to resell are typically aggregated on a
single line item on the balance sheet. This commenter also stated that
separating these items and requiring them to be disclosed on an average
balance basis may not be relevant or may be confusing to investors.
Several commenters recommended either retaining Guide 3's existing
language of ``should include,'' or revising the language in proposed
Item 1402 to state ``must include, if material'' when referring to the
disaggregation requirement, in order to give registrants the
flexibility to present this information in a way that they believe is
most relevant to users.\78\
---------------------------------------------------------------------------

    \75\ See letter from BAC.
    \76\ See letter from BPI/SIFMA.
    \77\ See letter from ABA.
    \78\ See letters from ABA and BPI/SIFMA.
---------------------------------------------------------------------------

iii. Final Rules
    After considering the comments, we are adopting the rules
substantially as proposed. Item 1402 of Regulation S-K codifies all of
the average balance sheet, interest and yield/rate analysis and rate/
volume analysis disclosure items currently in Item I of Guide 3, along
with General Instruction 7 and Instruction 5 of Item 1 of Guide 3. We
also are adopting the requirement to disaggregate the categories of
interest-earning assets and interest-bearing liabilities required to be
disclosed, as proposed.
    In a change from the proposal, as suggested by commenters, Item
1402(a) of Regulation S-K states that the categories enumerated in Item
1402(a) ``must be included, if material,'' rather than the proposed
language, which stated that disclosure ``must include, at a minimum.''
While we continue to believe this disclosure can elicit useful
information about the drivers of the changes in net interest earnings
across registrants in a simple and comparable format, we acknowledge
commenters' concerns about requiring disaggregated information when it
is not material to investors. We believe the adopted approach strikes
an appropriate balance between providing sufficient information to help
investors understand material changes in interest income and interest
expense from period to period, and permitting the omission of
immaterial information that could make it more difficult to understand
the material drivers of business results. Furthermore, we believe that
in practice registrants have applied a materiality qualifier in
providing the existing disclosures called for by Guide 3, and therefore
we believe that this change aligns the language in the final rules with
how registrants apply the existing descriptions of ``major categories
of interest-earning assets and interest-bearing liabilities.'' In
addition, while we acknowledge one commenter's statement that federal
funds sold and securities purchased with agreements to resell are
typically aggregated in a single line item on the balance sheet, the
type of collateral could vary under the two categories, which could
drive differences in weighted average interest rates and related
changes in the rate/volume analysis. As a result, we continue to
believe it is appropriate to list these two

categories separately but note that the final rules only require
disaggregation if material.

G. Investment Portfolio

i. Proposal
    We proposed to codify in Item 1403 of Regulation S-K the
requirement to disclose weighted average yield for each range of
maturities by category of debt securities and proposed to use the
categories required by U.S. GAAP \79\ or IFRS,\80\ rather than those
categories currently called for by Item II.B of Guide 3. In the
Proposing Release, we stated our belief that the proposed weighted
average yield disclosure would provide investors with information to
evaluate more effectively the performance of the portfolio and that
revising the categories of debt securities to conform to the categories
presented in accordance with U.S. GAAP or IFRS would enhance the
consistency and usefulness of the registrant's investment portfolio
disclosures.\81\ As proposed, this disclosure requirement would apply
only to debt securities that are not carried at fair value through
earnings. Due to the substantial overlap with U.S. GAAP and IFRS
disclosure requirements, we proposed not to codify in Item 1403 the
following disclosure items in Item II of Guide 3: (a) Book value
information; (b) the maturity analysis of book value information; and
(c) the disclosures related to investments exceeding 10% of
stockholders' equity.
---------------------------------------------------------------------------

    \79\ ASC 320-10 addresses the accounting and reporting for debt
securities. ASC 320-10-50-1B states that major security types should
be based on the nature and risks of the security and that an entity
should consider all of the following when considering whether
disclosure for a particular security type is necessary: (a) Shared
activity or business sector, (b) vintage, (c) geographic
concentration, (d) credit quality, and (e) economic characteristics.
Financial institutions, including banks, savings and loan
associations, savings banks, credit unions, finance companies and
insurance entities are required to include the nine securities
categories listed in ASC 942-320-50-2, although additional types may
also be necessary: (a) Equity securities, segregated by either (1)
industry type or (2) registrant size, or (3) investment objective;
(b) debt securities issued by U.S. Treasury and other U.S.
government corporations and agencies; (c) debt securities issued by
states of the United States and political subdivisions of the
states; (d) debt securities issued by foreign governments; (e)
corporate debt securities; (f) residential mortgage-backed
securities; (g) commercial mortgage-backed securities; (h)
collateralized debt obligations; and (i) other debt obligations.
    \80\ IFRS 7 addresses disclosures for financial instruments.
IFRS 7.6 requires disclosures by classes of financial instruments,
which are defined as ``. . . classes that are appropriate to the
nature of the information disclosed and that take into account the
characteristics of those financial instruments.''
    \81\ See Section II.F.iii of the Proposing Release.
---------------------------------------------------------------------------

ii. Comments on Proposal
    One commenter supported the proposal to eliminate the investment
portfolio disclosure items that overlap with U.S. GAAP.\82\ This
commenter also supported moving away from the bright-line thresholds in
Guide 3.\83\ Furthermore, this commenter also supported the proposal to
require disclosure of weighted average yields of each category of debt
securities not carried at fair value through earnings by specified
range of maturities because it would provide decision-useful
information to investors. While not commenting specifically on the
investment portfolio disclosure requirements, many commenters generally
supported the elimination of disclosure items that overlap with those
in Commission rules, U.S. GAAP, or IFRS.\84\
---------------------------------------------------------------------------

    \82\ See letter from BAC.
    \83\ For example, the disclosures related to investments
exceeding 10% of stockholders' equity. See further discussion in
Section II.F of the Proposing Release.
    \84\ See, e.g., letters from ABA; BPI/SIFMA; CAQ; Crowe;
Deloitte; EY; KPMG; M. Deering; and PwC.
---------------------------------------------------------------------------

iii. Final Rules
    After considering the comments, we are adopting Item 1403 of
Regulation S-K as proposed. Item 1403 of Regulation S-K codifies the
requirement to disclose weighted average yield for each range of
maturities by category of debt securities required to be disclosed in
the registrant's U.S. GAAP or IFRS financial statements. As proposed,
the final rules only apply to debt securities that are not carried at
fair value through earnings. The final rules do not codify the
following disclosure items in Item II of Guide 3: (a) Book value
information; (b) the maturity analysis of book value information; and
(c) the disclosures related to investments exceeding 10% of
stockholders' equity, because these items substantially overlap with
U.S. GAAP and IFRS disclosure requirements.

H. Loan Portfolio

i. Proposal
    We proposed to codify in Item 1404 of Regulation S-K the
requirement to disclose the maturity by loan category and the total
amount of loans due after one year that have (a) predetermined interest
rates and (b) floating or adjustable interest rates disclosure
currently called for by Item III.B, by the loan categories disclosed in
the registrant's U.S. GAAP \85\ or IFRS \86\ financial statements.
Currently Item III.B of Guide 3 provides for the exclusion of certain
loan categories (real estate-mortgage, installment loans to individuals
and lease financing) from these disclosures and the aggregation of
other loan categories (foreign loans to governments and official
institutions, banks and other financial institutions, commercial and
industrial and other loans). The proposed rules would not provide for
any exclusion of loan categories, or permit the aggregation of loan
categories for purposes of this disclosure. Additionally, we proposed
to codify the existing Guide 3 instruction stating that the
determination of maturities should be based on contractual terms. We
proposed to clarify the ``rollover policy'' for these disclosures by
stating that, to the extent non-contractual rollovers or extensions are
included for purposes of measuring the allowance for credit losses
under U.S. GAAP or IFRS, such non-contractual rollovers or extensions
should be included for purposes of the maturities classification and
the policy should be briefly disclosed.
---------------------------------------------------------------------------

    \85\ ASC 310-10-45-2 and ASC 310-10-50-3 require that major
categories of loans or trade receivables be presented separately
either in the balance sheet or in the notes to the financial
statements.
    \86\ See supra note 80.
---------------------------------------------------------------------------

    We proposed not to codify the following Guide 3 disclosure items
because they call for disclosures that are reasonably similar to
disclosures already required by Commission rules, U.S. GAAP, or IFRS:
\87\
---------------------------------------------------------------------------

    \87\ See Section II.G of the Proposing Release.
---------------------------------------------------------------------------

     The loan category disclosures called for by Item III.A of
Guide 3;
     The loan portfolio risk elements disclosure called for by
Item III.C, which among other disclosures, included disclosure of loan
concentrations exceeding 10% of loans that are not otherwise disclosed
in the loan category disclosure in Item III.A and disclosure of cross
border outstandings to borrowers in each foreign country where such
outstandings exceed 1% of total assets; and
     The other interest bearing assets disclosure called for by
Item III.D.\88\
---------------------------------------------------------------------------

    \88\ We also proposed to delete the loan presentation disclosure
required under 17 CFR 210.9-03(7)(a)-(c) (``Rule 9-03(7)(a)-(c) of
Regulation S-X''). See Section IV below.
---------------------------------------------------------------------------

ii. Comments on Proposal
    One commenter supported aligning the requirements with the loan
categories under existing U.S. GAAP and IFRS requirements but asked the
Commission to allow registrants to

exclude any loan categories from the maturity and sensitivity to
interest rate changes disclosure that are not material to the
registrant.\89\ This commenter stated that, similar to disclosure
requirements for U.S. GAAP, registrants should have the ability to
aggregate certain loan categories for purposes of the disclosure on the
basis of relevance, materiality, and other considerations. This
commenter also supported moving away from the bright-line thresholds in
Guide 3 and instead relying on existing U.S. GAAP and IFRS requirements
that call for the disclosure of significant concentrations of credit
risk. Finally, this commenter stated that the use of the
``significant'' threshold in U.S. GAAP and IFRS would not result in the
loss of material information.
---------------------------------------------------------------------------

    \89\ See letter from BAC.
---------------------------------------------------------------------------

    Another commenter recommended the Commission continue to allow
registrants to exclude or aggregate certain loan categories if they
determine an alternative presentation is more appropriate.\90\ This
commenter stated that mirroring the loan categories and classes
presented in the financial statements, without the flexibility to
exclude certain loan categories, would not result in more meaningful
disclosures. For example, this commenter stated it is likely that large
portfolios of consumer loans, such as credit cards, would be classified
in the ``within 1 year'' category, whereas residential real estate
loans would generally be in the ``over 10 year'' category.
---------------------------------------------------------------------------

    \90\ See letter from BPI/SIFMA.
---------------------------------------------------------------------------

iii. Final Rules
    After considering the comments, we are adopting final rules
substantially as proposed. Consistent with the proposal, Item 1404(a)
of Regulation S-K codifies the requirement to disclose the maturity by
loan category disclosure currently called for by Item III.B of Guide 3,
with the loan categories based on the categories required by U.S. GAAP
\91\ or IFRS \92\ in the financial statements, but in response to
comments received, the final rules also require additional maturity
categories to provide investors with sufficient information on the
potential interest rate risk associated with the loans in the
portfolio. The final rules also codify the existing Guide 3 instruction
stating the determination of maturities should be based on contractual
terms, and also codifies the language, as proposed, regarding the
``rollover policy'' for these disclosures.
---------------------------------------------------------------------------

    \91\ See supra note 85.
    \92\ See supra note 80.
---------------------------------------------------------------------------

    Item 1404(b) of Regulation S-K codifies the disclosure items in
Item III.B of Guide 3 regarding the total amount of loans due after one
year that have (a) predetermined interest rates or (b) floating or
adjustable interest rates, and specifies that this disclosure should
also be disaggregated by the loan categories disclosed in the
registrant's U.S. GAAP or IFRS financial statements.
    While we acknowledge commenter feedback suggesting that the final
rules should allow registrants to exclude certain loan categories from
the Item 1404 of Regulation S-K disclosure, we do not believe any
exceptions are necessary as the disclosure is driven by the loan
categories required by U.S. GAAP or IFRS. U.S. GAAP \93\ considers
materiality, so such immaterial loan categories generally would not be
presented in the financial statements, and therefore would not be
required by these disclosure requirements. The staff has observed that
registrants typically aggregate immaterial loan categories into an
``other'' loan category, or will combine these immaterial loan
categories with the most comparable material loan category. We would
not expect this ``other'' loan category to be disaggregated further for
purposes of this disclosure. Rather, this ``other'' loan category would
be disclosed as a single additional category, consistent with the
presentation in the U.S. GAAP or IFRS financial statements. We continue
to believe conforming the loan categories required in this disclosure
to those required by U.S. GAAP or IFRS promotes consistency of loan
portfolio disclosures throughout a registrant's filing, and elicits
trend information about interest income and potential interest rate
risk.
---------------------------------------------------------------------------

    \93\ See supra note 85.
---------------------------------------------------------------------------

    In response to commenter feedback about large portfolios being
concentrated in a single maturity category, the final rules require
additional maturity categories. Specifically, we have separated the
proposed ``after five years'' maturity category into two categories:
(1) After five years through 15 years, and (2) after 15 years. We
believe these additional maturity categories will elicit more decision-
relevant information for investors by capturing the maturity periods of
commonly offered residential mortgage loan products, such as 15-year
and 30-year residential mortgages. For example, we expect that under
the final rules, residential mortgage loans would no longer be
classified in a single maturity category, as noted by a commenter, thus
providing investors additional information about the risk profile of
those loans. Furthermore, for as long as the loans remain outstanding,
the loans would move through the maturity categories until they are
paid off or sold, such that over time, even 30-year residential
mortgage loans would migrate into different maturity categories.
    Consistent with the proposal, the final rules do not codify the
loan category disclosure items in Item III.A of Guide 3, the loan
portfolio risk element disclosure items in Item III.C, or the other
interest bearing asset disclosure items in Item III.D. The rules codify
the Guide 3 loan disclosure items that we believe elicit information
material to an investment decision and do not overlap with other
existing disclosure requirements or principles. The final rules will
thereby elicit disclosure that assists investors in evaluating the
registrant's loan portfolio while also limiting the burdens on
registrants to prepare such disclosures as registrants should be able
to derive this information from their existing books and records.

I. Allowance for Credit Losses

i. Proposal
    We proposed to require in Item 1405 of Regulation S-K the
disclosure of the ratio of net charge-offs during the period to average
loans outstanding based on the loan categories required to be disclosed
in the registrant's U.S. GAAP or IFRS financial statements, instead of
on a consolidated basis as called for by Guide 3. We also proposed to
require registrants to provide the tabular allocation of the allowance
disclosure called for by Item IV.B of Guide 3, except that the
allocation would be based on the loan categories presented in the U.S.
GAAP financial statements, instead of the loan categories specified in
Item IV.B of Guide 3, which we believe is not a substantive change from
existing practice given the existing instruction \94\ in Item IV of
Guide 3 which permits other loan categories to be used if considered a
more appropriate presentation.\95\ We did not propose to codify the
rollforward of the allowance for loan loss disclosures called for by
Item IV.A of Guide 3, given the overlap of this requirement with U.S.
GAAP and IFRS.
---------------------------------------------------------------------------

    \94\ See Instruction 3 to Item IV of Guide 3.
    \95\ As explained in the Proposing Release, we did not propose
to apply this requirement to IFRS registrants because IFRS 7.35H
already requires this information at a similar level of
disaggregation in the financial statements. See Section II.H.iii of
the Proposing Release.
---------------------------------------------------------------------------

    The proposed rules did not require any incremental disclosures
related to

the New Credit Loss Standard or IFRS 9 because, as explained in the
Proposing Release, we first wanted to assess the disclosures provided
under the new U.S. GAAP and IFRS standards and evaluate whether
additional information is necessary.\96\ However, the Proposing Release
contained a number of requests for comments seeking feedback on the
types of disclosures that may be material upon the adoption of the New
Credit Loss Standard.
---------------------------------------------------------------------------

    \96\ See Section II.H of the Proposing Release. Accounting
Standards Update (``ASU'') 2016-13- Financial Instruments--Credit
Losses (Topic 326) (``New Credit Loss Standard'') replaces the
current U.S. GAAP incurred loss methodology with a methodology that
reflects expected credit losses over the entire contractual terms of
the financial instruments. Absent an election to suspend adoption
under Section 4014 of the Coronavirus Aid, Relief, and Economic
Security Act (``CARES Act''), as discussed further below, the New
Credit Loss Standard became effective for public business entities
that meet the definition of an SEC filer for their fiscal years
beginning after December 15, 2019, including interim periods within
those fiscal years. Public Law 116-136, 134 Stat. 281 (Mar. 27,
2020). However, SEC filers that are eligible to be SRCs, as defined
by the SEC, and entities that are not SEC filers, are provided a
delayed effective date of three years. Thus, SRCs, certain EGCs, and
non-SEC filers are able to elect to defer adopting the New Credit
Loss Standard until their fiscal year beginning after December 15,
2022.
    The CARES Act provides an insured depository institution, a bank
holding company, or any affiliate thereof with the option to
temporarily suspend application of the New Credit Loss Standard
until the earlier of the date on which the national emergency
concerning COVID-19 terminates or December 31, 2020.
    IFRS 9--Financial Instruments was effective January 1, 2018 for
calendar year companies and requires a 12-month expected credit loss
measurement unless there has been a significant increase in credit
risk, in which case it is a lifetime expected credit loss
measurement.
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ii. Comments on Proposal
    Several commenters supported eliminating the allowance for credit
losses disclosure items, such as the five-year analysis of loan loss
experience called for by Item IV.A of Guide 3, that are duplicative of
U.S. GAAP or IFRS.\97\ One commenter was supportive of the proposed
allocation of the allowance for credit losses disclosure
requirement.\98\ Another commenter stated that the tabular allocation
of the allowance for credit losses would not be burdensome to prepare
and that it provides a convenient location for such information to be
obtained by investors.\99\ However, this commenter and another
commenter indicated that the disclosures should be at the same level as
the allowance disclosures under U.S. GAAP, which is at the portfolio
segment level, and that further disaggregation is not warranted.\100\
One of these commenters stated that there will be significant
operational difficulties in allocating the allowance in ways that would
not conform to U.S. GAAP reporting.\101\ The other commenter
recommended retaining the instruction to Item III.A of Guide 3, which
provides latitude to registrants to use loan categories outside of
those identified in Guide 3 ``if considered a more appropriate
presentation.'' \102\
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    \97\ See letters from ABA and BAC.
    \98\ See letter from A. Heilig.
    \99\ See letter from ABA.
    \100\ See letters from ABA and BPI/SIFMA.
    \101\ See letter from ABA.
    \102\ See letter from BPI/SIFMA.
---------------------------------------------------------------------------

    One commenter asserted that the proposed requirement to disclose
disaggregated net charge-offs to average loans ratios by loan category
may not provide meaningful information to the extent the disaggregated
ratios are not significant drivers of business results.\103\ Another
commenter stated that the charge-off ratios will have little, if any,
relation to credit loss provisions or the allowance for credit losses
upon the adoption of the New Credit Loss Standard, especially for loans
with longer terms, such as many consumer loan products, and therefore
appears not to support the requirement to provide this ratio.\104\ This
commenter further stated that charge-off ratios on these product lines
might confuse investors and others who are trying to assess credit
performance, as allowances will be recorded at origination or
commitment and can significantly change based on economic forecasts.
One commenter stated that the charge-off ratios should not be more
disaggregated than at the portfolio segment level, which is the level
U.S. GAAP requires for allowance disclosures.\105\ Several commenters
stated there may be operational challenges or systems limitations
associated with calculating the ratio of net charge-offs to average
loans on a disaggregated basis versus on a consolidated basis as
provided today.\106\ These commenters highlighted the estimated
increase in burden hours as well as professional costs related to these
disclosure requirements from the Paperwork Reduction Act analysis in
the Proposing Release and recommended the Commission consider feedback
from investors and others to determine whether the benefits justify
these costs.\107\
---------------------------------------------------------------------------

    \103\ See letter from BPI/SIFMA.
    \104\ See letter from ABA.
    \105\ See letter from ABA.
    \106\ See letters from CAQ (stating that the ratio would not be
computable from disclosures in the financial statements) and Crowe.
    \107\ See Table 12: Estimated Change in Internal Burden Hours
and Costs for Outside Professionals from the Aggregated Portions of
the Proposed Rules in Section VII of the Proposing Release.
---------------------------------------------------------------------------

    In response to request for comments on disclosure requirements
related to the New Credit Loss Standard or IFRS 9, no commenters
indicated that we should require disclosures incremental to the New
Credit Loss Standard or IFRS 9 at this time. A few commenters stated
that it was premature to determine which incremental disclosures may be
useful to investors given that the standard-setting processes for the
New Credit Loss Standard and IFRS 9 were only recently completed and
have resulted in major changes to previous accounting standards.\108\
These commenters recommended that the Commission provide registrants
the opportunity to determine the most appropriate way to communicate to
their investors about the new standard, including how best to explain
period-to-period changes in expected credit losses, consideration of
loan mix and volume, credit performance related to expectations,
changes in key inputs and assumptions, or other factors over the next
few years before proposing any additional disclosure requirements.
---------------------------------------------------------------------------

    \108\ See letters from ABA and KPMG.
---------------------------------------------------------------------------

    One of these commenters cautioned that, while the inputs and
assumptions made to the New Credit Loss Standard models will be
critical to credit loss estimates and thus will be important to
investment decisions, and disclosure of such inputs initially appears
helpful to investors, the complexity of credit loss modeling (for
example, non-linear relationships of changes in certain economic
conditions to loss given default) will likely frustrate many investors
who wish to use inputs in their own modeling.\109\ This commenter
stated that any future required disclosure related to the New Credit
Loss Standard methodology should not be required in a formulaic manner
or template. This commenter also noted that due to the broad range of
credit loss modeling methods that will be performed by banks, it
expects there to be a wide diversity in how qualitative adjustments are
defined and applied in the credit loss modeling, not only between
registrants, but also between periods within a registrant.
---------------------------------------------------------------------------

    \109\ See letter from ABA.
---------------------------------------------------------------------------

iii. Final Rules
    After considering the comments, we are adopting the rules as
proposed. Item 1405(c) of Regulation S-K codifies the requirement to
provide a tabular allocation of the allowance disclosures based on the
loan categories presented in the U.S. GAAP financial statements

for registrants applying or reconciling to U.S. GAAP. Item 1405(c) of
Regulation S-K does not apply to IFRS registrants because IFRS already
requires this information at a similar level of disaggregation in the
financial statements.\110\ While one commenter recommended retaining
the instruction to Item III.A of Guide 3, which provides latitude to
registrants to use loan categories outside of those identified in Guide
3, we do not believe this is necessary as we have tied the loan
categories for this disclosure to the loan categories presented in the
U.S. GAAP financial statements. We continue to believe the tabular
allocation required by this Item will provide for easier analysis by
investors when reviewing these disclosures. The final rules also codify
the requirement to disclose disaggregated net charge-off ratios. We
continue to believe that, in many circumstances, disclosure of
disaggregated net charge-off ratios may provide material information to
investors in terms of transparency and comparability. For example, the
staff has observed that credit cards and other unsecured loans often
have higher net charge-off ratios relative to secured loans, such as
residential mortgage loans or commercial loans. Therefore, to the
extent a bank and savings and loan registrant has a material loan
category with higher net charge-offs relative to other loan categories
in its loan portfolio, a single disclosure of the consolidated net
charge-off ratio may not reveal trends present in the loan portfolio
because the portfolio performance can be skewed by a specific loan
category or by the number and type of loan products. Furthermore,
disaggregated net charge-off ratio disclosures can facilitate
comparison of loan performance by specific loan category among banks of
varying sizes and operations.
---------------------------------------------------------------------------

    \110\ IFRS 7.35H.
---------------------------------------------------------------------------

    While one commenter noted that the meaningfulness of the
disaggregation of the net charge-off ratio may be contingent on whether
the ratios are significant drivers of business results, and another
stated that the charge-off ratio will have little, if any, relation to
the provisions or the allowance for credit losses upon the adoption of
the New Credit Loss Standard, we believe disaggregated net charge-off
ratios generally are key performance measures for bank and savings and
loan registrants. This is evident from the disclosure that bank and
savings and loan registrants provide in SEC filings, including earnings
releases, which often includes information about charge-offs by loan
category, and in some cases, the net charge-off ratio at the loan
category level. The staff has observed that some bank and savings and
loan registrants have continued to provide this information in their
quarterly reports after their recent adoption of the New Credit Loss
Standard. Additionally, the staff has observed that some bank and
savings and loan registrants have disclosed expectations of future
charge-off amounts as part of their disclosure of projections or
earnings guidance for the forecasted period upon their adoption of the
New Credit Loss Standard. We also note that the Federal Deposit
Insurance Corporation (``FDIC'') publishes a quarterly banking profile
(``FDIC Quarterly'') that provides a comprehensive summary of the
financial results for all FDIC-insured institutions.\111\ Both prior
to, and after, the adoption of the New Credit Loss Standard, the FDIC
Quarterly reports, among other things, the net charge-off amounts and
the net charge-off ratio on an industry-wide basis, including the
charge-off ratio at the loan category level. We therefore continue to
believe this information may be material for investors to understand a
registrant's financial results. Furthermore, we did not receive any
comments from registrants indicating that the disaggregated net charge-
off ratios would be costly or burdensome to provide. We acknowledge
that adoption of the New Credit Loss Standard affects the relationship
between the net charge-off ratio to the provision for loan losses and
the allowance for credit losses, but we continue to believe this
information is used by investors, as evidenced by the fact that the
information is still disclosed by a number of registrants.
Additionally, despite the change in the allowance for credit loss
methodology upon the adoption of the New Credit Loss Standard, we note
that both components of the disaggregated net charge-off ratios (net
charge-offs during the period and average loans outstanding during the
period), and therefore the ratio itself, are generally not materially
affected by the New Credit Loss Standard. The New Credit Loss Standard
did not directly change the applicable U.S. GAAP guidance for charge-
offs and total loans. Therefore, we believe that changes in these
ratios over time, including prior to and after adoption of the New
Credit Loss Standard, may provide material trend information to
investors about how the portfolio is performing.
---------------------------------------------------------------------------

    \111\ Federal Deposit Insurance Corporation, Quarterly Banking
Profile (Second Quarter 2020), available at https://www.fdic.gov/bank/analytical/quarterly/2020-vol14-3/fdic-v14n3-2q2020.pdf.
---------------------------------------------------------------------------

    Consistent with the proposal, and the suggestions of several
commenters, the final rules do not codify the disclosure items in Item
IV of Guide 3 that overlap with U.S. GAAP and IFRS and do not require
any disclosures related to the New Credit Loss Standard or IFRS 9.
iv. Proposal--New Credit Ratios Disclosure
    Guide 3 currently calls for the disclosure of one credit ratio, net
charge-offs during the period to average loans outstanding, as outlined
in Item IV.A of Guide 3. As discussed in Section II.I.i above, we
proposed to codify the requirement to disclose this ratio by the loan
categories disclosed in the U.S. GAAP or IFRS financial statements. In
addition, we also proposed to require in Item 1405(a) of Regulation S-K
disclosure of the following new credit ratios on a consolidated basis,
along with each of the components used in their calculation: (1)
Allowance for Credit Losses \112\ to Total Loans; (2) Nonaccrual Loans
to Total Loans; and (3) Allowance for Credit Losses \113\ to Nonaccrual
Loans. The proposed rules would also require a discussion of the
factors that drove material changes in the ratios, or related
components, during the periods presented. As discussed in Section
II.E.iii above, the credit ratios would be required for each annual
period for which Commission rules require financial statements, and any
additional interim period if there was a material change in the
information or the trends evidenced thereby. The proposed rules would
not require disclosure of the ratio of nonaccrual loans to total loans
or the allowance for credit losses to nonaccrual loans for IFRS
registrants, as

there is no concept of nonaccrual loans in IFRS.
---------------------------------------------------------------------------

    \112\ Allowance for Credit Losses refers to the allowance for
loan losses recorded on the registrant's loan portfolio calculated
in accordance with U.S. GAAP or IFRS. To the extent that net
investments in leases by a lessor are included in the total loans
denominator, the allowance for credit losses also includes the
related allowance for credit losses for the net investment in
leases. The allowance for credit losses excludes any allowance for
credit losses recorded related to the securities portfolio or
unfunded commitments, which are not considered as part of the total
loan portfolio in the denominator of this ratio.
    \113\ To the extent that net investments in leases by a lessor
are included in the nonaccrual loans denominator, the allowance for
credit losses also includes the related allowance for credit losses
for the net investment in leases. The allowance for credit losses
excludes any allowance for credit losses recorded related to the
securities portfolio or unfunded commitments, which are not
considered within nonaccrual loans in the denominator of this ratio.
---------------------------------------------------------------------------

v. Comments on Proposal
    We received limited feedback on our proposal to require credit
ratios disclosure. The primary feedback we received was that these
credit ratios may no longer be as relevant to investors upon the
adoption of the New Credit Loss Standard.\114\
---------------------------------------------------------------------------

    \114\ See letter from ABA.
---------------------------------------------------------------------------

    One commenter stated that each of the ratios, excluding the net
charge-off to average loans ratio, is readily calculable from U.S. GAAP
disclosures already provided in the financial statements and encouraged
the Commission to consider feedback from users to determine whether
separate disclosure of the amounts is necessary.\115\ Another commenter
stated that many analysts and investors already calculate and monitor
these ratios and that disclosing them would not be substantially
burdensome to banks.\116\ However, this commenter recommended not
codifying the requirement to disclose the ratios due to the potential
changes resulting from the adoption of the New Credit Loss
Standard.\117\ This commenter noted that under the incurred loss
accounting methodology, increases in nonaccrual loans will typically
coincide with higher allowance levels and higher credit loss
provisions, but this relationship is significantly diminished under the
New Credit Loss Standard as credit performance should effectively be
anticipated at origination.\118\ This commenter further cautioned that,
due to the significant changes in the measurement basis of the
allowance for credit losses from the New Credit Loss Standard, the
ratio disclosures may be confusing to analysts, not only in comparing
the ratios based on the incurred loss methodology prior to the adoption
of the New Credit Loss Standard, but also in comparing registrants that
are adopting the New Credit Loss Standard in 2020 to those that will
adopt in 2023.\119\
---------------------------------------------------------------------------

    \115\ See letter from CAQ.
    \116\ See letter from ABA.
    \117\ The New Credit Loss Standard replaces the current incurred
loss methodology with a methodology that reflects expected credit
losses over the entire contractual term of the financial
instruments. See ASC Topic 326.
    \118\ This comment relates only to the allowance for credit
losses to nonaccrual loans and not the other three credit ratios
proposed.
    \119\ See supra note 96.
---------------------------------------------------------------------------

    One commenter noted the proposed credit ratios are not required by
U.S. GAAP and IFRS.\120\ This commenter recommended that we not require
disclosures beyond those required by U.S. GAAP or IFRS until such time
as it is clear that incremental disclosures are necessary given that
the standard-setting processes for the New Credit Loss Standard and
IFRS 9 were only recently completed by the FASB and IASB and have
resulted in major changes to the previous accounting standards.
---------------------------------------------------------------------------

    \120\ See letter from KPMG.
---------------------------------------------------------------------------

    A few commenters stated the Commission should not require a
discussion of the factors that drove material changes in credit
ratios.\121\ One of these commenters said the proposed disclosure
requirement overlaps with Item 303(a) of Regulation S-K's requirement
to provide such other information that the registrant believes is
necessary to an understanding of its financial condition, changes in
financial condition, and results of operations.\122\ Another commenter
cited the complexity of what can drive the New Credit Loss Standard
estimate.\123\ For example, this commenter observed that nonaccrual
loans and charge-offs result from credit deterioration events, which
are not necessarily direct drivers of the New Credit Loss Standard
allowance estimate, and therefore would not necessarily drive changes
in ratios to the extent they have been accurately forecast. As a
result, according to this commenter, a discussion of these metrics may
be confusing to analysts or investors. Finally, although the proposed
rules would not have required disclosure of the ratio of nonaccrual
loans to total loans or the allowance for credit losses to nonaccrual
loans for IFRS registrants as there is no concept of nonaccrual loans
in IFRS, this commenter asked the Commission to explore how ``Stage 3''
\124\ assets under IFRS 9 may be considered comparable to nonaccrual
loans within U.S. GAAP.
---------------------------------------------------------------------------

    \121\ See e.g., letters from ABA and BPI/SIFMA.
    \122\ See letter from BPI/SIFMA.
    \123\ See letter from ABA.
    \124\ The term ``Stage 3 assets'' is not formally defined in
IFRS 9 but has become part of the common description of the IFRS 9
methodology. In this context, Stage 3 assets are considered to be
non-performing or credit-impaired loans.
---------------------------------------------------------------------------

vi. Final Rules
    Having considered the comments, we are adopting the rules as
proposed. We continue to believe that investors evaluate these ratios
when making investment decisions and that disclosure of the components
used in the calculation of the ratios, along with the proposed
narrative disclosure of the factors driving material changes in the
ratio or related components, would further aid investors' understanding
of the reasons for the material changes in ratios. The staff has
observed that these credit ratios are already commonly disclosed by
most bank and savings and loan registrants with material lending
portfolios, and the staff has observed that many bank and savings and
loan registrants have continued to provide these credit ratios in their
earnings releases and periodic reports after the adoption of the New
Credit Loss Standard. Therefore, we believe these registrants may
continue to find that this information may be material for an
investor's understanding of their financial results.\125\
---------------------------------------------------------------------------

    \125\ See supra note 96. As illustrated by Table 2 in Section
VII, around 44% of bank and savings and loan registrants are either
SRCs or EGCs and are not required to adopt the New Credit Loss
Standard until fiscal years beginning after December 15, 2022.
Therefore, over the next few years, there will continue to be a
significant population of bank and savings and loan registrants that
apply the incurred loss approach and not the New Credit Loss
Standard.
---------------------------------------------------------------------------

    We also note that the FDIC Quarterly,\126\ both prior to and after
the adoption of the New Credit Loss Standard, continues to collect and
report industry-wide data on the components, or similar components, of
these ratios, and the related ratios or similar ratios. For example,
the FDIC Quarterly reports industry-wide data on the allowance for
credit losses and total loans, and the related allowance for credit
losses to total loans outstanding ratio. Additionally, the FDIC
Quarterly reports noncurrent loans and leases,\127\ the noncurrent
loans to total loans ratio, and the ratio of the allowance for credit
losses to noncurrent loans and leases, which is similar to, but not the
same as, the two nonaccrual \128\ ratios (nonaccrual loans to total
loans outstanding at each period end and allowance for credit losses to
nonaccrual loans at each period end) that we are codifying in Item 1405
of Regulation S-K. Furthermore, while we acknowledge commenter feedback
that the ratios are affected by the adoption of the New Credit Loss
Standard, the staff has observed that registrants that continue to
disclose them have provided disclosure to explain the impact of the
change in the accounting for credit losses on the ratios from period to
period. Additionally, despite the change in the allowance for credit
loss methodology upon the adoption of the New Credit Loss Standard, we
note that both components of the nonaccrual loans to total loans ratio
(nonaccrual loans and total loans outstanding at

period end), and therefore the ratio itself, are generally not
materially affected by the New Credit Loss Standard. The New Credit
Loss Standard did not directly change the applicable U.S. GAAP guidance
for nonaccrual loans or total loans outstanding. Therefore, we believe
that changes in this ratio over time, including prior to and after
adoption of the New Credit Loss Standard, can provide material trend
information to investors about how the portfolio is performing.
---------------------------------------------------------------------------

    \126\ See supra note 111.
    \127\ The FDIC Quarterly defines noncurrent loans as loans that
are past due 90 days or more or that are in nonaccrual status.
    \128\ Nonaccrual loans represent loans that are in nonaccrual
status. See ASC 326-20-50-16.
---------------------------------------------------------------------------

    We recognize that, under the incurred loss approach, changes in the
allowance for credit losses are based on changes in losses incurred to
date, whereas under the New Credit Loss Standard, changes in the
allowance for credit losses are based on changes in estimates of
expected credit losses over the life of the loan portfolio. As such,
the allowance for credit losses to total loans ratio and allowance for
credit losses to nonaccrual loans ratio convey different information to
investors under the two approaches. We believe that, despite this
important difference in the information contained in these ratios under
alternative credit loss approaches, the disclosure of these two ratios
along with the discussion of the factors that led to material changes
in these ratios or their components could be material to investors,
regardless of the approach used (incurred loss approach or New Credit
Loss Standard). This is because investors are familiar with these
ratios and are accustomed to analyzing them, and while the drivers of
the changes in the ratios are affected by the New Credit Loss Standard,
we believe the ratios continue to convey information that is relevant
to evaluating a registrant's credit risk and lending policy decisions.
For example, the ratio of nonaccrual loans to total loans conveys
information about the registrant's lending decisions and how their
portfolio has performed since origination. Similarly, the allowance for
credit losses to total loans provides information about the level of
credit losses estimated relative to the loan portfolio, with a higher
ratio reflecting a higher estimate of credit losses in the portfolio.
Over time, investors can evaluate changes in trends in these ratios,
which may give material quantitative information about how changes in
the registrant's underwriting policies or servicing decisions can
affect the credit quality of their portfolio, or how the loan portfolio
is affected by macroeconomic and other factors. Furthermore, having
this information disclosed on a ratio basis allows for comparability of
credit trends across bank and savings and loan registrants of all
sizes. For example, the ratios take into account the size of the loan
portfolio, and thus a small community bank's ratio could be compared
against a large bank's ratio, in addition to peers of a similar size.
This could allow investors to assess credit trends more broadly. While
we acknowledge commenter feedback that with the adoption of the New
Credit Loss Standard, credit deterioration events, including those that
result in nonaccrual loans and charge-offs, may not necessarily
directly drive changes in the ratios, another commenter stated that
analysts and investors calculate and monitor these ratios.\129\ The
final rules ensure these ratios are calculated on a consistent and
comparable basis among all bank and savings and loan registrants. The
benefit to investors of having these consistent and comparable ratio
disclosures along with their components and discussion of the material
changes to the ratios already disclosed in the filing, without
investors having to perform their own calculations and analysis,
justifies the limited burden on a registrant to disclose this
information.
---------------------------------------------------------------------------

    \129\ See letter from ABA.
---------------------------------------------------------------------------

    We acknowledge commenter feedback that the ratio disclosures may be
confusing to analysts, not only in comparing a registrant's prior
ratios based on the incurred loss methodology to the ratios after the
adoption of the New Credit Loss Standard, but also in comparing
registrants that are adopting the New Credit Loss Standard in 2020 to
those that will adopt in 2023. However, it is common for any new
accounting standard to have different adoption dates based on the size
or type of entity, so this is not unique to the New Credit Loss
Standard, and we believe investors and analysts are accustomed to
making adjustments to their analysis as a result. Furthermore, since
the final rules require registrants to disclose material changes in the
credit ratios, we believe investors should have the information
available to understand the factors driving the changes in the ratios,
which may include how they are affected upon the adoption of the New
Credit Loss Standard, or material changes in the credit quality of the
loan portfolio.
    We also acknowledge that a few commenters stated that we should not
require a discussion of the factors that drove material changes in the
credit ratios. However, we continue to believe that this narrative
disclosure is necessary for an investor's understanding of the material
changes in the ratios and credit quality of the loan portfolio, and we
believe management has the information readily available to them to
discuss the drivers of the material changes in the ratios because the
individual components are already required by U.S. GAAP and IFRS. We
believe this information could be provided within MD&A if management
believes it is the most appropriate place to discuss the information.
To the extent that there were no material changes in the credit ratios
or the related components, there would be no requirement to provide
this narrative discussion.
    We also note that U.S. GAAP, both before and after the adoption of
the New Credit Loss Standard, requires disclosure of many of the
components of these ratios, such as nonaccrual loans, and the
rollforward of the allowance for credit losses by portfolio segment,
which includes separate line items showing charge-offs against the
allowance and recoveries of amounts previously charged off (that
together can be used to calculate net charge-offs, which is the
numerator to the disaggregated net charge-off ratio). We believe this
indicates that these components, and potentially the related ratios,
continue to have relevance upon the adoption of the New Credit Loss
Standard.\130\ As noted by a commenter, we believe this will limit the
burden a registrant will have in providing these disclosures.\131\
---------------------------------------------------------------------------

    \130\ ASC 310-10-50-7 (and ASC 326-20-50-16 upon the adoption of
the New Credit Loss Standard) requires disclosure of nonaccrual
loans by class of financing receivable. ASC 310-10-50-11B (and ASC
326-20-50-13 upon the adoption of the New Credit Loss Standard)
requires disclosure of a rollforward of the allowance for credit
losses, by portfolio segment, showing the beginning and ending
balance, the current period provision, writeoffs charged against the
allowance, and recoveries of amounts previously charged off.
    \131\ See letter from ABA.
---------------------------------------------------------------------------

J. Deposits

i. Proposal
    We proposed to codify in Item 1406 of Regulation S-K the majority
of the deposit disclosure items in Item V of Guide 3, with some
revisions. Specifically, we proposed to replace the ``amount of
outstanding domestic time certificates of deposit and other time
deposits equal to or in excess of $100,000'' by maturity disclosure
called for by Item V.D with a requirement to disclose the ``amount of
time deposits in uninsured accounts'' by maturity. We proposed to
require separate presentation of: (1) U.S. time deposits in amounts in
excess of the FDIC insurance limit, and (2) time deposits that are

otherwise uninsured (including, for example, U.S. time deposits in
uninsured accounts, non-U.S. time deposits in uninsured accounts, or
non-U.S. time deposits in excess of any country-specified insurance
fund), by time remaining until maturity of: (A) Three months or less;
(B) over three through six months; (C) over six through 12 months; and
(D) over 12 months. The proposed rules did not have a defined dollar
threshold for the disclosure, which we indicated would make the rules
easier to apply when there is a change in the FDIC insurance
limit.\132\
---------------------------------------------------------------------------

    \132\ See Section II.I.iii of the Proposing Release.
---------------------------------------------------------------------------

    Additionally, we proposed that bank and savings and loan
registrants quantify the amount of uninsured deposits as of the end of
each reported period. The proposed rules defined uninsured deposits for
bank and savings and loan registrants that are U.S. federally insured
deposit institutions as individual deposits in U.S. offices of amounts
exceeding the FDIC insurance limit and investment products such as
mutual funds, annuities, or life insurance policies. The proposed rules
would require foreign bank and savings and loan registrants to disclose
how they define uninsured deposits for purposes of this disclosure
given that the definition varies from jurisdiction to jurisdiction.
ii. Comments on Proposal
    One commenter stated that the proposed deposit disclosures would
provide transparency with respect to a registrant's source of funding
and liquidity risk profile.\133\ Another commenter was supportive of
the proposed disclosures related to bank deposits, including the
amounts that are uninsured. \134\
---------------------------------------------------------------------------

    \133\ See letter from BAC.
    \134\ See letter from A. Heilig.
---------------------------------------------------------------------------

    One commenter stated the Commission should emphasize that the rules
would change existing practice regarding the disclosure of uninsured
deposits as existing Guide 3 disclosures do not call for the separate
disclosure of the uninsured portion of time deposits or any other
deposits.\135\ Several commenters highlighted that there may be
potential complexity and costs or operational challenges involved in
calculating a precise amount for uninsured deposits.\136\ Most of these
commenters attributed these challenges to complex deposit insurance
rules \137\ that apply across accounts.\138\ A few of these commenters
also noted that depository institutions report estimated uninsured
amounts in their call reports.\139\
---------------------------------------------------------------------------

    \135\ See letter from CAQ.
    \136\ See e.g., letters from ABA; BPI/SIFMA; CAQ; Crowe; EY; and
PwC.
    \137\ 12 CFR 1821(a).
    \138\ See letters from ABA; BPI/SIFMA; CAQ; Crowe; and PwC.
    \139\ See letters from CAQ; Crowe; and PwC.
---------------------------------------------------------------------------

    Several commenters mentioned the FDIC's new rule, Recordkeeping for
Timely Deposit Insurance Determination (FDIC Part 370 Rule),\140\ which
became effective on April 1, 2020, and is limited to insured depository
institutions with greater than two million deposit accounts.\141\ This
rule requires such institutions to configure information systems to
accurately calculate insured and uninsured deposits. One of these
commenters encouraged the Commission to consider further outreach to
the FDIC and registrants about the potential difficulty and cost of
preparing the proposed disclosure and whether the disclosure objective
could be achieved in another way.\142\ This commenter also asked the
Commission to consider whether certain information provided in investor
and analyst presentations with respect to registrant's sources of
deposits might achieve the same objective as the proposed rule.
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    \140\ 12 CFR part 370. See also Federal Deposit Insurance
Corporation, 12 CFR part 370 Recordkeeping for Timely Deposit
Insurance Determination (July 17, 2020), available at https://www.fdic.gov/regulations/resources/recordkeeping/.
    \141\ See e.g., letters from ABA; BPI/SIFMA; and PwC.
    \142\ See letter from Crowe.
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    One commenter suggested that given the complexities and the FDIC's
new standard of accuracy in reporting that will differ between the
largest and other depository institutions, the Commission should
consider aligning its proposed disclosures with other regulatory
requirements and standards, or otherwise simplify the proposed
disclosure requirements.\143\ Another commenter stated that providing
total uninsured deposits would not address the purpose of the proposed
disclosure to allow users of the financial statements to assess a
firm's potential liquidity risk, because disclosing only total
uninsured deposits provides an incomplete picture of a firm's liquidity
risk and, on its own, could result in an investor making an uninformed
judgment.\144\ This commenter further stated that the disclosure of
uninsured deposits would present significant challenges and costs for
registrants, and the lack of comparability among different deposit
schemes may prove misleading to investors and therefore should not be
adopted.
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    \143\ See letter from PwC.
    \144\ See letter from BPI/SIFMA.
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    Several commenters stated that, if adopted, the Commission should
clarify the definition of uninsured deposits.\145\ For example:
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    \145\ See e.g., letters from ABA; BPI/SIFMA; CAQ; and EY.
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     A few commenters sought clarity on whether the amount to
be disclosed would be the portion of the individual deposit account
balance that is greater than the FDIC limit, or the total deposit
account balance.\146\
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    \146\ See letters from ABA; BPI/SIFMA; CAQ and EY.
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     One commenter sought clarification on whether the amount
of uninsured deposits should be measured for each individual account or
should include all accounts or persons to whom the insurance limits
apply.\147\
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    \147\ See letter from EY.
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     Another commenter noted that certain states such as
Massachusetts have their own deposit insurance funds and recommended
that deposits covered by these and other similar regimes be considered
insured for purposes of the proposed disclosure.\148\
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    \148\ See letter from BPI/SIFMA.
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     A few commenters stated that the final rule should explain
how the term ``uninsured deposits'' would be applied to investment
products such as mutual funds, annuities, or life insurance
policies.\149\
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    \149\ See letters from ABA and BPI/SIFMA.
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    One commenter commended the Commission for proposing to remove the
$100,000 threshold for uninsured deposits and replace it with a more
principles-based requirement and to provide foreign registrants with
the flexibility to disclose the definition of uninsured deposits
appropriate for their country of domicile.\150\ However, this commenter
stated that U.S. GAAP disclosure requirements largely address the
proposed disclosure of outstanding time deposits in uninsured accounts
by maturity and recommended not adopting this disclosure
requirement.\151\
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    \150\ See letter from BAC.
    \151\ See letter from BAC (stating that ASC-942-405-50-1
requires disclosure of the aggregate amount of time deposit accounts
(including certificates of deposits) in denominations that meet or
exceed the FDIC insurance limit and ASC 470-10-50-1 requires
disclosure of time deposits having a remaining term of more than one
year and the aggregate amount of maturities for each of the five
years following the balance sheet date).
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iii. Final Rules
    After considering the comments, we are adopting the rules
substantially as proposed. Item 1406 of Regulation S-K codifies the
majority of the disclosure items in Item V of Guide 3, with some
revisions.

    The final rules define uninsured deposits for bank and savings and
loan registrants that are U.S. federally insured depository
institutions as the portion of deposit accounts in U.S. offices that
exceed the FDIC insurance limit or similar state deposit insurance
regimes and amounts in any other uninsured investment or deposit
accounts that are classified as deposits and not subject to any federal
or state deposit insurance regimes. This definition varies slightly
from the proposal based on commenter feedback. Specifically, we have
clarified that the amount to be disclosed for uninsured deposits is
based on the portion of the account balance greater than the FDIC
insurance limit and that registrants may consider other similar state
deposit insurance regimes in evaluating whether a deposit is insured.
We also eliminated the reference to ``individual'' deposits in the
revised definition to address commenter feedback seeking clarity on
whether uninsured deposits are measured based on each individual
account, or include all accounts or persons to whom the insurance
limits apply. Consistent with the proposal, the final rules require
foreign bank and savings and loan registrants to disclose the
definition of uninsured deposits appropriate for their country of
domicile. However, in response to commenter concerns about how the
proposed disclosure requirements would interact with overlapping
regulatory regimes, the final rules specify that all registrants should
determine the amount of uninsured deposits for purposes of Item 1406
based on the same methodologies and assumptions used for regulatory
reporting requirements, to the extent applicable. This clarification
better aligns the final rules with U.S. bank regulatory reporting
requirements and provides some additional parameters for foreign
registrants that may operate in several different jurisdictions and
therefore may be subject to different insurance regimes. We believe
this change should reduce the cost of providing this disclosure and
reduce some of the comparability concerns for registrants operating in
different jurisdictions. Unlike the proposed rules, however, the final
rules do not expressly reference other investment products such as
mutual funds, annuities or life insurance policies or otherwise address
whether such products would be considered uninsured deposits as some
commenters requested. We believe bank and savings and loan registrants
already evaluate whether any particular product is subject to an FDIC
insurance regime, or similar state deposit insurance regimes, and
therefore additional guidance is unnecessary.
    In another change from the proposal, and consistent with commenter
feedback, we have revised the final rules to permit a registrant to
disclose uninsured deposits at the reported date based on an estimate
of uninsured deposits if it is not reasonably practicable to provide a
precise measure of uninsured deposits. To avail itself of this
accommodation, a registrant must disclose that the amounts are based on
estimated amounts of uninsured deposits, and the estimates must be
based on the same methodologies and assumptions used for the bank or
savings and loan registrant's regulatory reporting requirements, such
as the FDIC rules. We believe this change will reduce complexity and
better align the requirements with U.S. bank regulatory reporting
requirements, which should reduce the cost of providing this
disclosure.
    Consistent with the proposal, the rules require disclosure of (1)
U.S. time deposits in excess of the FDIC insurance limit, and (2) time
deposits that are otherwise uninsured by time remaining until maturity
of: (A) Three months or less; (B) over three through six months; (C)
over six through 12 months; and (D) over 12 months. While U.S. GAAP
\152\ requires disclosure of time deposits that meet or exceed the
insured limit, it does not require this information to be disaggregated
into the same maturity categories. Furthermore, U.S. GAAP does not
require disclosure of time deposits that are otherwise uninsured by
time remaining until maturity. IFRS does not specifically require any
of the deposit disclosures in Item 1406 of Regulation S-K.\153\ While
we acknowledge commenter feedback that U.S. GAAP disclosure
requirements are similar to the uninsured deposit disclosures, we
continue to believe the disaggregated maturity categories provide
material information about deposits that are more prone to withdrawals
if a registrant experiences financial difficulty, which may help
investors better evaluate potential risks to the registrant's short-
term liquidity position. While we acknowledge commenters' concerns that
disclosing only total uninsured deposits may present an incomplete
picture of a firm's liquidity risk, we believe the disclosure of
uninsured deposits, along with the other deposit disclosures required
by the final rules, as well as the liquidity disclosures required
within MD&A, would significantly mitigate these concerns.
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    \152\ ASC 942-405-50-1(a).
    \153\ See Section II.I of the Proposing Release.
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    Overall, in light of the revisions and clarifications we have made,
we believe the final rules provide transparency regarding a material
source of funding for bank and savings loan registrants, while
balancing any operational costs and burdens a registrant may incur in
providing this disclosure.\154\
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    \154\ See Section VII.C.i below.
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III. Certain Existing Guide 3 Disclosures That Would Not Be Codified in
Subpart 1400 of Regulation S-K

A. Return on Equity and Assets

    Item VI of Guide 3 calls for disclosure of four specific ratios for
each reported period, including return on assets, return on equity, a
dividend payout ratio, and an equity to assets ratio. We proposed not
to codify the requirement to disclose these ratios in Subpart 1400 of
Regulation S-K because these ratios are not unique to bank and savings
and loan registrants, and the Commission's guidance on MD&A already
requires registrants to identify and discuss key performance measures
when they are used to manage the business and would be material to
investors.\155\ Furthermore, the Commission recently issued additional
guidance on the disclosure of key performance indicators and metrics in
MD&A that highlights the requirement to provide disclosure that a
registrant believes is necessary to an understanding of its financial
condition, changes in financial condition, and results of
operations.\156\ We did not receive any commenter feedback on this
aspect of the proposal. For the reasons noted in the Proposing Release,
and in light of this recent guidance, we are adopting the rules as
proposed and are not codifying the requirement to disclose any of the
ratios currently called for by Item VI of Guide 3.
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    \155\ See Section III.A of the Proposing Release.
    \156\ See Commission Guidance on Management's Discussion and
Analysis of Financial Condition and Results of Operations, Release
No. 33-10751 (Jan. 30, 2020) (the ``2020 MD&A Interpretive
Release'').
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B. Short-Term Borrowings

    We proposed not to codify the short-term borrowing disclosure items
in Item VII of Guide 3 in their current form. Instead, we proposed to
codify as part of proposed Item 1402 of Regulation S-K the average
balance and related average rate paid for each major category of
interest-bearing liability disclosures currently called for by Item
I.B.1 and I.B.3 of Guide 3, and to further require disaggregation of
the major

categories of interest-bearing liabilities to include those referenced
in Item VII of Guide 3 and Article 9 \157\ of Regulation S-X. We did
not propose to codify any of the other existing disclosure items in
Item VII because we believed these are substantially covered by
existing Commission rules \158\ and the financial statement
requirements.\159\ We did not receive any commenter feedback on this
aspect of the proposal, and are adopting the rules as proposed for the
reasons noted in the Proposing Release.
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    \157\ 17 CFR 210.9-01 through 9-07. Article 9 sets forth the
form and content of the consolidated financial statements filed for
bank holding companies and for any financial statements of banks
that are included in filings with the Commission.
    \158\ In the Proposing Release, the Commission referred to the
Commission Guidance on Presentation of Liquidity and Capital
Resources Disclosures in Management's Discussion and Analysis,
Release No. 33-9144 (Sept. 17, 2010) [75 FR 59893 (Sept. 28, 2010)],
as support for the idea that Item 303 of Regulation S-K elicits
disclosure of any trends or uncertainties that may arise related to
the maximum month-end amounts of short-term borrowings called for by
Item VII.2. See Section III.B.i of the Proposing Release.
    \159\ See Section II.F.i discussing the proposed codification of
the requirement to disclose the average amount outstanding during
the period and the interest paid on such amount, and the average
rate paid, for each major category of interest-bearing liability.
Article 9 of Regulation S-X requires disclosure of the period-end
amount outstanding by the short-term borrowing categories.
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IV. Changes to Article 9 of Regulation S-X

    Rule 9-01 of Regulation S-X states that Article 9 is applicable to
the consolidated financial statements filed for BHCs and to any
financial statements of banks that are included in filings with the
Commission, although other registrants with material lending and
deposit activities also apply the rules in Article 9 of Regulation S-
X.\160\ In light of our proposal to codify the scope of Subpart 1400 of
Regulation S-K to include savings and loan associations and savings and
loan holding companies, we proposed to amend Rule 9-01 of Regulation S-
X to include these registrants within the scope of Article 9 of
Regulation S-X as well. However, we also noted that, if registrants
other than bank and savings and loan registrants believe the Article 9
presentation would be material to an understanding of their business,
the proposed rules would not preclude that presentation for those
registrants. Additionally, we proposed deleting Rule 9-03(7)(a)-(c) of
Regulation S-X due to overlapping requirements with both U.S. GAAP
\161\ and IFRS.\162\ We did not receive any commenter feedback on this
aspect of the proposal, and are adopting the amendments as proposed for
the reasons noted in the Proposing Release.
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    \160\ See supra note 5.
    \161\ See supra note 85.
    \162\ See supra note 80.
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V. Compliance Date

    After considering feedback from commenters,\163\ registrants will
be required to apply the final rules for the first fiscal year ending
on or after December 15, 2021 (the ``mandatory compliance date'').
Registrants filing initial registration statements are not required to
apply the final rules until an initial registration statement is first
filed containing financial statements for a period on or after the
mandatory compliance date. Until the mandatory compliance date, bank
and savings and loan registrants should continue to refer to Guide 3
for assistance in meeting their disclosure obligations.
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    \163\ See letters from BPI/SIFMA and KPMG. BPI/SIFMA recommended
that the Commission not require the rules to be effective until at
least the December 31, 2021 Form 10-K to allow registrants
sufficient time to source and test the information and ensure the
information produced is accurate and reliable. KPMG encouraged the
Commission to provide detailed transition guidance that includes
consideration of the timing of the rule's effective date and
approaching relevant filing deadlines.
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    Voluntary early compliance with the final rules is permitted \164\
in advance of the registrant's mandatory compliance date, provided that
the final rules are applied in their entirety from the date of early
compliance.
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    \164\ To the extent that registrants have questions about
application of the rules in connection with early compliance, they
should reach out to Commission staff for additional transition
guidance.
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VI. Other Matters

    If any of the provisions of these rules, or the application thereof
to any person or circumstance, is held to be invalid, such invalidity
shall not affect other provisions or application of such provisions to
other persons or circumstances that can be given effect without the
invalid provisions or application.
    Pursuant to the Congressional Review Act,\165\ the Office of
Information and Regulatory Affairs has designated these rules as not a
``major rule,'' as defined by 5 U.S.C. 804(2).
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    \165\ 5 U.S.C. 801 et seq.
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VII. Economic Analysis

A. Introduction