SEC adopts rules to update statistical disclosures for banking registrants

September 17, 2020

Securities Law Alert

Author(s): Lloyd H. Spencer, Bohao Zhou

In this alert, we discuss what businesses and investors need to know about the Securities and Exchange Commission’s rules to update and expand the statistical disclosure requirements for banks and savings and loans, and the holding companies of such registrants.

On September 11, 2020, the Securities and Exchange Commission (SEC) adopted rules to update and expand the statistical disclosure requirements for banks and savings and loans, and the holding companies of such registrants (banking registrants). The SEC updated and codified certain disclosure items from Industry Guide 3, Statistical Disclosure by Bank Holding Companies (Guide 3), and eliminated other Guide 3 disclosure items that overlap with SEC rules, U.S. Generally Accepted Accounting Principles (U.S. GAAP), or International Financial Reporting Standards (IFRS). The codified disclosure requirements are relocated to the new subpart 1400 of Regulation S-K, and Guide 3 will be rescinded effective January 1, 2023. In addition, the SEC also amended Rule 9-01 of Regulation S-X to include savings and loan associations and savings and loan holding companies within the scope of Article 9 of Regulation S-X.

Currently, banking registrants provide many disclosures in response to the items set forth in Guide 3, which are not SEC rules and have not been substantively updated for more than 30 years. The update and codification of Guide 3 reflect the significant financial reporting changes that have taken place for banking registrants since Guide 3 was last updated. While currently, the Guide 3 guidelines represent staff policies and practices, this codification will elevate them to SEC rules. This action is also part of the SEC’s ongoing Disclosure Effectiveness Initiative to consider ways to improve disclosure requirements for the benefit of investors and registrants.

Update and codification of Guide 3 in new subpart 1400 of Regulation S-K

The codification of the updated Guide 3 disclosure items is consistent with the approach the SEC had taken when it modernized other Industry Guides. The new Subpart 1400 of Regulation S-K will apply to banking registrants, domestic and foreign. Subpart 1400 reduces the “reporting period” required by Guide 3. As opposed to the three and five-year requirements of Guide 3, the Subpart 1400 “reporting period” is each annual period for which SEC rules require a registrant to provide financial statements and for any interim period when there is a material change in the information or the trend evidenced by the information.

Banking registrants are not required to include Subpart 1400 disclosures in the notes to the financial statements. Consequently, the Subpart 1400 disclosures will not be subject to audit, nor will they be subject to the SEC’s requirement to file financial statements in a machine-readable format using XBRL.

The codified updated Guide 3 requirements call for disclosure of the following areas: (i) distribution of assets, liabilities and stockholders’ equity, interest rates, and interest differential (Item 1402), (ii) investment portfolios (Item 1403), (iii) loan portfolios (Item 1404), (iv) allowance for credit losses (Item 1405), and (v) deposits (Item 1406).

Distribution of assets, liabilities and stockholders’ equity; interest rates, and interest differential

The SEC codified in new 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, including the disaggregation of all major categories of interest-earning assets and interest-bearing liabilities. New Item 1402 requires banking registrants to further disaggregate the categories of interest-earning assets and interest-bearing liabilities required to be disclosed, if material, by separating (i) federal funds sold from securities purchased with agreements to resell and (ii) federal funds purchased from securities sold under agreements to repurchase and to disaggregate commercial paper.

Investment portfolio

New Item 1403 of Regulation S-K requires a banking registrant to disclose the weighted average yield of each category of debt securities not carried at fair value through earnings for which disclosure is required in the financial statements, presented for a specified range of maturities (i.e., due one year or less, within five years, within five to ten years, and after ten years). In this regard, the new SEC rules use the categories required by U.S. GAAP and IFRS rather than those categories currently called for by Item II.B of Guide 3.

New Item 1403 does not require the following existing disclosure items in Item II of Guide 3: (i) book value information, (ii) the maturity analysis of book value information, and (iii) the disclosures related to investments exceeding 10% of stockholders’ equity, because these would substantially overlap with U.S. GAAP and IFRS disclosure requirements. This is intended to provide investors with information to evaluate more effectively the performance of the portfolio and enhance the consistency and usefulness of the registrant’s investment portfolio disclosures.

Loan portfolio

New Item 1404(a) of Regulation S-K codifies the maturity by loan category disclosure currently called for by Item III.B of Guide 3, but the loan categories are based on the loan categories required in the registrant’s U.S. GAAP or IFRS financial statements. The final rules do not exclude any loan categories (real estate-mortgage, installment loans to individuals, and lease financing) or permit aggregation of other loan categories (foreign loans to governments and official institutions, banks, and other financial institutions, commercial and industrial, and other loans) currently provided in Item III.B of Guide 3. However, new Item 1404(a) requires additional maturity categories of (i) after five years through 15 years and (ii) after 15 years.

tem 1404(b) codifies the disclosure items in Item III.B of the Guide 3 regarding the total amount of loans due after one year that have (i) predetermined interest rates or (ii) 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.

The final rules do not codify the following Guide 3 disclosure items because of their overlap with SEC rules, U.S. GAAP, or IFRS: (i) the loan category disclosures called for by Item III.A of Guide 3, (ii) the loan portfolio risk elements disclosure called for by Item III.C, (iii) and the other interest-bearing assets disclosure called for by Item III.D.

Allowance for credit losses

New Item 1405 of Regulation S-K requires 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. Item 1405 also requires 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.

New Item 1405 also requires a registrant to disclose, for each reported period, the following new credit ratios on a consolidated basis, along with each of the components used in their calculations: (i) allowance for credit losses to total loans, (ii) nonaccrual loans to total loans, and (iii) allowance for credit losses to nonaccrual loans. Registrants will also be required to discuss the factors that drove material changes in the ratios or related components during the periods presented.


New Item 1406 of Regulation S-K codifies the majority of the disclosure items in Item V of Guide 3, with some revisions. Instead of requiring disclosure of time deposits of a certain dollar threshold, Item 1406 requires a registrant to disclose the amount of uninsured deposits. It requires separate presentation of  U.S. time deposits in amounts in excess of the FDIC insurance limit and  time deposits that are otherwise uninsured, by time remaining until maturity of (i) three months or less (ii) over three through six months, (iii) over six through 12 months, and (iv) over 12 months.

The new rules also 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, provided that the estimates are 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.

Certain existing Guide 3 disclosure items to be eliminated

The SEC decided not to codify Item VI of Guide 3 that 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. The SEC noted that these ratios are not unique to banking registrants, and the SEC’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.

The SEC also did not codify the existing disclosure items in Item VII with respect to short-term borrowings. New Item 1402 of Regulation S-K, however, requires disaggregation of the major categories of interest-bearing liabilities to include those referenced in Item VII of Guide 3. The other disclosure items in Item VII were not codified because those are substantially covered by existing SEC rules and the financial statement requirements.

The new rules will be effective 30 days after publication in the Federal Register and will apply to fiscal years ending on or after December 15, 2021. Voluntary compliance with the new rules will be accepted in advance of the mandatory compliance date, provided that the final rules are applied in their entirety.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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