§ 1831m. Early identification of needed improvements in financial management
(a)
Annual report on financial condition and management
(1)
Report required
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)
Contents of report
Any annual report required under paragraph (1) shall contain—
(3)
Public availability
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.
(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—
(c)
Internal control evaluation and reporting requirements for independent public accountants
(d)
Annual independent audits of financial statements
(1)
Audits required
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
1831n of this title.
(f)
Form and content of reports and auditing standards
(1)
In general
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.
(g)
Improved accountability
(1)
Independent audit committee
(A)
Establishment
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)
Duties
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) of this section.
(C)
Criteria applicable to committees of large insured depository institutions
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—
(D)
Exemption authority
(i)
In general
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)
Factors to be considered
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.
(2)
Review of quarterly reports of large insured depository institutions
(A)
In general
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)
Report to audit committee
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.
(3)
Qualifications of independent public accountants
(A)
In general
All audit services required by this section shall be performed only by an independent public accountant who—
(4)
Enforcement actions
(A)
In general
In addition to any authority contained in section
1818 of this title, 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.
(5)
Notice by accountant of termination of services
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.
(h)
Exchange of reports and information
(1)
Report to the independent auditor
(A)
In general
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 chapter or any other provision of law) and a copy of the most recent report of examination received by the institution.
(B)
Additional information
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
1818 of this title;
(2)
Reports to banking agencies
(A)
Independent auditor reports
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)
Notice of change of auditor
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.
(i)
Requirements for insured subsidiaries of holding companies
(1)
In general
Except with respect to any audit requirements established under or pursuant to subsection (d) of this section, 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
(2)
Large institutions
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)
Applicability based on risk to fund
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.
(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—