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                                                                            February 25, 2008


Ms. Jennifer J. Johnson                             Office of the Comptroller of the Currency
Secretary                                           Communications Division
Board of Governors of the Federal Reserve           Public Information Room
 System                                             250 E Street, S.W.
20th Street and Constitution Avenue, N.W.           Mail Stop 1-5
Washington, D.C. 20551                              Washington, DC 20219
                                                    Attention: 1557-NEW
Re: FFIEC 101
                                                    Re: FFIEC 101

Ms. Valerie Best                                    Information Collection Comments
Supervisory Counsel                                 Chief Counsel's Office
Attention: Comments Room F-1070                     Office of Thrift Supervision
Federal Deposit Insurance Corporation               1700 G Street, N.W.
550 17th Street, N.W.                               Washington, DC 20552
Washington, DC 20429
                                                    Attention: FFIEC 101
Re: FFIEC 101

Re:    Joint Notice of Proposed Advanced Capital Adequacy Framework Regulatory
       Reporting Requirements Relating to Basel II (FFIEC 101)

Ladies and Gentlemen:

               The Clearing House Association L.L.C. ("The Clearing House") 1 and the
American Bankers Association ("ABA") 2 appreciate the opportunity to comment on the
proposed revisions (the "proposal") to the Regulatory Reporting Requirements relating to
Basel II ("FFIEC 101") published by the Office of the Comptroller of the Currency, the Board of

1
       The Clearing House is an association of major commercial banks. Its members include: ABN AMRO
       Bank N.V.; Bank of America, National Association; The Bank of New York; Citibank, N.A.; Deutsche
       Bank Trust Company Americas; HSBC Bank USA, National Association; JPMorgan Chase Bank, National
       Association; UBS AG; U.S. Bank National Association; Wachovia Bank, National Association; and Wells
       Fargo Bank, National Association.
2
       ABA brings together banks of all sizes and charters into one association. Its members ­ the majority of
       which are banks with less than $125 million in assets ­ represent over 95 percent of the industry's
       $12.7 trillion in assets. ABA also consulted with the other "core" banking firms on the proposal.
Board of Governors of the Federal Reserve System                                        -2-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the
Office of Thrift Supervision (together, the "Agencies"). Our comments on this proposal, which
were developed in consultation with representatives from all the "core" Basel II banking firms,
are presented below.

A)     Calculation of the 6% scaling factor for credit risk assets:

        On the recently released draft reporting schedules, Schedule B, Line 28 "Total Credit
Risk-Weighted Assets (Cell G27 x 1.06)", indicates that the total credit risk-weighted assets on
that schedule would be subject to the 6% gross up factor. Included in lines 24 to 26 of Schedule
B are three types of "Other Assets" which we believe should not be subject to this gross up:
"Unsettled Transactions", "Assets not included in a Defined Exposure Category", and
"Non Material Portfolios of Exposures". These exposures are subject to Basel I-type risk
weightings, as they are calculated based on mandated percentages from the regulators, or
conservative estimates, and are not calculated from internal models.

        The U.S. Basel II final rule defines Credit Risk-Weighted Assets as "1.06 multiplied by
the sum of: (1) Total wholesale and retail risk-weighted assets; (2) Risk-weighted assets for
securitization exposures; and (3) Risk-weighted assets for equity exposures". This excludes the
"Other Assets" that have mandated risk weights. We believe exposures in the "Other Assets"
category should not be included within the x1.06 scalar for the following reasons:

      (i)    These exposures are not captured within the defined Basel II credit risk exposure
             categories, and/or
      (ii)   These exposures have been mandated to receive Basel I-type risk weightings, or
     (iii)   Banking organizations expect to make use of conservative risk weighting defaults to
             derive risk-weighted assets for certain exposures where the portfolios are either de
             minimus or where some data elements are not readily verifiable.

We believe that the scalar was intended to compensate for the use of internal estimations that are
inherent in the Advanced Internal Ratings-Based approach introduced by Basel II, and were not
intended to adjust other types of exposures.

        Therefore, we request that the Agencies give consideration on Schedule B to only
applying the x1.06 scalar to the sum of (1) Total wholesale and retail risk-weighted assets;
(2) Risk-weighted assets for securitization exposures; and (3) Risk-weighted assets for equity
exposures. In addition, we request that the Agencies clarify why the 6% scaling factor should be
applied in cases where mandated percentages are used in the Ratings Based Approach for
securitization exposures.
Board of Governors of the Federal Reserve System                                         -3-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



B)   Disclosure requirements of Schedules A & B by certain subsidiaries:

       The final rules issued on December 7, 2007 introduced the requirement that all material
U.S. banking subsidiaries of a Bank Holding Company ("BHC") would have to implement the
Advanced Approaches if their BHC is required to implement the Basel II Advanced Approaches.
The instructions for the FFIEC 101 report require public disclosure of Schedules A and B by all
material subsidiaries of U.S. banks subject to the Advanced Approaches, not just the BHC. The
only apparent reason for public disclosure by these smaller subsidiaries is that the Advanced
Approaches have been mandated because they are U.S. banking subsidiaries. Therefore, we seek
confirmation or clarification that U.S. banking subsidiaries that do not qualify to implement the
Advanced Approaches due to their own small size, but which are subsidiaries of "advanced"
method BHCs, are exempt from publication of Schedules A and B. This would promote
consistent treatment of banks of similar size and not impose additional reporting costs.

C)   Schedules C to G require reporting of weighted average LGD before consideration of
     eligible guarantees (and credit derivatives) and require the effect of PD substitution
     and LGD adjustment approaches on RWA:

        The impact of guarantees and credit derivatives on the calculation of risk-weighted assets
(column I for Schedules C to G) is a U.S.-only requirement for Basel II. We believe this
requirement would be unduly burdensome, and in our view, would be of uncertain value to the
extent that it requires a recalculation based on the presence of an eligible guarantee.

        The clarification in the notice of January 24, 2008 allows banks to omit the impact of
eligible guarantees where the PD substitution approach is taken. While this is welcome, we
believe this clarification still requires banks to calculate the impact of guarantees for obligors
with part of their facilities guaranteed. This reduces the volume but does nothing to reduce the
number of systems changes and complex data analysis required. The identification and
calculation would be unduly costly in relation to the result, and hence, we believe, as set out
below, that there is almost no value to the result.

        While eligible guarantees may well cover a specific facility (e.g., a leasing contract where
a lessor covers the risk associated with a new item of equipment, or an export credit guarantee,
or a wealthy private individual guaranteeing a particular facility for a family-owned company),
they may not always cover the whole exposure. In addition, situations arise where a parent will
guarantee a subsidiary in a developing country, and without the guarantee, the rating of the
exposure would be capped at the sovereign rating of the country. Banking organizations are
asked to strip out the impact of these guarantees and recalculate the risk without the guarantee.
Calculating the risks associated without such guarantees would require a re-engineering of credit
risk records and could require changes to credit risk practices by allocating risk to the obligor
rather than the guarantor. This would require changes to established credit risk recording
systems as these facilities would currently be aggregated for risk purposes with those of the
Board of Governors of the Federal Reserve System                                          -4-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



provider of the guarantee. We note that the Canadian regulators have dealt with this problem by
requiring only the related EAD amounts, which does not require additional processing.

        We also question the benefit of such information. While we accept that it may well be
relevant to report the impact of credit derivatives, the additional complexity and cost of backing
out eligible guarantees seems very uncertain. If the Agencies insist that this type of information
is significant, then we believe the only practical approach is to ask for related EAD amounts and
not require "with and without" risk-weighted asset calculations. However, we would prefer to
eliminate eligible guarantees from this reportable item and restrict it to reporting just the impact
of the hedge received from credit derivatives.

   For example: Bank ABC has an exposure of $100mm to a parent rated A which
   includes a guarantee over $10mm to a subsidiary in a developing country whose
   rating is capped by the sovereign rating at BB+. Bank ABC also has $5mm already
   advanced locally to that subsidiary with all amounts due from the subsidiary secured
   on local assets. Assuming a maturity of 2.5 years and a LGD of 35% unsecured and
   20% secured, our calculations would be:


                                                Internal              Adjusted
                                              Measurement         without Guarantee
           Average LGD                           34.3%                    32.9%

           Risk-Weighted Assets                    19.0                     21.2

           Impact of Parent Guarantee                                       +2.2


        We question whether the additional information provided from the calculation by
stripping out the impact of the guarantee is of any significant value. In this case, the LGD is
reduced but risk-weighted assets increase. We believe this information is of little practical value
especially when aggregated across many obligors, and particularly as the impact on LGD can be
very different from the impact on risk-weighted assets, which could result in misleading trends in
the information when changes in the components occur. We believe it would be far better to
look for risk concentrations within the actual risk-weighted asset numbers as they can result in
significant additional risk, rather than require banks to undertake this unnecessary calculation at
the cost of considerable additional systems requirements and recordkeeping complexity.
Board of Governors of the Federal Reserve System                                       -5-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



D)   Retail schedules still require weighted average bureau scores, but the Agencies
     acknowledge that banks may not have all the bureau data and so can omit those
     accounts for which the data is not available:

         Schedules K to O require the weighted average bureau score to be reported to the extent
that it is available. However, the bureau score is not always updated, especially where an
internal model is used as a determinant of original decision making. In addition, the cost to
banks of maintaining up-to-date bureau scores for all U.S. borrowers would be significantly out
of proportion to any business benefit. Since the reporting instructions indicate that the bureau
score can be omitted from the average calculation where it is not available (e.g., international
portfolios) and many approximations are allowed, we believe this information will fail to provide
useful data. Even the trend in the average bureau score is unlikely to provide useful data, given
the limitations of the bureau score not being updated and not providing for a wide range of
international portfolios. Moreover, since this information will not be updated, it will not
necessarily reflect the changes in risk profile within the segments reported. Thus, we suggest
that the Agencies seriously reconsider requiring average bureau scores at all.

E)   For mortgages, the reporting schedules still require weighted average age based on
     date of origination, not months on book. The Agencies have confirmed in their notice
     of January 24, 2008 that banks have to obtain the original origination date for
     mortgages purchased even when that measure is not currently used either to segment
     the portfolio or to manage the mortgage:

        Obtaining the origination date of all mortgages so that a bank can complete the reporting
line on Schedules K, L, and M would be extremely burdensome ­ particularly since this
information is not used by banks internally to evaluate the risk of their mortgage portfolios.
When managing a mortgage, the months on book is not as good an indicator as to whether a bank
will receive full payment for the mortgage as the LTV, the current level of delinquency of the
mortgage, how much longer the loan is to remain outstanding in order for it to be paid off, or the
financial circumstances of the mortgagee. Therefore, we question the Agencies' need for data
going back to origination. To obtain this data, banks will need to access files of mortgages
purchased from other institutions, which will often be in remote storage, and a typical cost would
be approximately $25 per mortgage when taking into account the time to obtain the files and
input the data, and the resulting overhead costs. Therefore, we request that the Agencies
reconsider this decision.
Board of Governors of the Federal Reserve System                                         -6-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



F)   Schedule S - Operational Risk:

        The reporting instructions for Schedule S require the reporting of data "used in
calculating the risk-based requirement for operational risk". In Schedule S, capital changes only
when the model is updated. If the model input is not updated from the prior period, then capital
is unchanged. Therefore, we recommend that the Agencies require Schedule S to be filed on an
annual basis or when the model input is updated.

G)   Schedule B, Lines 21-23 - Equity Exposures:

        According to the preamble section V. F. 1. "Introduction and Exposure Measurement",
"The final rule clarifies the determination of the effective notional principal amount of unfunded
equity commitments. For an unfunded equity commitment that is unconditional, a bank must use
the notional amount of the commitment. If the unfunded equity commitment is conditional, the
bank must use its best estimate of the amount that would be funded during economic downturn
conditions."

       A bank may have certain unconditional, unfunded commitments related to private equity
funds and community development that might otherwise be reported in Column C "Total
Undrawn Amount". However, the Agencies appear to not require reporting of this data, as this
column is blocked for Equity in the current draft. We request clarification as to whether these
commitments should be reported on the proposed Schedule B, given that Column C is currently
shaded.

H)   Reporting due dates:

        The notice of January 24, 2008 provides that the FFIEC 101 schedules will be due 60
days following the end of a quarter during the parallel run period. Once a bank qualifies to use
the Advanced Approaches and enters the transitional floor period, the Agencies believe the bank
should have the ability to fully support regulatory capital calculations to coincide with the timing
of other financial disclosures. Accordingly, all schedules ­ not just Schedules A and B ­ must be
submitted within the same timeframes set forth in the reporting instructions for the Call Report
and FR Y-9C filed by banks and BHCs, respectively.

        As permitted by the final rule, a bank may provide a summary table on its website that
specifically indicates where all Pillar 3 disclosures may be found, including in its Form 10-K.
Form 10-Ks are not filed with the SEC until 60 days after year-end. This creates a timing issue
for certain disclosures that will be referenced from a disclosure matrix to a Form 10-K. As the
Agencies noted, some of the information in the FFIEC 101 overlaps with the Pillar 3
requirements. Therefore, such overlapping disclosures should be made consistent.
Board of Governors of the Federal Reserve System                                       -7-
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision



         We recommend delaying Basel II year-end reporting due dates to correspond with the
later of regulatory or SEC reporting due dates. Please refer to page 3 of the Appendix of The
Clearing House comment letter dated March 26, 2007 for further information.

I)    Lookback portfolios:

        The Agencies also mention that a separate document will be released for reporting under
"lookback" portfolio scenarios. We continue to object to any formal reporting requirements for
"lookbacks". Please refer to The Clearing House comment letter dated March 26, 2007 for
further information.

                             *       *      *       *      *        *

        We believe the above additional requirements add significantly to the cost of reporting
and do not provide the Agencies with much added value in terms of understanding the risks
within the portfolios or the way business is conducted in practice. We look forward to your
consideration of our views.
                                                     Sincerely yours,



                                                                .
Norman R. Nelson                                  Robert W. Strand
General Counsel                                   Senior Economist
The Clearing House Association L.L.C.             American Bankers Association