What Happened to the “Short” in Short Form Call Report?
It’s the law of the land. After years of an ICBA initiated campaign to streamline the Call Report filing process for community banks, the Congress listened. The Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) mandates that the nation’s federal bank regulatory agencies develop a “short form” call report for the first and third calendar quarters for all FDIC insured banks under $5 billion in consolidated assets.
In 21st century America such a statute is just common sense. There are no other small privately-owned businesses in America that are required to submit a 50+ page report on every minute detail of financial activities and equity position every 90 days – whether the information has materially changed or not!
To be fair, Federal bank regulatory agencies have “shortened” the previously 80+page quarterly call report to about 54 pages, a reduction of over two dozen pages. However, the main reason those pages were eliminated was that nearly all the data sought on those pages by the banking agencies did not apply to the nation’s community banks in the first place. So, with the elimination of those pages, a process that previously took 52 hours per quarter to complete (equivalent to just over one full work week for one person per quarter) now takes only 50.5 hours per quarter to complete for banks under $1 billion in assets according to the banking agencies. Time to pop the champagne cork, everyone! Small banks can now save a little over an hour every three months with the new and improved quarterly call report. Somehow, I don’t think that is what Congress had in mind when it ordered the regulatory agencies to create a short form call report for small community banks.
And what defies common sense even more is that other non-bank financial businesses offering the same products and services to the same consumers are not required to file these overly burdensome reports – only commercial banks are required to do so. And worse, the smallest commercial banks in the nation are required to file basically the same report as the largest banks in the world! And to add insult to injury, community banks are only asking to file the short form call reports twice a year – not all four quarters. Year-end and mid-year reports would still be the full long form call report.
Do Federal bank regulators seriously believe that a $50 million-dollar asset bank or even a $5 billion-dollar asset bank has a financial profile so dangerous and volatile that the bank must fill out an over 50-page financial report to regulators every 90 days? What is so vital in the typical community bank that regulators must drill down in minute detail into every financial facet of the bank every 90 days? Remember, every commercial bank in the nation, large and small is also examined and audited annually (and many times more often) by both Federal and state regulators and independent audit firms. So, the quarterly call reports are in addition to those audits and examinations.
Can we all get real? Congress gets it. Congress understood that requiring small banks to fill out reams of paperwork on every single financial item of the bank every 90 days was a waste of bank management time, and frankly regulatory authority time. There are much more productive uses of bank management time and regulatory time than pouring over a financial snapshot of a $200 million-dollar asset bank every 90 days.
Here’s an idea. How about a “no material financial changes” report filed at the end of the first and third quarters? It would be an attestation by the board and senior management of the bank that nothing material has changed financially in the bank since the filing of the most recent long form call report (year end and mid-year). That should do it, right?
But such an approach or something close to it is apparently unacceptable to Federal bank regulators. They cut a couple of dozen pages that mostly didn’t apply to community banks and believe that satisfies the requirement for a “short form” call report. Never mind that the time it takes for a small bank to fill out the report is essentially the same as it was before they reduced the number of pages. Again, is this what Congress really intended? I think not.
It is high time that our bank regulatory agencies recognize that in 2019 America the banking system has evolved to a point where anachronisms like 50+ page quarterly call reports every 90 days for small commercial banks makes absolutely no sense at all.