Aggregated News From Investment Management Regulators

FIL-99-2020 – The FDIC Approves Interim Final Rule to Provide Temporary Relief from Part 363 Audit and Reporting Requirements

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Summary:

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 insured depository institutions (IDIs) that have experienced temporary growth due to participation in the Paycheck Protection Program (PPP), the Paycheck Protection Program Liquidity Facility (PPPLF), the Money Market Mutual Liquidity Fund (MMLF), or other factors, such as other stimulus activities. The IFR is effective immediately, and comments on the IFR will be accepted for 30 days after publication in the Federal Register.

A copy of the IFR is available on the FDIC’s website.

Statement of Applicability: This IFR is applicable to all FDIC-insured institutions with $500 million or more in consolidated total assets.

Highlights:

  • Due to recent disruptions in economic conditions, some IDIs have experienced large cash inflows resulting from participation in PPP, MMLF, PPPLF, or due to other factors, such as the effects of other government stimulus efforts.
  • The IFR will allow IDIs to determine whether they are subject to the requirements of Part 363 of the FDIC’s regulations 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 years ending in 2021. Currently, an IDI determines if it is subject to the annual independent audit and reporting requirements of Part 363 based on its consolidated total assets as of the beginning of its fiscal year.
  • Part 363 requires IDIs with assets of $500 million or more to obtain annual independent audits and meet related reporting requirements, and requires assessments of the effectiveness of internal control over financial reporting for IDIs with consolidated total assets of $1 billion or more. It also includes requirements for audit committees at IDIs meeting these thresholds, plus additional audit committee requirements for IDIs with consolidated total assets of $3 billion or more.
  • The intent of the IFR is to neutralize burdens that IDIs may incur or have incurred because of temporary increases in their consolidated total assets resulting from participation in recent COVID-19-related stimulus activities, including the PPP, PPPLF, and MMLF, as the effort to develop processes and systems to comply with the requirements of Part 363 can be substantial.
  • The FDIC in the IFR reserves 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 a merger or acquisition.

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Regulator Information

Abbreviation: FDIC
Jurisdiction: United States

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