Many community financial institutions have experienced substantial balance sheet growth during 2020, which has largely stemmed from the Paycheck Protection Program, the Money Market Mutual Fund Liquidity Facility, the Paycheck Protection Program Liquidity Facility, and the effects of other government stimulus efforts. For many institutions, this growth has pushed their total assets to a level that exceeds the Federal Deposit Insurance Corporation Improvement Act (FDICIA) threshold under part 363 of $1 billion, which can have significant effects on operating and reporting requirements for the upcoming year (2021), notably a required opinion audit on the institution’s internal controls over financial reporting. This threshold is typically based on the financial institution’s total assets on the first day of its calendar year based on the December 31 call report.
In response to industry concern, the FDIC issued an interim final rule (IFR) on October 20, 2020, to address the applicability of part 363 regulations regarding annual independent audits and reporting requirements for fiscal years ending in 2021.
The IFR would allow financial institutions to determine the applicability of part 363 of the FDIC’s regulations, Annual Independent Audits and Reporting Requirements, 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. Notwithstanding any temporary relief provided by this rule, an institution would continue to be subject to any otherwise applicable statutory and regulatory audit and reporting requirements. The IFR also reserves the authority to require an institution to comply with one or more requirements of part 363 if the FDIC determines that asset growth was related to a merger or acquisition.
The IFR is effective upon publication in the Federal Register, and comments on the IFR will be accepted for 30 days thereafter.