FDIC Provides Temporary Audit Relief for Banks with COVID-Bulked Balance Sheets

For banks that have experienced rapid and possibly short-term inflows of assets and deposits during the coronavirus pandemic, the FDIC today issued an interim final rule providing relief from auditing, internal control and audit committee requirements that would have resulted from those inflows. Responding to requests from the American Bankers Association and its members, the rule allows banks to determine the applicability of Part 363 of the FDIC’s regulations for fiscal years ending in 2021 with their consolidated total assets as of Dec. 31, 2019, or the beginning of fiscal years ending in 2021, whichever is less.

Part 363 generally requires specific independent auditor reports to be issued for banks that exceed $500 million and $1 billion in assets and also requires specific audit committee member qualifications for banks with over $3 billion in assets. The agency noted that asset inflows—a result of banks’ participation in the Paycheck Protection Program and other government-encouraged relief and recovery efforts—“may be temporary, but are significant and unpredictable.” ABA believes that approximately 290 banks may be affected, based on June Call Report data, and that further stimulus measures enacted by Congress could increase that number significantly.

“With today’s actions on bank audit requirements, the FDIC has taken an important step toward alleviating the regulatory pressures on banks that have seen their balance sheets swell as a result of serving their customers during COVID-19, including absorbing an influx of deposits and participating in the critical Paycheck Protection Program,” said ABA SVP Hugh Carney. “Recognizing that the growth at these institutions is in safe assets and is a byproduct of the national response to the pandemic, we encourage other regulatory agencies and policymakers to consider taking similar steps.”