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#1109325 - 01/12/09 07:14 PM Audit committee members
MarieR Offline
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Joined: Nov 2005
Posts: 614
I have reviewed FDIC part 363.5 and the guidelines that follow for the requirements of audit committees at different asset sizes and I need a clarification. In the guidelines it says that we need to consider if the outside audit committee members are independent of Management- one of these is having an outstanding extension of credit with the institution. So does this mean that if an outside director is independent of management in all other respects that they cannot be on the audit committee if they have an extension of credit with the bank or that it is at the discretion of management? We are close to the 1 billion mark and are looking at our committees for what might be changing. Thanks
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General Discussion
#1109620 - 01/13/09 12:37 AM Re: Audit committee members MarieR
Dazed and Confused Offline
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Dazed and Confused
Joined: Feb 2006
Posts: 250
Big XII South
In the Appendix to Part 363 ... there is "discussion" surrounding the determination of the final rule ... which includes the following:

The final rule reiterates the requirements of the statute, but does not include specific definitions of "independent person," "large customer," and "banking and financial management expertise". The FDIC expects boards of directors to determine if an outside director meets audit committee requirements. Such a determination will be subject to review by examiners.

My interpretation of Part 363 would allow for limited credit relationships by "outside directors" ... and in practice ... this appears to be in place as well. If you do a "corporate governance" search for public banks ... you will find that their corporate governance policies are available on-line ... and you will see that they allow audit committee members to have a credit relationship. But most non-public banks I observed take a hard-line approach and preclude outside directors from having a credit relationship with the bank.

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#1109697 - 01/13/09 02:03 PM Re: Audit committee members Dazed and Confused
MarieR Offline
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Joined: Nov 2005
Posts: 614
Thank you Dazed- We are non-public and have always taken the hard-line approach too. I just don't know if we will continue to use that approach. I think I will recommend that they consult with our examiners to get their opinion.
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