United States: SEC Proposes Update Of Statistical Disclosures For Bank And Savings And Loan Registrants, Replacing Industry Guide 3

Last Updated: September 27 2019
Article by Ryan Castillo, Jerry R. Marlatt and Anna T. Pinedo

On September 17, 2019, the Securities and Exchange Commission (SEC) proposed rules to update the statistical disclosures that bank and savings and loan registrants provide to investors.1 The proposed rules would rescind Industry Guide 3, Statistical Disclosure by Bank Holding Companies (Guide 3)2 , codify certain Guide 3 disclosures into a new Subpart 1400 of Regulation S-K, eliminate other Guide 3 disclosures that overlap with other SEC disclosure requirements, U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), and add certain credit ratio disclosure requirements.

According to the SEC, the proposed rules aim to streamline compliance efforts and decrease reporting burdens for registrants, and enhance comparability among issuers. The proposed changes also form part of the SEC's Division of Corporation Finance's (CorpFin) disclosure effectiveness initiative. Comments on the SEC proposals are due 60 days after the proposing release (Release) is published in the Federal Register.


Guide 3 was first published in 1976 as a "convenient reference" to the statistical disclosures sought by CorpFin in registration statements and other disclosure documents filed by bank holding companies (BHCs).3 In essence, Guide 3 calls for statistical disclosures related to interest-earning assets and interest-bearing liabilities of BHCs. These disclosures were designed to assist investors to evaluate loan portfolio risk characteristics, among other risks, to BHCs. Guide3 disclosures are commonly found in tabular form in the Description of Business or Management's Discussion and Analysis (MD&A) sections of a registrant's SEC filings.

While Guide 3 has been amended on a few occasions, its last substantive revision was more than 30 years ago, in 1986. Since then, a number of significant financial reporting changes have occurred, including the issuance of new accounting standards by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). In addition, especially since the financial crisis, the banking agencies have adopted a number of disclosure requirements for BHCs. Hence, in March 2017, the SEC published a request for comment seeking public input on possible changes to Guide 3.4 It noted that the financial services industry has dramatically changed since Guide 3 was published and consequently, existing guidance may not always reflect recent industry developments or changes in accounting standards related to financial and reporting requirements. The present Release echoes that same sentiment, considers feedback received from the March 2017 request for comment and sets outs the SEC's proposals, which we now summarize and discuss below.

Codification, Elimination and Addition

The SEC's proposals in the Release can be grouped into three main categories or action items: codification, elimination and addition.

First, certain Guide 3 disclosures would be updated and codified into a new Subpart 1400 of Regulation S-K. At present, Guide 3 and other industry guides do not constitute SEC rules, nor do they bear official SEC approval. Rather, they represent disclosure policies and practices followed by CorpFin to administer the federal securities laws, and are intended to assist registrants and their counsel in preparing disclosures. The SEC's proposal would elevate the required disclosures from CorpFin guidance to SEC rule. The SEC believes that codifying a new subpart under Regulation S-K would avoid uncertainty about whether or when the proposed disclosures are required, promote comparability of issuer disclosures, and increase the quality and availability of information.

Second, the proposed rules would not codify a number of Guide 3 disclosure items that currently overlap with existing SEC rules, GAAP or IFRS, in effect eliminating such Guide 3 disclosure requirements. For instance, some Guide 3 disclosure items are already required under Article 9 of Regulation S-X, which sets out the form and content of the consolidated financial statements to be filed by BHCs with the SEC.

Third, the SEC proposes to add three new credit ratios related to allowances for credit losses, which would be presented on a consolidated basis. The SEC would also adopt the existing ratio of net charge-offs to average loans outstanding disclosure requirement, but require it to be presented on a disaggregated basis, based on loan categories disclosed by registrants in theirfinancial statements. The SEC observes that these credit ratios are already commonly disclosed by bank and savings and loan registrants with material lending portfolios. Morever, such information is generally available to them without undue cost or burden as the ratio components are either provided in their Consolidated Reports of Condition and Income (Call Reports) filed with U.S. banking agencies or are required to be disclosed under U.S. GAAP.5

We take a closer look at each of the above categories, beginning with a discussion of the proposed to be codified, new Subpart 1400 of Regulation S-K (Subpart 1400).


1. Release No. 33-10688 (Sept. 17, 2019) (the "Release"), available at: http://bit.ly/2mC6NoD.

2. The existing Securities Act Industry Guide 3 and Securities Exchange Act Industry Guide 3 are available at: http://bit.ly/2kT1C3f.

3. Release No. 33-5735 (Aug. 31, 1976), 41 FR 39007.

4. Release No. 33-10321 (Mar. 1, 2017), available at: http://bit.ly/2l6nV5w ("March 2017 RFP"). The March 2017 RFP follows a concept release issued by the SEC in April 2016 that sought public comment on modernizing certain business and financial disclosure requirements in Regulation S-K, including whether the Industry Guides should be updated or codified into Regulation S-K. See Release No. 33-10064 (Apr. 13, 2016), available at: http://bit.ly/2m7QEqT.

5. See infra "—Item 1405: Allowance for Credit Losses" for a discussion of the additional credit ratios.

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