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[author: Chris van Heerden]*
Is one of the universe’s greatest mysteries about to fade? This comes as US banking regulators have issued a request for comment on proposed changes to the call reporting form and process that would require more detailed disclosure of loans to private equity funds. This is one of the questions asked.
By way of background, a consolidated report of condition and income, or call report, is required to be filed quarterly by all U.S. banks and savings associations, as well as U.S. branches of foreign banks. These reports summarize key indicators of financial position and income in a standardized manner that allows for aggregation and comparison between financial institutions. In reality, extracting meaningful information from call reports once recorded is another matter, but expect updates on this in the near future in FFF.
Among the Cole Report’s loan classification categories, loans to non-deposit financial institutions (NDFIs) are a relatively recent addition, added in 2010. NDFI loans are an umbrella category and include loans to insurance companies, BDCs, REITs, and mortgage lenders. , market financiers, private funds, and many more. Generally reported in this category.
As proposed, the call report update updates the loan categories to NDFIs to include (1) loans to mortgage credit intermediaries, (2) loans to business credit intermediaries, and (3) private Loans to equity funds, (4) Loans to consumer financial intermediaries, and (5) Other loans to non-deposit financial institutions.
In terms of impact, the first-order impact is limited to disclosure, but second-order impacts may follow. The additional information will allow regulators to take a closer look at outliers in terms of market share and loan concentration. Peer analysis could also be improved. The proposal would apply to institutions with assets of $10 billion or more. The comment period runs until February 26, 2024, and the revised version is proposed to be effective for the reporting period of June 30, 2024.
Let’s return to the mysteries of the universe. A natural question is whether the new data provides a more empirical approach to defining the size of the US fund financial market. From what we’ve read, the short answer is “not completely.” First, loan exposures of non-US banks registered outside of US branches are not captured. Second, the term “private equity” is not currently defined in this proposal. Without further clarification, the lines between newly proposed subcategories (e.g., “private equity” and “other”) may become blurred and the final market size may not be estimated. . Of course, definitions can be clarified during the notice and comment process or spelled out in the filing instructions. stay tuned.
*Director | Fund Finance
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