FFIEC Annual Report 1999

Task Force on Surveillance Systems meeting.
activities. In particular, the guidance
stresses the specific expectation
that any securitization-related
retained interest claimed and
booked by a financial institution
will be supported by documentation
of the interest’s fair value,
determined by using reasonable,
conservative valuation assumptions
that can be objectively verified.
Retained interests that lack such
objectively verifiable support
or that fail to meet the supervisory
standards set forth in the
guidance will be classified as loss
and disallowed as assets of the
institution for regulatory capital
purposes.
High LTV Residential Real Estate
Lending
In October 1999, the four banking
agencies issued guidance on high
loan-to-value residential real estate
lending. The guidance discusses the
credit risks associated with such
lending and the controls needed to
manage those risks. The guidance
also clarifies that the agencies’ 1992
real estate lending standards apply
to these transactions.
20
Task Force on Surveillance
Systems
The Task Force on Surveillance Systems
oversees the development and
implementation of uniform interagency
surveillance and monitoring
systems. Historically, the task
force’s primary objective has been
to develop and produce the Uniform
Bank Performance Report
(UBPR). This report is an analytical
tool created for supervisory purposes.
It is used to monitor the condition
and performance of banking
institutions and to identify potential
or emerging problems in those financial
institutions. A UBPR is produced
quarterly for each commercial
bank and insured savings bank
in the United States that is supervised
by the FRB, the FDIC, or the
OCC.
During 1999, the Surveillance Task
Force and Surveillance Working
Group completed the following
projects:
Revised the earnings and profitability
analysis to reflect the special
tax status of banks electing
Subchapter S treatment for
income taxes. To improve the
earnings analysis of such banks
the UBPR includes an estimate of
the taxes. This new computation
should enhance bank-to-bank
analysis.
Revised peer group analysis in
the UBPR to reflect line-of-business
peer groups. This addition
is part of an ongoing project to
revamp peer group definitions.
The task force has undertaken
this change to make the peer
grouping used in the UBPR more
reflective of a changing banking
industry.
Revised the risk-based capital
calculation to include regulatory
changes to the treatment of accumulated
gain or loss on cash
flow hedges and made other minor
changes to capital analysis.
Reviewed the combined Call
Report proposed by the Reports
Task Force and performed an
extensive analysis of all UBPR
ratios to determine impact. Coordinated
survey responses from
state bank supervisors on this
project.
Tested the developmental version
of the project to place the
UBPR on the public web site.
Agency involvement in Y2K
issues resulted in the movement
of final implementation to 2000.
This project was approved by the
Council in 1998.
Produced and distributed four
quarterly versions of the UBPR
ahead of schedule. Each federal
banking agency received UBPR
data in electronic format. State
banking agencies were provided
two sets of printed UBPRs for
banks in their respective states.
It is anticipated that some of the
state banking agencies that are
developing information systems
may ultimately substitute UBPR
data from either web site or tape
delivery for the printed copies
currently provided. Additionally,
printed UBPR reports were
sent to all banks. Several thou-