FDIC Federal Register Citations

Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th and C Streets, N.W.
Washington, D.C. 20551

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal Division
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429

Re:Consolidated Reports of Condition & Income 7100-0036
Notice and Request for Comment

Ladies and Gentlemen:

Citigroup appreciates the opportunity to comment on the proposed revisions regarding subprime lending (the "proposal") to the Consolidated Reports of Condition and Income (Call Report) by the Office of the Comptroller of the Currency (the "OCC"), the Board of Governors of the Federal Reserve System (the "Board"), and the Federal Deposit Insurance Corporation (the "FDIC"; together with the OCC and the Board, the "Agencies").

The proposal indicates that the Agencies will utilize the subprime lending data to better plan their examination of banks and to monitor changes in and performance of subprime lending programs at banking institutions. Citigroup suggests that a more effective approach to monitor subprime lending data for supervisory purposes would be to review the underwriting standards, other internal risk management controls, and the overall lending process at institutions. If however, the regulators decide to proceed with the proposed disclosures, our specific recommendations on the proposal are presented below.

Definitions of Subprime Loans and Subprime Lending Program

Citigroup is encouraged by the progress that has been made in defining subprime lending and subprime lending programs. However, we recommend that the Agencies continue to refine these definitions going forward. While acknowledging the difficult and complex nature of monitoring this type of lending, Citigroup believes that in order for there to be consistent financial disclosure and comparability across lending institutions more uniform definitions of subprime loans and subprime lending programs will need to evolve. While the proposal details many credit characteristics of subprime borrowers and subprime loans, it also indicates that this "list is illustrative rather than exhaustive and does not define specific parameters for all subprime borrowers." The proposal also states, institutions that have identified borrowers as "subprime" based on their own internal rating systems should be reported as such. The subjectivity of these defining criteria will limit the ability for consistency and comparability between institutions, and of even greater risk and concern, may result in inaccurate conclusions being drawn from the data. Citigroup recommends that the definition continue to be refined to ensure accurate and consistent reporting across institutions.

Citigroup is in agreement with both the materiality thresholds for detailed disclosures and the proposal to limit the scope of reporting on subprime activity to programs rather than individual loans. However, similar to our recommendations concerning the definition of subprime, Citigroup recognizes the potential risks with inconsistent application of the term "program" across institutions.

Confidentiality of the Subprime Lending Schedule

Citigroup strongly agrees with the Agencies' proposal that the information in this schedule be accorded confidential treatment on an individual institution basis. The supervisory and examination, rather than statistical, focus of the data captured by the proposed schedule supports this treatment. Additionally, we concur that confidentiality should remain in effect until there is a standard industry-wide approach to the "subprime" or "program" definitions since failure to do so could result in misinterpretation of the data by the public. In addition to possible improper interpretation of the data, the failure to maintain confidential treatment will also result in placing banking institutions at a competitive disadvantage to those lending organizations not supervised by the banking regulators, and not subject to the required disclosures. Accordingly, Citigroup recommends that the proposed schedule be granted permanent confidential treatment, similar to what has been accorded for fiduciary and related services income as disclosed on schedule RC-T - Fiduciary and Related Services.

Timing of Effectiveness and Implementation

As the proposal states "there is no standard industry-wide approach to the definitions of either subprime loans or sub-prime lending programs, indicating that the meanings of these terms are institution specific. Until uniform definitions of subprime loans and subprime lending programs are developed, it would be difficult for banks to automate the collection of this type of data. Therefore, reporting institutions may need to manually gather the data, which will be operationally cumbersome. Accordingly Citigroup would recommend that the agencies allow sufficient lead-time ( not less than two reporting quarters)for implementation of any approved reporting changes.

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We would be pleased to discuss these comments with you at your convenience.

Sincerely,
Edward J. Schneider
Vice President-Citibank
212-559-1073