FOR IMMEDIATE RELEASE
ICBA Applauds FDIC Proposal to Raise the Internal Control Threshold under FDICIA
Washington, D.C. (July 19, 2005) - The Independent Community Bankers of America (ICBA) commended the Federal Deposit Insurance Corporation for proposing to raise the asset-size threshold for internal control reporting under the FDIC Improvement Act (FDICIA) from $500 million to $1 billion.
"Raising the FDICIA threshold so that privately held community banks with assets less than $1 billion will no longer be subject to the internal control attestation requirements would be an important step towards reducing the regulatory burden on community banks," said Camden R. Fine, ICBA president and CEO. "Because of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, the costs of these internal control audits have soared even for non-publicly held institutions. Community banks need relief from this burdensome requirement."
As proposed by the FDIC, banks with total assets of less than $1 billion would no longer be required to assess and report on the effectiveness of internal controls, the external auditors would no longer be required to examine and attest to management's internal control assertions, and the outside directors on the audit committee would no longer be required to be independent of management. Institutions are still required to have adequate internal controls, however, which will continue to be reviewed by bank examiners.
"We hope that the SEC would consider a similar exemption under Section 404 of Sarbox so that all community banks with assets less than $1 billion, including those that are publicly held, would no longer be subject to the internal control attestation requirements," said Fine. "Section 404 is another example of a regulatory burden that disproportionately affects community banks. Since community banks are already highly regulated and closely supervised entities, there is little added public benefit associated with these high compliance costs."
In March, ICBA released a study that showed that complying with the internal control attestation requirements of Section 404 of Sarbox increases outside audit fees for publicly held community banks more than 52 percent. The study showed that the average community bank will spend more than $200,000 and devote over 2,000 internal staff hours to comply with Section 404.
For more information on the ICBA study visit www.icba.org.