FDIC approves final rule to amend certain regulatory thresholds
Yesterday, the FDIC adopted the final rule to adjust certain regulatory thresholds and implement a methodology to index future threshold adjustments. Of most interest are changes to Part 363 which define annual independent audit and reporting requirements. The final rule includes the following changes to total asset thresholds for the following requirements, subject to future inflation adjustments:
- Annual financial statement audit: from $500 million to $1 billion
- Internal control over financial reporting (ICFR) management assessment and related audit: from $1 billion to $5 billion
- Minimum audit committee requirements: between $500 million and $1 billion to between $1 billion and $5 billion, and $1 billion or more to $5 billion or more
- Additional audit committee requirements: from $3 billion to $5 billion
The rule also increases the threshold for compensation to a director to be considered independent of management from $100,000 to $120,000. This change will not be subject to future inflation adjustments.
Part 363 timing considerations
The final rule is effective beginning on January 1, 2026; however, the rule clarifies that if an institution is no longer subject to the requirements on January 1, 2026 then an institution does not need to comply with the requirements in effect as of December 31, 2025.
Total asset thresholds will be indexed for inflation adjustments every two years beginning on October 1, 2027, based on the non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The rule allows regulators to exercise discretion to provide relief if an adjustment is likely to cause an entity to fall below the adjusted threshold.
The updates to Part 363 within this final rule will be welcome relief for many community banks. For more information or a discussion on how this may impact your bank, please contact Joseph Jalbert or your BNN advisor.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.
