# FDIC FIL-72-2005: Annual Independent Audits and Reporting Requirements Proposed Amendment to Part 363

> Federal · Agency guidance · Superseded

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL05072

## Section

- **Citation:** FDIC FIL-72-2005
- **Heading:** Annual Independent Audits and Reporting Requirements Proposed Amendment to Part 363
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** Superseded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / Annual Independent Audits and Reporting Requirements Proposed Amendment to Part 363

## Text

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.
Proposed Rules
Federal Register
44293
Vol. 70, No. 147
Tuesday, August 2, 2005
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
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
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)
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
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
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Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Proposed Rules
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.
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
e 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
g 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.’’
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
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
ction 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
nal 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
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Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Proposed Rules
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
rements
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.’’
3 See Guidelines 27 through 29 of Appendix A to
part 363.
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
tes 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
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
d
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
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
ufficient 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
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.
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g 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.
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Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Proposed Rules
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
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:
ved 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
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:
§ 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:
§ 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:
§ 363.3
Independent public accountant.
*
*
*
*
*
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:
§ 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:
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44297
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Proposed Rules
§ 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.
gement 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 (§ 363.4)
22. * * *
ad 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 (§ 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 (§ 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
ish 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
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2005–21835; Directorate
Identifier 2005–CE–35–AD]
RIN 2120–AA64
Airworthiness Directives; Pilatus
Aircraft Ltd. Models PC–12 and PC–12/
45 Airplanes
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
SUMMARY: The FAA proposes to adopt a
new airworthiness directive (AD) for
certain Pilatus Aircraft Ltd. (Pilatus)
Models PC–12 and PC–12/45 airplanes.
This proposed AD would require you to
inspect the left and right main landing
gear (MLG) assemblies for any part
number (P/N) 532.10.12.077 bolts that
do not have white primed and painted
heads; and replace any bolt found with
new P/N 532.10.12.077F bolts in all
MLG assemblies. This proposed AD
results from mandatory continuing
airworthiness information (MCAI)
issued by the airworthiness authority for
Switzerland. We are issuing this
proposed AD to detect and correct any
P/N 532.10.12.077 bolts that do not have
white primed and painted heads, which
could result in corrosion of the bolt and
consequent failure of the bolt. This
failure could lead to MLG collapse
during airplane landing and take-off
operations with consequent loss of
airplane control.
DATES: We must receive any comments
on this proposed AD by August 31,
2005
sed AD to detect and correct any
P/N 532.10.12.077 bolts that do not have
white primed and painted heads, which
could result in corrosion of the bolt and
consequent failure of the bolt. This
failure could lead to MLG collapse
during airplane landing and take-off
operations with consequent loss of
airplane control.
DATES: We must receive any comments
on this proposed AD by August 31,
2005.
ADDRESSES: Use one of the following to
submit comments on this proposed AD:
• DOT Docket Web site: Go to
http://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide rulemaking Web
site: Go to http://www.regulations.gov
and follow the instructions for sending
your comments electronically.
• Mail: Docket Management Facility;
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
Room PL–401, Washington, DC 20590–
001.
• Fax: 1–202–493–2251.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
To get the service information
identified in this proposed AD, contact
Pilatus Aircraft Ltd., Customer Liaison
Manager, CH–6371 Stans, Switzerland;
telephone: +41 41 619 6208; facsimile:
+41 41 619 7311; e-mail:
SupportPC12@pilatus-aircraft.com or
from Pilatus Business Aircraft Ltd.,
Product Support Department, 11755
Airport Way, Broomfield, Colorado
80021; telephone: (303) 465–9099;
facsimile: (303) 465–6040.
To view the comments to this
proposed AD, go to http://dms.dot.gov.
This is docket number FAA–2005–
21835; Directorate Identifier 2005–CE–
35–AD.
FOR FURTHER INFORMATION CONTACT:
Doug Rudolph, Aerospace Engineer,
FAA, Small Airplane Directorate, 901
Locust, Room 301, Kansas City,
Missouri 64106; telephone: (816) 329–
4059; facsimile: (816) 329–4090
303) 465–9099;
facsimile: (303) 465–6040.
To view the comments to this
proposed AD, go to http://dms.dot.gov.
This is docket number FAA–2005–
21835; Directorate Identifier 2005–CE–
35–AD.
FOR FURTHER INFORMATION CONTACT:
Doug Rudolph, Aerospace Engineer,
FAA, Small Airplane Directorate, 901
Locust, Room 301, Kansas City,
Missouri 64106; telephone: (816) 329–
4059; facsimile: (816) 329–4090.
SUPPLEMENTARY INFORMATION:
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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL05072. Check the current official text before relying on it. Not legal advice.