On January 15, 2016, the Federal Reserve Board, FDIC and OCC released an advisory indicating support for the Basel Committee on Banking Supervision’s March 2014 guidance entitled “External audits of banks” for internationally active banks. The advisory notes that while the guidance is largely consistent with existing US standards and practices, there are certain differences between the principles and the expectations of US regulators. The advisory defines “internationally active banks” as insured depository institutions that have consolidated total assets of $250 billion or more, consolidated total on-balance sheet foreign exposure of $10 billion or more and US depository institution holding companies that meet, or have a subsidiary depository institution that meets, the same standards (with the calculation of consolidated total assets excluding assets held by insurance underwriting subsidiaries, in the case of bank holding companies). Key differences highlighted in the advisory include: (i) unlike the guidance, US standards and practices do not require “tendering”, i.e., putting an external audit contract out for bid, but the US banking agencies recommend that institutions consider whether such practice is appropriate; and (ii) while the US banking agencies encourage open communication between external auditors and a financial institution’s supervisor, there is no generally applicable requirement for an external auditor to report directly to the institution’s primary regulators.

The interagency advisory statement is available at: https://www.fdic.gov/news/news/financial/2016/fil16005a.pdf