and thrifts establish an external audit committee and hire a public accountant to conduct annual audits.
In a joint statement, the four bank and thrift regulators suggested that institutions with assets of less than $500 million should strongly consider adopting the rigorous audit mechanisms already required of their peers with assets above $500 million.
Bank regulators said such procedures would help ensure more accurate reporting by small institutions as well as identify any areas of potential risk.
However, the agencies stopped short of formerly requiring the measures and assured that banks that fail to take them would not be penalized.
A draft of the statement was issued for public comment in February 1998 and alarmed many small institutions that believed they were being required to hire an auditor.
The new policy is unlikely to affect many institutions. According to the Office of the Comptroller of the Currency, approximately 90% of national banks with assets below $500 million already hire independent public accountants to perform annual audits. Many state bank regulators have similar audit requirements in place.