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FIL-72-2005 Attachment

[Federal Register: August 2, 2005 (Volume 70, Number 147)]

[Proposed Rules]

[Page 44293-44297]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr02au05-16]


 

========================================================================

Proposed Rules

Federal Register

________________________________________________________________________


 

This section of the FEDERAL REGISTER contains notices to the public of

the proposed issuance of rules and regulations. The purpose of these

notices is to give interested persons an opportunity to participate in

the rule making prior to the adoption of the final rules.


 

========================================================================




 

[[Page 44293]]




 

FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 363


 

RIN 3064-AC91


 

 

Annual Independent Audits and Reporting Requirements


 

AGENCY: Federal Deposit Insurance Corporation (FDIC).


 

ACTION: Notice of proposed rulemaking.


 

-----------------------------------------------------------------------


 

SUMMARY: The FDIC is proposing to amend its regulations concerning

annual independent audits and reporting requirements, which implement

Section 36 of the Federal Deposit Insurance Act (FDI Act). Section 36

and the FDIC's implementing regulations are generally intended to

facilitate early identification of problems in financial management at

insured depository institutions with total assets above a certain

threshold (currently $500 million) through annual independent audits,

assessments of the effectiveness of internal control over financial

reporting and compliance with designated laws and regulations, and

related reporting requirements. Section 36 also includes requirements

for audit committees at these insured depository institutions. The

FDIC's amendments would raise the asset size threshold from $500

million to $1 billion for internal control assessments by management

and external auditors and for the members of the audit committee, who

must be outside directors, to be independent of management. As required

by section 36, the FDIC has consulted with the other Federal banking

agencies. These amendments are proposed to take effect December 31,

2005.


 

DATES: Comments must be received on or before September 16, 2005.


 

ADDRESSES: Interested parties are invited to submit written comments to

the FDIC by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.


 

Follow the instructions for submitting comments.

Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html.

Follow the instructions for submitting comments


 

on the FDIC Web site.

E-mail: Comments@FDIC.gov. Include RIN number in the

subject line of the message.

Mail: Robert E. Feldman, Executive Secretary, Attention:

Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429.

Hand Delivery/Courier: Guard station at the rear of the

550 17th Street building (located on F Street) on business days between

7 a.m. and 5 p.m.

Instructions: All submissions received must include the agency name

and RIN number for this rulemaking. All comments received will be

posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html

including any personal information provided. Comments may


 

be inspected and photocopied in the FDIC Public Information Center,

Room 100, 801 17th Street, NW., Washington, DC, between 9 a.m. and 4:30

p.m. on business days.


 

FOR FURTHER INFORMATION CONTACT: Harrison E. Greene, Jr., Senior Policy

Analyst (Bank Accounting), Division of Supervision and Consumer

Protection, at hgreene@fdic.gov or (202) 898-8905; or Michelle

Borzillo, Counsel, Supervision and Legislation Section, Legal Division,

at mborzillo@fdic.gov or (202) 898-7400.


 

SUPPLEMENTARY INFORMATION:


 

A. Background


 

Section 112 of the Federal Deposit Insurance Corporation

Improvement Act of 1991 (FDICIA) added Section 36, ``Early

Identification of Needed Improvements in Financial Management,'' to the

FDI Act (12 U.S.C. 1831m). Section 36 is generally intended to

facilitate early identification of problems in financial management at

insured depository institutions above a certain asset size threshold

through annual independent audits, assessments of the effectiveness of

internal control over financial reporting and compliance with

designated laws and regulations, and related requirements. Section 36

also includes requirements for audit committees at these insured

depository institutions. Section 36 grants the FDIC discretion to set

the asset size threshold for compliance with these statutory

requirements, but it states that the threshold cannot be less than $150

million. Sections 36(d) and (f) also obligate the FDIC to consult with

the other Federal banking agencies in implementing these sections of

the FDI Act, and the FDIC has performed that consultation requirement.

In June 1993, the FDIC published 12 CFR part 363 (58 FR 31332, June

2, 1993) to implement the provisions of section 36 of the FDI Act.

Under part 363, the requirements of section 36 apply to each insured

depository institution with $500 million or more in total assets at the

beginning of its fiscal year (covered institution). Often referred to

as the ``FDICIA reporting requirements,'' part 363 requires each

covered institution to submit to the FDIC and other appropriate Federal

and state supervisory agencies an annual report that includes audited

financial statements, a statement of management's responsibilities,

assessments by management of the effectiveness of internal control over

financial reporting and compliance with designated laws and

regulations, and an auditor's attestation report on internal control

over financial reporting. In addition, part 363 provides that each

covered institution must establish an independent audit committee of

its board of directors comprised of outside directors who are

independent of management of the institution. Part 363 also includes

Guidelines and Interpretations (Appendix A to part 363), which are

intended to assist institutions and independent public accountants in

understanding and complying with section 36 and part 363.

A covered institution may satisfy the audited financial statements

requirement of part 363 at the holding company level. Subject to

certain conditions, the other requirements of part 363 may be satisfied

at the holding company level. Members of the independent audit

committee of a holding company may serve as the audit committee of a

subsidiary covered institution provided they are otherwise independent

of the subsidiary's management and meet the other criteria set forth in

part 363.

When it adopted part 363 in 1993, the FDIC stated that it was

setting the asset size threshold at $500 million rather


 

[[Page 44294]]


 

than the $150 million specified in section 36 to mitigate the financial

burden of compliance with section 36 consistent with safety and

soundness. In selecting $500 million in total assets as the size

threshold, the FDIC noted that approximately 1,000 of the then nearly

14,000 FDIC-insured institutions would be subject to part 363. These

covered institutions held approximately 75 percent of the assets of

insured institutions at that time. By imposing the audit, reporting,

and audit committee requirements of part 363 on institutions with this

percentage of the industry's assets, the FDIC intended to ensure that

the Congress's objectives for achieving sound financial management at

insured institutions when it enacted section 36 would be focused on

those institutions posing the greatest risk to the insurance funds

administered by the FDIC. Today, due to consolidation in the banking

and thrift industry and the effects of inflation, approximately 1,150

of the 8,900 insured institutions have $500 million or more in total

assets and are therefore subject to part 363. These covered

institutions hold approximately 90 percent of the assets of insured

institutions.


 

B. Increasing the Asset Size Threshold for Internal Control Assessments


 

An effective internal control structure is critical to the safety

and soundness of each insured institution. Given its importance,

internal control is evaluated as part of the supervision of individual

institutions and its adequacy is a factor in the management rating

assigned to an institution. Furthermore, in the audit of an

institution's financial statements, the external auditor must obtain an

understanding of internal control, including assessing control risk,

and must report certain matters regarding internal control to the

institution's audit committee.

An institution subject to part 363 has the added requirement that

its management perform an assessment of the internal control structure

and procedures for financial reporting and that its external auditor

examine, attest to, and report on management's assertion concerning the

institution's internal control over financial reporting. For purposes

of these internal control provisions of part 363, the FDIC has advised

covered institutions that the term ``financial reporting'' includes

both financial statements prepared in accordance with generally

accepted accounting principles and those prepared for regulatory

reporting purposes.\1\ Until year-end 2004, external auditors performed

their internal control assessments in accordance with an attestation

standard issued by the American Institute of Certified Public

Accountants (AICPA) known as ``AT 501.''

---------------------------------------------------------------------------


 

\1\ See FDIC Financial Institution Letter (FIL) 86-94, dated

December 23, 1994. FIL-86-94 indicates that financial statements

prepared for regulatory reporting purposes encompass the schedules

equivalent to the basic financial statements in an institution's

appropriate regulatory report, e.g., the bank Reports of Conditions

and Income and the Thrift Financial Report.

---------------------------------------------------------------------------


 

The Sarbanes-Oxley Act was enacted into law on July 30, 2002.

Section 404 of this Act imposes a requirement for internal control

assessments by the management and external auditors of all public

companies that is similar to the FDICIA requirement. The Securities and

Exchange Commission's (SEC) rules implementing these requirements took

effect at year-end 2004 for ``accelerated filers,'' i.e., generally,

public companies whose common equity has an aggregate market value of

at least $75 million, but they will not take effect until 2006 for

``non-accelerated filers.'' For the section 404 auditor attestations,

the Public Company Accounting Oversight Board's (PCAOB) Auditing

Standard No. 2 (AS 2) applies. AS 2 replaces the AICPA's AT 501

internal control attestation standard for public companies, but AS 2

does not apply to nonpublic companies. The SEC's section 404 rules for

management and the provisions of AS 2 for section 404 audits of

internal control establish more robust documentation and testing

requirements than those that have been applied by covered institutions

and their auditors to satisfy the internal control reporting

requirements in part 363.

For internal control attestations of nonpublic companies, the AICPA

is currently developing proposed revisions to AT 501 that are expected

to bring it closer into line with the provisions of AS 2. The revisions

also are likely to have the effect of requiring greater documentation

and testing of internal control over financial reporting by an

institution's management in order for the auditor to perform his or her

attestation work.

As the environment has changed and continues to change since the

enactment of the Sarbanes-Oxley Act, the FDIC has observed that

compliance with the audit and reporting requirements of part 363 has

and will continue to become more burdensome and costly, particularly

for smaller nonpublic covered institutions. Thus, the FDIC has reviewed

the current asset size threshold for compliance with part 363 in light

of the discretion granted by Section 36 that permits the FDIC to

determine the appropriate size threshold (at or above $150 million) at

which insured institutions should be subject to the various provisions

of section 36. Based on this review, the FDIC is proposing to amend

part 363 to increase the asset size threshold for internal control

assessments by management and external auditors from $500 million to $1

billion. Raising the threshold to $1 billion would achieve meaningful

burden reduction without sacrificing safety and soundness.

In reaching this decision, the FDIC concluded that raising the $500

million asset size threshold to $1 billion and exempting all

institutions below this higher size level from all of the reporting

requirements of part 363 would not be consistent with the objective of

the underlying statute, i.e., early identification of needed

improvements in financial management. In contrast, the FDIC believes

that relieving smaller covered institutions from the burden of internal

control assessments, while retaining the financial statement audit and

other reporting requirements for all institutions with $500 million or

more in total assets, strikes an appropriate balance in accomplishing

this objective. If the FDIC were to raise the size threshold for

internal control assessments to $1 billion, about 600 of the largest

insured institutions with approximately 86 percent of industry assets

would continue to be covered by the internal control reporting

requirements of part 363. At the same time, the managements of covered

institutions would remain responsible for establishing and maintaining

an adequate internal control structure and procedures for financial

reporting, and all institutions with $500 million or more in total

assets would continue to include a statement to that effect in their

part 363 annual report.

Accordingly, the FDIC is seeking comments on the proposed amendment

to part 363 to increase the asset size threshold for internal control

assessments by management and external auditors to $1 billion. This

amendment is proposed to take effect December 31, 2005. For insured

institutions (both public and non-public) with calendar year fiscal

years that had $500 million or more in total assets, but less than $1

billion in total assets, on January 1, 2005, this proposal would mean

that the part 363 annual report for 2005 that they submit to the FDIC

and other appropriate Federal and state supervisory agencies would need

to include only audited financial statements, statements of

management's


 

[[Page 44295]]


 

responsibilities, management's assessment of the institution's

compliance with designated laws and regulations, and an auditor's

report on the financial statements.

For insured depository institutions that are public companies or

subsidiaries of public companies, regardless of size, the FDIC's

proposed amendment to part 363 would not relieve public companies of

their obligation to comply with the internal control assessment

requirements imposed by section 404 of the Sarbanes-Oxley Act in

accordance with the effective dates for compliance set forth in the

SEC's implementing rules.

Nevertheless, the FDIC reminds insured institutions with $1 billion

or more in total assets that are public companies or subsidiaries of

public companies that they have considerable flexibility in determining

how best to satisfy the internal control assessment requirements in the

SEC's section 404 rules and the FDIC's part 363. As indicated in the

preamble to the SEC's section 404 final rule release, the FDIC (and the

other Federal banking agencies) agreed with the SEC that insured

depository institutions that are subject to both part 363 (as well as

holding companies permitted under the holding company exception in part

363 to file an internal control report on behalf of their insured

depository institution subsidiaries) and the SEC's rules implementing

section 404 can choose either of the following two options:

They can prepare two separate reports of management on the

institution's or the holding company's internal control over financial

reporting to satisfy the FDIC's part 363 requirements and the SEC's

section 404 requirements; or

They can prepare a single report of management on internal

control over financial reporting that satisfies both the FDIC's

requirements and the SEC's requirements.\2\

---------------------------------------------------------------------------


 

\2\ Footnote 117 in the preamble to the SEC's Section 404 final

rule releases states that ``[a]n insured depository institution

subject to both the FDIC's [internal control assessment]

requirements and our new requirements [i.e., a public depository

institution] choosing to file a single report to satisfy both sets

of requirements will file the report with its primary Federal

regulator under the Exchange Act and the FDIC, its primary Federal

regulator (if other than the FDIC), and any appropriate state

depository institution supervisor under part 363 of the FDIC's

regulations. A [public] holding company choosing to prepare a single

report to satisfy both sets of requirements will file the report

with the [Securities and Exchange] Commission under the Exchange Act

and the FDIC, the primary federal regulator of the insured

depository institution subsidiary subject to the FDIC's

requirements, and any appropriate state depository institution

supervisor under part 363.''

---------------------------------------------------------------------------


 

For more complete information on these two options, institutions

(and holding companies) should refer to Section II.H.4. of the preamble

to the SEC's Section 404 final rule release (68 FR 36648, June 18,

2003).


 

C. Composition of the Audit Committee


 

Currently, part 363 requires each covered institution to establish

an independent audit committee of its board of directors, comprised of

outside directors who are independent of management of the institution.

The duties of the audit committee include reviewing with management and

the institutions' independent public accountant the basis for the

reports included in the part 363 annual report submitted to the FDIC

and other appropriate Federal and state supervisory agencies. The

FDIC's Guidelines to part 363 provide that, at least annually, the

board of directors of a covered institution should determine whether

all existing and potential audit committee members are ``independent of

management of the institution.'' The guidelines also describe factors

to consider in making this determination.\3\

---------------------------------------------------------------------------


 

\3\ See Guidelines 27 through 29 of Appendix A to part 363.

---------------------------------------------------------------------------


 

Section 36 provides that an appropriate Federal banking agency may

grant a hardship exemption to a covered institution that would permit

its independent audit committee to be made up of less than all, but no

fewer than a majority of, outside directors who are independent of

management. To grant the exemption, the agency must find that the

institution has encountered hardships in retaining and recruiting a

sufficient number of competent outside directors.

Notwithstanding this exemption provision of section 36, the FDIC

has observed that a number of smaller covered institutions,

particularly those with few shareholders that have recently exceeded

$500 million in total assets and become subject to part 363, have

encountered difficulty in satisfying the independent audit committee

requirement. To comply with this requirement, these institutions must

identify and attract qualified individuals in their communities who

would be willing to become a director and audit committee member and

who would be independent of management.

To relieve this burden, but also recognizing that the FDIC has long

held that individuals who serve as directors of any insured depository

institution should be persons of independent judgment, the FDIC is

proposing to amend part 363 to increase from $500 million to $1 billion

the asset size threshold for requiring audit committee members to be

independent of management. Conforming changes would be made to

Guidelines 27-29 of Appendix A to part 363. Each insured depository

institution with total assets of $500 million or more but less than $1

billion would continue to be required to have an audit committee

comprised of outside directors. Consistent with Guideline 29 of

Appendix A to part 363, an outside director would be defined as an

individual who is not, and within the preceding year has not been, an

officer or employee of the institution or any affiliate of the

institution.

This proposed amendment to the audit committee requirements for

institutions with between $500 million and $1 billion in total assets

would allow an outside director who is, for example, a consultant or

legal counsel to the institution, a relative of an officer or employee

of the institution or its affiliates, or the owner of 10 percent or

more of the stock of the institution to serve as an audit committee

member. Nevertheless, the FDIC would encourage each institution with

between $500 million and $1 billion in assets to make a reasonable good

faith effort to establish an audit committee of outside directors who

are independent of management.

Accordingly, the FDIC is seeking comments on the proposed amendment

to increase from $500 million to $1 billion the asset size threshold at

which members of a covered institution's audit committee must be

outside directors who are independent of management. This amendment is

proposed to take effect December 31, 2005.


 

D. Technical Changes


 

The FDIC also proposes to make certain technical changes to part

363 to correct outdated titles, terms, and references in the regulation

and its appendix.


 

E. Other Revisions


 

The FDIC has identified other aspects of part 363 that may warrant

revision in light of changes in the industry and the passage of the

Sarbanes-Oxley Act. However, the FDIC believes that finalizing the

amendments in this proposal should take priority over other possible

revisions to part 363 in order to reduce compliance burdens and

expenses for affected institutions in the current year. The FDIC

expects to propose further revisions to part 363 as soon as

practicable.


 

[[Page 44296]]


 

Request for Comments


 

The FDIC welcomes comments on all aspects of this proposal.


 

Solicitation of Comments on Use of Plain Language


 

Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec.

722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking

agencies to use plain language in all proposed and final rules

published after January 1, 2000. We invite your comments on how to make

this proposal easier to understand. For example:

Have we organized the material to suit your needs? If not,

how could this material be better organized?

Are the requirements in the proposed regulation clearly

stated? If not, how could the regulation be more clearly stated?

Does the proposed regulation contain language or jargon

that is not clear? If so, which language requires clarification?

Would a different format (grouping and order of sections,

use of headings, paragraphing) make the regulation easier to

understand? If so, what changes to the format would make the regulation

easier to understand?

What else could we do to make the regulation easier to

understand?


 

Solicitation of Comments on Impact on Community Banks


 

The FDIC seeks comments on the impact of this proposal on community

banks. The FDIC recognizes that community banks operate with more

limited resources than larger institutions and may present a different

risk profile. Thus, the FDIC specifically requests comments on the

impact of the proposal on community banks' current resources, including

personnel, and whether the goals of the proposed rule could be

achieved, for community banks, through an alternative approach.


 

Regulatory Flexibility Act Analysis


 

The Regulatory Flexibility Act (RFA) requires that each Federal

Agency either certify that a proposed rule would not, if adopted in

final form, have a significant economic impact on a substantial number

of small entities or prepare an initial regulatory flexibility analysis

(IRFA) of the proposal and publish the analysis for comment. See 5

U.S.C. 603, 605. The Small Business Administration (SBA) defines small

banks as those with less than $150 million in assets. Because this rule

expressly exempts insured depository institutions having assets of less

than $500 million, it is inapplicable to small entities as defined by

the SBA. Therefore, it is certified that this proposed rule would not

have a significant economic impact on a substantial number of small

entities.


 

Paperwork Reduction Act


 

This proposed rule would revise a collection of information that

has been reviewed and approved by the Office of Management and Budget

under control number 3064-0113, pursuant to the Paperwork Reduction Act

(44 U.S.C. 3501 et seq). The primary revisions increase the asset size

threshold for compliance with sections 363.2(b), 363.3(b), and

363.5(a). It is anticipated that these changes will result in a burden

reduction for affected insured institutions. Comments are invited on:

(a) Whether the collection of information is necessary for the proper

performance of the FDIC's functions, including whether the information

has practical utility; (b) the accuracy of the estimates of the burden

of the information collection; (c) ways to enhance the quality,

utility, and clarity of the information to be collected; and (d) ways

to minimize the burden of the information collection on respondents,

including through the use of automated collection techniques or other

forms of information technology.

Comments should be addressed to Steven F. Hanft, Paperwork

Clearance Officer, Room MB-3064, Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC 20429, with copies to Desk Officer

Mark Menchik, Office of Information and Regulatory Affairs, Office of

Management and Budget, NEOB, Washington, DC 20503.

The paperwork burden associated with this rule was last reviewed in

2002. At that time, the FDIC estimated the burden to be 42,639 hours

for FDIC-supervised institutions. Since then, data has become available

to the FDIC that indicates the 2002 estimate was too low. Taking that

information (including the results of a burden study conducted by a

major trade association) into account, the FDIC believes a more

accurate estimate for this collection of information is 118,535 hours.

If the revisions in this proposed rule are implemented, the resulting

estimated reporting burden for the collection of information would be

65,612 hours, a 45 percent reduction (52,923 hours).

Number of Respondents: 5,243.

Total Annual Responses: 15,684.

Total Annual Burden Hours: 65,612.


 

List of Subjects in 12 CFR Part 363


 

Accounting, Administrative practice and procedure, Banks, banking,

Reporting and recordkeeping requirements.


 

For the reasons set forth in the preamble, the Board of Directors

of the FDIC proposes to amend part 363 of title 12, chapter III, of the

Code of Federal Regulations as follows:


 

PART 363--ANNUAL INDEPENDENT AUDITS AND REPORTING REQUIREMENTS


 

1. The authority citation for part 363 continues to read as

follows:


 

Authority: 12 U.S.C 1831m.


 

2. Section 363.1 is amended by revising paragraph (b)(2)(ii)(B) to

read as follows:



 

Sec. 363.1 Scope.


 

* * * * *

(b) * * *

(2) * * *

(ii) * * *

(B) Total assets of $5 billion or more and a composite CAMELS

rating of 1 or 2.

* * * * *

3. Section 363.2 is amended by revising paragraph (b)(2) and adding

paragraph (b)(3) to read as follows:



 

Sec. 363.2 Annual reporting requirements.


 

* * * * *

(b) * * *

(1) * * *

(2) An assessment by management of the institution's compliance

with such laws and regulations during such fiscal year; and

(3) For an institution with total assets of $1 billion or more at

the beginning of such fiscal year, an assessment by management of the

effectiveness of such internal control structure and procedures as of

the end of such fiscal year.

4. Section 363.3 is amended by revising paragraph (b) to read as

follows:



 

Sec. 363.3 Independent public accountant.


 

* * * * *

(b) Additional reports. For each insured depository institution

with total assets of $1 billion or more at the beginning of the

institution's fiscal year, such independent public accountant shall

examine, attest to, and report separately on, the assertion of

management concerning the institution's internal control structure and

procedures for financial reporting. The attestation shall be made in

accordance with generally accepted standards for attestation

engagements.

* * * * *

5. Section 363.5 is amended by revising paragraph (a) to read as

follows:


 

[[Page 44297]]


 

Sec. 363.5 Audit committees.


 

(a) Composition and duties. Each insured depository institution

shall establish an audit committee of its board of directors, the

composition of which complies with paragraphs (a)(1), (2), and (3) of

this section, and the duties of which shall include reviewing with

management and the independent public accountant the basis for the

reports issued under this part.

(1) Each insured depository institution with total assets of $1

billion or more as of the beginning of its fiscal year shall establish

an independent audit committee of its board of directors, the members

of which shall be outside directors who are independent of management

of the institution.

(2) Each insured depository institution with total assets of $500

million or more but less than $1 billion as of the beginning of its

fiscal year shall establish an audit committee of its board of

directors, the members of which shall be outside directors.

(3) An outside director is a director who is not, and within the

preceding fiscal year has not been, an officer or employee of the

institution or any affiliate of the institution.

* * * * *

6. Appendix A to Part 363 is amended as follows:

a. Footnote 2 Guideline 10 is amended by adding ``and Consumer

Protection Risk Management'' after ``FDIC's Division of Supervision'';

b. Guideline 16 is amended by removing ``Registration and

Disclosure Section'' and adding in its place ``Accounting and

Securities Disclosure Section'';

c. Guideline 22 is amended by revising the first sentence of

paragraph (a) to read as set forth below:

d. Guideline 27 is amended by revising the second sentence to read

as set forth below;

e. Guideline 28 is amended by revising paragraph (a) to read as set

forth below;

f. Guideline 29 is revised to read as set forth below; and

g. The first sentence of Guideline 36 is revised to read as set

forth below.

The revisions read as follows:


 

Appendix A to Part 363--Guidelines and Interpretations


 

* * * * *


 

Filing and Notice Requirements (Sec. 363.4)


 

22. * * *

(a) FDIC: Appropriate FDIC Regional or Area Office (Supervision

and Consumer Protection), i.e., the FDIC regional or area office in

the FDIC region or area that is responsible for monitoring the

institution or, in the case of a subsidiary institution of a holding

company, the consolidated company. * * *

* * * * *


 

Audit Committees (Sec. 363.5)


 

27. * * * At least annually at an institution with $1 billion or

more in total assets at the beginning of its fiscal year, the board

should determine whether all existing and potential audit committee

members are ``independent of management of the institution.'' * * *

28. * * *

(a) Has previously been an officer of the institution or any

affiliate of the institution;

29. Lack of Independence. An outside director should not be

considered independent of management if such director owns or

controls, or has owned or controlled within the preceding fiscal

year, assets representing 10 percent or more of any outstanding

class of voting securities of the institution.

* * * * *


 

Other


 

36. * * * The FDIC Board of Directors has delegated to the

Director of the FDIC's Division of Supervision and Consumer

Protection (DSC) authority to make and publish in the Federal

Register minor technical amendments to the Guidelines in this

appendix in consultation with the other appropriate Federal banking

agencies, to reflect the practical experience gained from

implementation of this part. * * *

* * * * *


 

By order of the Board of Directors.


 

Federal Deposit Insurance Corporation.


 

Dated at Washington, DC, this 19th day of July, 2005.

Robert E. Feldman,

Executive Secretary.


 

[FR Doc. 05-15109 Filed 8-1-05; 8:45 am]

BILLING CODE 6714-01-P

Last Updated: March 24, 2024