WASHINGTON -- Examiners at the Federal Deposit Insurance Corp. have been instructed to be lenient in enforcing some new accounting rules until banks get used to them.
The rules, which were required by the FDIC Improvement Act of 1991, apply to insured depository institutions with $500 million or more of total assets, requiring them to undergo an annual audit by an independent public accountant.
Complicated Law
Each institution must also have an independent audit committee composed of outside directors.
Because the improvement act is complicated and new, and therefore presents many potential compliance problems, the FDIC said it will allow each institution a grace period during its first exam.
Examiners will focus on educating institutions and giving recommendations rather than pursuing formal enforcement in the early stages of the law, according to an agency memo.
This policy is a concrete example of what the banking agencies have long been promising the industry - a more humane examination process.
|A Learning Phase'
The Office of the Comptroller of the Currency and the Federal Reserve Board are now preparing what are expected to be similar standards on the law.
"We are in a learning phase as we look at these regulations in the next few months," said Robert F. Storch of the division of Supervision at the FDIC, at an American Institute of Certified Public Accountants banking conference earlier this month.
And in that phase, the agency doesn't plan to come down too hard on bankers, he said.
Mr. Storch said FDIC examiners will still look for unusual transactions and other problems, but they will concentrate on educating banks about violations and the exam process itself.
Not Off the Hook
This is not to say banks will have a free ride, however. Examination reports will include all problems found, which will be addressed at the next exam.
The memo outlines the FDIC's expectations of their examiners. During the exam, he or she should make sure all the required reports have been filed and the audit committee is in place.
The examiner is also expected to review the minutes of the committee and boared of directors meetings.
The examination team will use the original report as a tool to determine if another examination is needed soon after.
|Eases |Panic Level'
The go-slow instruction to examiners "reduces the panic level," said Donna Fisher, manager of accounting policy at the American Banker's Association.
And there are always unanswered questions during a new regulation's first year, Ms. Fisher said.
The law took effect July 2 but applies to fiscal years of insured depository institutions that began after last Dec. 31.
The act has been accused of creating more red tape for banks than any law in recent memory.
