IIB Urges Bank Regulators to Revise FFIEC Country Exposure Reporting Framework

The Institute of International Bankers ("IIB") urged U.S. banking regulators to revise the Federal Financial Institutions Examination Council's "Country Exposure Report Form" ("FFIEC 009,") warning that flaws in the form distort foreign exposure data and drive disproportionate prudential standards.

FFIEC 009 collects "detailed information on the distribution, by country, of claims on foreigners held by certain U.S. banks, savings associations, bank holding companies, savings and loan holding companies, and intermediate holding companies." 

In a comment letter responding to the OCC, Federal Reserve, and FDIC’s joint notice to extend the FFIEC 009, the IIB argued that the form is not merely an administrative reporting tool but a critical driver of regulatory outcomes, as its data flows directly into systemic risk data risk report Form FR Y-15, and shapes how banks are categorized for prudential standards. The IIB warned that flaws in its methodology exaggerate foreign exposures and cross-jurisdictional activity, improperly pushing institutions into stricter categories and undermining principles of fairness and national treatment.

The IIB recommended the agencies take the following steps to improve the FFIEC 009 framework:

• Recognize True Exposure. The IIB urged the agencies to revise the FFIEC 009 to recognize U.S. collateral in securities financing transactions, such as reverse repos and securities borrowing, so that exposures backed by U.S. Treasuries are treated as domestic. The IIB also recommended allowing net rather than gross exposure reporting and ensuring guarantees and insurance are not penalized, noting that current rules inflate systemic risk metrics by overstating foreign exposure.
• Modify Treatment of U.S. Branches of International Banks. The IIB argued that exposures to U.S. branches of international banks should not be automatically classified as foreign. The IIB explained that this treatment distorts FR Y-15 systemic risk calculations, discourages domestic transactions, and violates principles of competitive equality and national treatment.
• Revise Treatment of Exposures to International and Regional Organizations. The IIB recommended that exposures to international and regional organizations, such as development banks, be classified as riskless or domestic. The IIB noted that capital rules assign these exposures a zero percent risk weight, and that treating them as foreign is inconsistent and inflates risk metrics.
• Address Multiple Party Issues. The IIB urged changes to how the FFIEC 009 handles transactions involving multiple guarantors, collateralized loan obligation co-issuers, and agent-based exposures. The IIB explained that current rules shift entire exposures to the highest-rated foreign guarantor or impose arbitrary foreign classifications, overstating actual risk and creating operational challenges.