Reservation of Authority for Determining Part 363 Compliance Requirements for Insured Depository Institutions (IDIs)
December 23, 2020 / Source: FDIC
On October 20, 2020, the FDIC Board of Directors voted to issue an Interim Final Rule (IFR) to provide temporary relief from the Part 363 Audit and Reporting requirements for IDIs experiencing asset growth as a result of their participation in pandemic-related government stimulus programs or related effects. The IFR reserves to the FDIC the authority to require an IDI to comply with one or more Part 363 requirements if the FDIC determines that asset growth was related to merger or acquisition transactions. This FIL provides information on how the FDIC intends to exercise the reservation of authority.
Statement of Applicability: This IFR is applicable to all FDIC-insured institutions with $500 million or more in consolidated total assets.
- The IFR allows an IDI to determine whether it is subject to the requirements of Part 363 of the FDIC’s regulations for fiscal years ending in 2021 based on the lesser of the IDI’s (a) consolidated total assets as of December 31, 2019, or (b) consolidated total assets as of the beginning of its fiscal year ending in 2021.
- The IFR reserves to the FDIC the authority to require an IDI to comply with one or more Part 363 requirements if the FDIC determines that asset growth was related to merger or acquisition transactions.
- An IDI is eligible for the relief provided unless the FDIC advises the IDI that it must comply with one or more of the requirements of Part 363.
- IDIs that have undergone merger or acquisition transactions or are planning to during fiscal years ending in 2020 should contact the appropriate FDIC Regional Office for additional information on compliance with Part 363.
- The FDIC will consider whether to exercise the reservation of authority on a case-by-case basis after a review of the facts and circumstances.
- In deciding whether to exercise its reservation of authority, the FDIC will review the following factors, among others:
- the extent of participation in pandemic-related government programs,
- the IDI’s composite Uniform Financial Institutions rating,
- whether merger or acquisition transactions were supervisory in nature, and whether the acquired IDI was merged out of existence,
- whether the IDI is required to have its financial statements audited by an independent public accountant for reasons other than being required by Part 363,
- the degree of compliance with the requirements of Part 363, as applicable,
- the supervisory concerns set forth in an IDI’s Report of Examination,
- the effectiveness of the IDI’s internal audit function, and
- the nature of audit issues and internal control deficiencies set forth in the independent public accountant’s management report to the IDI, as applicable.
- If the FDIC exercises its reservation of authority, it will notify an IDI in writing of the reason and will provide the IDI an opportunity to share its views with the FDIC within 30 days of receipt of the notice if the IDI believes it should be eligible for the temporary relief provided in 363.1(a)(2). The FDIC will consider providing the IDI additional time for compliance with Part 363.
- For IDIs supervised by another federal regulator, the FDIC will consult with the primary federal regulator when exercising the reservation of authority.
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