FOR IMMEDIATE RELEASE
ICBA Concerned about FDIC’s Proposed Amendments to Independent Audit and Reporting Rules
Would Inhibit Community Banks' Ability to Support Customers' Credit Needs
Washington, D.C. (Feb. 1, 2008)—The Independent Community Bankers of America (ICBA) expressed concern that proposed changes to the Federal Deposit Insurance Corporation's (FDIC) independent audit and reporting regulations would inhibit some community banks' abilities to serve their customers and their credit needs.
"The regulatory and paperwork requirements that would result if the proposed FDIC audit and reporting rules are adopted would impose a burden on larger, privately held community banks, diminishing their ability to attract capital, support the credit needs of their customers and contribute to local economies," said Karen Thomas, ICBA executive vice president and director of government relations.
In a comment letter to the FDIC, ICBA noted particular concern with the proposal to incorporate the Public Company Accounting Oversight Board's (PCAOB) auditor independence standards into FDIC regulations. "Since the PCAOB has strict independence standards about whether an auditor can perform both audit and tax services, this proposal will adversely impact community banks or holding companies with $500 million or more in assets that are located in areas with limited access to tax and accounting services," said Christopher Cole, ICBA senior regulatory counsel, in ICBA's letter. "This also reflects a disturbing trend by banking regulators to apply the principles and practices of the Sarbanes Oxley Act of 2002 (SOX) to privately held banking institutions."
ICBA recommended that the FDIC provide an exemption from the auditor independence standards for community banks located in areas with limited access to auditing and tax services, rather than incorporate the PCAOB standards into their own accounting requirements.
ICBA also said that the FDIC existing guidance concerning whether an outside director should be considered "independent of management" is adequate and expressed concern that any movement toward adopting the independent director standards used by the national securities exchanges for privately held banks will impose challenges for community banks located in areas where it is difficult to find directors to serve on audit committees. Currently, FDIC rules require the audit committees of banks with assets of $500 million or more to have a majority or more of outside directors who are independent of management. ICBA also expressed concerns about the increase in documentation, testing and liability that would result if bank management is required to address additional items in its report on internal controls.
Read ICBA's letter at www.icba.org.