Banks crossing asset thresholds of $500 million and $1 billion given temporary reporting relief
Many banks have experienced balance sheet growth in 2020 due to participation in the Paycheck Protection Program or other stimulus programs. Additionally, banks have seen deposit balances increase due to their customers receiving stimulus funds. Though much of this balance sheet growth was expected to be temporary, it put banks at risk of having to comply with additional audit and reporting requirements under Part 363 of FDIC regulations.
Under Part 363, banks exceeding total assets of $500 million must obtain annual independent audits and meet additional reporting requirements. Banks crossing $1 billion in total assets are required to assess the effectiveness of internal control over financial reporting, which is subject to attestation by the bank’s independent public accountant. Satisfying these requirements incurs costs and requires substantial time and effort. Currently, banks determine whether they are subject to the annual independent audit and reporting requirements of Part 363 based on their consolidated total assets as of the beginning of their fiscal year.
To provide relief to banks experiencing temporary balance sheet growth, the FDIC approved an Interim Final Rule on Tuesday, October 20, 2020, that changes the dates banks may use to determine whether they meet thresholds established in Part 363. Under the Interim Final Rule, banks may determine whether they are subject to the requirements of Part 363 for fiscal years ending in 2021 based on the lesser of their (a) consolidated total assets as of December 31, 2019, or (b) consolidated total assets as of the beginning of their fiscal year ending in 2021. The Interim Final Rule grants the FDIC final authority to require a bank to comply with one or more Part 363 requirements if the FDIC determines that asset growth was related to a merger or acquisition.
This will be welcome news to many banks experiencing balance sheet growth in 2020 due to stimulus-related activities.
If you have questions about this Interim Final Rule or any other FDIC requirement, Weaver can help. Contact us to speak with one of our financial institution compliance professionals.