SEC Updates Disclosure Requirements for Banking Registrants

On September 11, 2020, the SEC adopted rules to improve the readability of disclosures and eliminate overlapping duplicative disclosures for banking registrants.1 New subpart 1400 of Regulation S-K rescinds and replaces Industry Guide 3 (Guide 3). Guide 3 was first published over 40 years ago and has remained substantially unchanged while other SEC rules and accounting standards (both U.S. GAAP and IFRS) have evolved over time to address changes within the financial services industry.  The final rules codify or eliminate many of the Guide 3 disclosures, and add several new disclosures, including:

Codification of certain statistical disclosures under Guide 3 in the following areas:

  • Distribution of assets, liabilities, and stockholders’ equity, interest rates, and net interest margin;

  • Investments in debt securities;

  • Loan portfolio:

  • Allowance for credit losses; and

  • Deposits.

Elimination of certain existing Guide 3 disclosure requirements, including:

  • Disclosure of ratios, including the return on assets, return on equity, dividend payout, and equity to assets ratios;

  • Short-term borrowing disclosures beyond those retained in the new subpart 1400 of Regulation S-K, or required by GAAP; and

  • Other disclosures including book value information, the maturity analysis of book value information, certain loan category disclosures, loan portfolio risk elements, the analysis of loss experience and investments exceeding 10% of stockholders’ equity.

Addition of new disclosures, including:

  • Disaggregated categories of material interest-earning assets and liabilities, if material;

  • Weighted average yield for each range of maturities by each category of debt securities;

  • New categories of the maturity by loan category disclosure: 1) after five and through 15 years; 2) and after 15 years.  Disclosure of net charge-off ratio on a more disaggregated basis based on loan categories;

  • Credit ratios including allowance for credit losses to total loans, nonaccrual loans to total loans, and allowance for credit losses to nonaccrual loans; and

  • U.S. time deposits in excess of the FDIC insurance limit and uninsured time deposits by time remaining until maturity.

Subpart 1400 of Regulation S-K aligns the reporting periods required for disclosure with relevant annual periods required by the SEC’s rules for financial statements.  Additionally, disclosures in interim reports are only required if there are material changes from the most recent annual disclosures, or if there is evidence that a trend has occurred.
For more information on these amendments, please refer to the SEC press release and final rules.
The amendments will become effective 30 days after publication in the Federal Register and compliance is mandatory for fiscal years ending on or after December 15, 2021. The new rules may be applied voluntarily prior to the mandatory compliance date.  Guide 3 will be rescinded effective January 1, 2023. 

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1 The rules apply to bank holding companies, banks, savings and loan holding companies, and savings and loan associations.