A Short History of Bank Call Reports

At the end of the calendar year, people who work in financial accounting roles at banks and other financial services organizations are increasingly focused on “closing the books” because for most banks, the fiscal year and the calendar year are synonymous. A key annual deliverable is the bank’s “statement of condition,” an accounting activity which dates to the nineteenth century.

In the age of gold coins and paper ledger books, compiling information was extremely time-consuming and labor-intensive. A spate of banking failures during the 1893 and 1907 recessions led to a call for more regulatory oversight of deposit-taking banks. The Office of the Controller of the Currency within the U.S. Treasury department began to issue a “call” for the reports of a bank’s financial condition on specific but irregular dates, leading to the colloquial term “call reports.” The irregular timing interjected the element of surprise and prohibited banks from temporarily improving their balance sheets through transitory transactions, still known to this day as “window dressing.”

Early call reports focused primarily on reporting “reserves,” such as gold coins and currency, and “liabilities,” such as demand deposits and time deposits. Details about earning assets, such as bonds and loans, were sparse.

The episodic nature of the external dissemination of detailed and timely information regarding a bank’s “statement of condition” was prevalent in the U.S. until the widespread and catastrophic bank failures at the onset of the Great Depression. The Federal Deposit Insurance Corporation (FDIC) was created by Congress in 1933, and bank call reports were required on a quarterly basis thereafter and heavily scrutinized for evidence of insolvency.

Today, the cornerstone of quarterly regulatory reporting of banks in the U.S. are “FFIEC 031/041: Consolidated Reports of Condition and Income (Call) Report” and “FR Y-9 Consolidated Financial Statement of Bank Holding Companies.” The preponderance of banks regulated by the Securities and Exchange Commission (SEC) are also required to publish a “10-Q” (quarterly unaudited financial statement) and “10-K” (annual audited financial statement), the latter complemented by a comprehensive management discussion of the business and financial condition.

More granular regular reporting of detailed banking activity is also required by regulators, such as the annual “Summary of Deposits,” required by the FDIC, in which banks report deposit balances at the branch level. In addition, loan-level information is required for compliance with the Home Mortgage Disclosure Act (HMDA), administered by the Consumer Financial Protection Bureau (CFPB).

The increasing breadth and complexity of regulatory reporting requires banks to have a disciplined approach to processing and consolidating financial transaction data on a holistic basis. Many of the world’s leading banks, including globally systematically important banks, rely on Teradata’s platform to facilitate financial entity reporting, often by leveraging the Teradata Banking Reference Architecture.

While originally designed for regulatory oversight, the vast amount of publicly disclosed information required by bank regulators can be efficiently repurposed to understand a given bank’s local deposit market share, risk appetite, liquidity risk, solvency risk, and financial performance relative to the bank’s peer group. One great resource for benchmarking is the FDIC Quarterly Banking Profile, a cornucopia of diagnostic summary reports on the “statement of condition” of banks in the U.S.