One of the major problems associated with the term "subprime" is that there are no specific criteria by which to define subprime assets for reporting purposes.
However, a change to the quarterly call report, expected to be released in late April, suggests the regulators have come up with a method for defining subprime, said one industry specialist.
The plan is said to add 80 questions concerning securitization to the call report, which is the financial set of information all federally insured banks are required to report each quarter. Of the 80 questions, 18 will address subprime assets.
"It had been a goal and problem with the FDIC since the failure of certain banks, to define subprime," said one market source, who noted First National Bank of Keystone as an example. "To require banks to report on subprime assets is fine, but they have to define it."
"There has been an ongoing discussion among the agencies about how subprime loans should be defined for reporting purposes, and we expect to be requesting comment from banks and the public about the definition, once the call report proposal is issued," said a source at one of the regulatory agencies.
The most recent and specific definition of subprime lending by regulators was released last March in an inter-agency report.
Cited from the report, subprime lending' is defined as "extending credit to borrowers who exhibit characteristics indicating a significantly higher risk of default than traditional bank lending customers. Risk of default may be measured by traditional credit-risk measures (credit/repayment history, debt-to-income levels, etc.) or by alternative measures such as credit scores."
"It's a very difficult thing to get your arms around, without getting into controversial grounds," the industry specialist said.