The American Bankers Association continues to press for small bank exclusion in proposed regulations to implement the establishment of outside audit committees ordered by the Federal Deposit Insurance Corporation Improvement Act.

The ABA had argued the FDIC, which is writing the regulations under the act for all bank and thrift regulatory agencies, to limit the requirement for outside audit committees to financial institutions with total insured deposits of more than $10 billion. FDICIA said the requirement does not apply to banks and thrifts with insured assets of less than $150 million. The law gave the FDIC authority to set a higher threshold, but the agency left it at $150 million (for story on ABA recommendations, see The Mortgage Marketplace, May 25, page 3).

"We think $150 million is very, very tiny," said Bill O'Halloran, chairman of the ABA's accounting committee and senior vice president/comptroller for Atlanta-based Sun Trust Banks.

"We have asked for input from the affected institutions to determine whether a higher threshold should be established," said Robert Storch, chief accountant for the FDIC.

FDCIA prohibits membership on the outside audit committee of any "large customers of the institutions." The proposed regulation defines this to mean any customer whose loans or deposits exceed the less of 15% of the institution's total risk-based capital or $50 million.

The comment period on the proposed regulations ends Oct. 30.

O'Halloran said the ABA is pleased that the FDIC staff will recommend that another FDICIA requirement, the inclusion on call reports of assets and liabilities at market value, be done annually. This is the current requirement for annual financial statements under Financial Accounting Standards Board rules. Storch said the FDIC will circulate a proposed form for the market value reporting required by FDICIA.

The ABA has recommended that, for purposes of such reporting, all differences between regulatory accounting principles and generally accepted accounting principles be resolved in favor of GAAP. The FDIC must publish final regulations to implement FDICIA by Dec. 19.

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