(a) Annual report on financial condition and management.
(1) Each insured depository institution
shall submit an annual report to the Corporation, the appropriate
Federal banking agency, and any appropriate State bank supervisor (including
any State bank supervisor of a host State).
(2) Any annual report required under paragraph
(1) shall contain—
(A) the information required to be provided
by—
(i) the institution’s management under subsection
(b); and
(ii) an independent
public accountant under subsections (c) and (d); and
(B) such other information
as the Corporation and the appropriate Federal banking agency may
determine to be necessary to assess the financial condition and management
of the institution.
(3) Any annual report required under paragraph
(1) shall be available for public inspection. Notwithstanding the
preceding sentence, the Corporation and the appropriate Federal banking
agencies may designate certain information as privileged and confidential
and not available to the public.
1-400.1
(b) Management responsibility for financial statements
and internal controls. Each insured depository institution shall
prepare—
(1) annual financial statements
in accordance with generally accepted accounting principles and such
other disclosure requirements as the Corporation and the appropriate
Federal banking agency may prescribe; and
(2) a report signed by the chief executive
officer and the chief accounting or financial officer of the institution
which contains—
(A) a statement of the management’s
responsibilities for—
(i) preparing financial statements;
(ii) establishing and maintaining
an adequate internal control structure and procedures for financial
reporting; and
(iii) complying
with the laws and regulations relating to safety and soundness which
are designated by the Corporation and the appropriate Federal banking
agency; and
(B) an assessment, as of the end of
the institution’s most recent fiscal year, of—
(i) the effectiveness
of such internal control structure and procedures; and
(ii) the institution’s compliance
with the laws and regulations relating to safety and soundness which
are designated by the Corporation and the appropriate Federal banking
agency.
1-400.11
(c) Internal control evaluation and reporting
requirements for independent public accountants.
(1) With respect to any internal control
report required by subsection (b)(2) of any institution, the institution’s
independent public
accountant shall attest to, and report separately on, the assertions
of the institution’s management contained in such report.
(2) Any attestation pursuant
to paragraph (1) shall be made in accordance with generally accepted
standards for attestation engagements.
1-400.12
(d) Annual independent audits of financial
statements.
(1) The Corporation, in consultation with
the appropriate Federal banking agencies, shall prescribe regulations
requiring that each insured depository institution shall have an annual
independent audit made of the institution’s financial statements by
an independent public accountant in accordance with generally accepted
auditing standards and section 37.
(2) In connection with any audit under
this subsection, the independent public accountant shall determine
and report whether the financial statements of the institution—
(A) are presented fairly in accordance with generally accepted accounting
principles; and
(B)
comply with such other disclosure requirements as the Corporation
and the appropriate Federal banking agency may prescribe.
(3) The requirements for
an independent audit under this subsection may be satisfied for insured
depository institutions that are subsidiaries of a holding company
by an independent audit of the holding company.
1-400.13
(e) [Repealed]
1-400.14
(f) Form
and content of reports and auditing standards.
(1) The scope of each report by an independent
public accountant pursuant to this section, and the procedures followed
in preparing such report, shall meet or exceed the scope and procedures
required by generally accepted auditing standards and other applicable
standards recognized by the Corporation.
(2) The Corporation shall consult with
the other appropriate Federal banking agencies in implementing this
subsection.
1-400.15
(g) Improved accountability.
(1) (A) Each insured
depository institution (to which this section applies) shall have
an independent audit committee entirely made up of outside directors
who are independent of management of the institution, except as provided
in subparagraph (D) and who satisfy any specific requirements the
Corporation may establish.
(B) An independent audit committee’s
duties shall include reviewing with management and the independent
public accountant the basis for the reports issued under subsections
(b)(2), (c), and (d).
(C) In the case of each insured depository institution which the
Corporation determines to be a large institution, the audit committee
required by subparagraph (A) shall—
(i) include members with
banking or related financial management expertise;
(ii) have access to the committee’s own outside
counsel; and
(iii) not
include any large customers of the institution.
(D) (i) An appropriate Federal banking agency may, by order or regulation,
permit the independent audit committee of an insured depository institution
to be made up of less than all, but no fewer than a majority of, outside
directors, if the agency determines that the institution has encountered
hardships in retaining and recruiting a sufficient number of competent
outside directors to serve on the internal audit committee of the
institution.
(ii) In determining
whether an insured depository institution has encountered hardships
referred to in clause (i), the appropriate Federal banking agency
shall consider factors such as the size of the institution, and whether
the institution has made a good faith effort to elect or name additional
competent outside
directors to the board of directors of the institution who may serve
on the internal audit committee.
1-400.16
(2) (A)
In the case of any insured depository institution which the Corporation
has determined to be a large institution, the Corporation may require
the independent public accountant retained by such institution to
perform reviews of the institution’s quarterly financial reports in
accordance with procedures agreed upon by the Corporation.
(B) The independent public
accountant referred to in subparagraph (A) shall provide the audit
committee of the insured depository institution with reports on the
reviews under such subparagraph and the audit committee shall provide
such reports to the Corporation, any appropriate Federal banking agency,
and any appropriate State bank supervisor.
(C) Reports provided under subparagraph
(B) shall be only for the information and use of the insured depository
institution, the Corporation, any appropriate Federal banking agency,
and any State bank supervisor that received the report.
(D) The Corporation shall
promptly notify an insured depository institution, in writing, of
a determination pursuant to subparagraph (A) to require a review of
such institution’s quarterly financial reports.
1-400.17
(3) (A)
All audit services required by this section shall be performed only
by an independent public accountant who—
(i) has agreed to provide
related working papers, policies, and procedures to the Corporation,
any appropriate Federal banking agency, and any State bank supervisor,
if requested; and
(ii)
has received a peer review that meets guidelines acceptable to the
Corporation.
(B) Reports on peer reviews shall be
filed with the Corporation and made available for public inspection.
1-400.18
(4) (A) In addition to any authority
contained in section 8, the Corporation or an appropriate Federal
banking agency may remove, suspend, or bar an independent public accountant,
upon a showing of good cause, from performing audit services required
by this section.
(B) The appropriate Federal banking agencies shall jointly issue
rules of practice to implement this paragraph.
(5) Any independent public
accountant performing an audit under this section who subsequently
ceases to be the accountant for the institution shall promptly notify
the Corporation and each appropriate Federal banking agency pursuant
to such rules as the Corporation and each appropriate Federal banking
agency shall prescribe.
1-400.19
(h) Exchange of reports and information.
(1) (A)
Each insured depository institution which has engaged the services
of an independent auditor to audit such institution shall transmit
to the auditor a copy of the most recent report of condition made
by the institution (pursuant to this Act or any other provision of
law) and a copy of the most recent report of examination received
by the institution.
(B) In addition to the copies of the reports required to be provided
under subparagraph (A), each insured depository institution shall
provide the auditor with—
(i) a copy of any supervisory memorandum of
understanding with such institution and any written agreement between
such institution and any appropriate Federal banking agency or any
appropriate State bank supervisor which is in effect during the period
covered by the audit; and
(ii) a report of—
(I) any action initiated or taken by the appropriate Federal banking
agency or the Corporation during such period under subsection (a), (b), (c),
(e), (g), (i), (s), or (t) of section 8;
(II) any action taken by any appropriate
State bank supervisor under State law which is similar to any action
referred to in subclause (I); or
(III) any assessment of any civil money penalty
under any other provision of law with respect to the institution or
any institution-affiliated party.
1-400.2
(2) (A) Each insured depository
institution shall provide to the Corporation, any appropriate Federal
banking agency, and any appropriate State bank supervisor, a copy
of each audit report and any qualification to such report, any management
letter, and any other report within 15 days of receipt of any such
report, qualification, or letter from the institution’s independent
auditors.
(B) Each
insured depository institution shall provide written notification
to the Corporation, the appropriate Federal banking agency, and any
appropriate State bank supervisor of the resignation or dismissal
of the institution’s independent auditor or the engagement of a new
independent auditor by the institution, including a statement of the
reasons for such change within 15 calendar days of the occurrence
of the event.
1-400.21
(i) Requirements for insured subsidiaries of holding
companies.
(1) Except with respect to any audit requirements
established under or pursuant to subsection (d), the requirements
of this section may be satisfied for insured depository institutions
that are subsidiaries of a holding company, if—
(A) services
and functions comparable to those required under this section are
provided at the holding company level; and
(B) the institution—
(i) has total assets,
as of the beginning of such fiscal year, of less than $5,000,000,000;
or
(ii) has—
(I) total assets, as of the beginning of
such fiscal year, of $5,000,000,000, or more; and
(II) a CAMEL composite rating of 1 or 2 under
the Uniform Financial Institutions Rating System (or an equivalent
rating by any such agency under a comparable rating system) as of
the most recent examination of such institution by the Corporation
or the appropriate Federal banking agency.
(2) For purposes
of this subsection, in the case of an insured depository institution
described in paragraph (1)(B)(ii) that the Corporation determines
to be a large institution, the audit committee of the holding company
of such an institution shall not include any large customers of the
institution.
(3) The
appropriate Federal banking agency may require an institution with
total assets in excess of $9,000,000,000 to comply with this section,
notwithstanding the exemption provided by this subsection, if it determines
that such exemption would create a significant risk to the Deposit
Insurance Fund if applied to that institution.
1-400.22
(j) Exemption for small depository institutions. This section
shall not apply with respect to any fiscal year of any insured depository
institution the total assets of which, as of the beginning of such
fiscal year, are less than the greater of—
(1) $150,000,000; or
(2) such amount (in excess of $150,000,000)
as the Corporation may prescribe by regulation.
[12
USC 1831m. As added by act of Dec. 19, 1991 (105 Stat. 2242) and amended
by acts of Oct. 28, 1992 (106 Stat. 4079); Sept. 23, 1994 (108 Stat.
2221, 2222); Sept. 30, 1996 (110 Stat. 3009-419); and Feb. 15, 2006
(119 Stat. 3615). This section applies to fiscal years beginning after
December 31, 1992.]
