FDIC: Temporary Relief from Part 363 Audit and Reporting Requirements

As a result of the global COVID-19 pandemic’s impact on economic conditions, some insured depository institutions (IDIs) have experienced large cash inflows from participation in government relief programs including the Paycheck Protection Program (PPP), Money Market Mutual Fund Liquidity Facility (MMLF), and Paycheck Protection Program Liquidity Facility (PPPLF), among others. This temporary but significant growth in assets means they may be subject to the independent auditing and reporting requirements of Part 363 of the FDIC’s regulations, for fiscal years ending in 2021.  

Currently, Part 363 applies to IDIs that meet these asset thresholds at the beginning a fiscal year:

  • $500 million or more - annual independent audits and reporting requirements 
  • $500 million or more but less than $1 billion - must establish an independent audit committee of its board of directors, the members of which must be outside directors, a majority of whom must be independent of management 
  • $1 billion or more - must provide management’s assessment of, and the independent public accountant’s report on, the effectiveness of internal controls over financial reporting
  • $1 billion or more - must establish an independent audit committee of its board of directors, the members of which must be outside directors who are independent of management of the IDI
  • $3 billion or more - audit committees are required to include members with banking or related financial management expertise, have access to their own outside counsel, and not include any large customers of the institution

Based on consolidated total assets reported as of December 31, 2019 compared to those reported as of June 30, 2020, the FDIC estimates the proposed rule providing temporary exemption from Part 3636 would apply to approximately 290 IDIs: 

  • $500 million or more – 156 IDIs
  • $1 billion or more - 107 IDIs
  • $3 billion or more - 27 IDIs

Those estimates are likely to differ from the actual number of IDIs that will avoid Part 363 costs for two main reasons: consolidated total asset levels are likely to continue to change throughout the remainder of 2020; and Part 363 compliance costs are likely to depend in part on IDIs’ eligibility at the holding company level.

The rule is effective October 23, 2020 through December 31, 2021 unless extended by the FDIC. It does not affect IDIs that are bound to comply with Part 363 as of December 31, 2019. 

Read the IFR. 

 

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