The changes aim to reduce compliance burdens for smaller institutions and align various standards with inflation.
The Federal Deposit Insurance Corporation (FDIC) has issued its final rule updating 12 CFR Part 363 — commonly known as FDICIA— which governs annual independent audits and reporting requirements for insured depository institutions (IDIs).
The rule reduces the compliance burdens for smaller institutions and aligns various standards with inflation. Explore details of the final rule and what it means for IDIs.
Key changes to the FDICIA requirements
General applicability threshold
The general applicability threshold as noted in Part 363.1(a) increased from $500 million to $1 billion in total assets.
Internal control threshold
The threshold for internal control over financial reporting (ICOFR) assessments as noted in part 363.2(b)(3) (management assessment of internal control) and part 363.3(b) (auditor opinion on the effectiveness of internal control over financial reporting) increased from $1 billion to $5 billion in total assets.
Audit committee composition thresholds
- Part 363.5(a)(1) — which requires all audit committee members to be outside directors independent of management — increased from $1 billion to $5 billion in total assets.
- Part 363.5(a)(2) — which requires all audit committee members to be outside directors and a majority to be independent of management — increased from $500 million to $1 billion in total assets.
- Part 363.5(b) — which requires audit committees to include members with banking or related financial management expertise, have access to its own outside counsel, and not include any large customers — increased from $3 billion to $5 billion in total assets.
Independent of management compensation threshold
The compensation threshold used to determine whether a director is independent of management increased from $100,000 to $120,000, aligning with national securities exchange standards.
Future asset threshold indexing
Generally, the FDIC adjusts the dollar thresholds described above at the end of every consecutive two-year period based on the cumulative percent change of the non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) since the effective date of the final rule.
Scope and impact of FDICIA requirement revisions
These changes are expected to remove nearly 800 institutions from the scope of Part 363, while still covering institutions with approximately 95% of industry assets.
Implications for insured depository institutions
Smaller institutions
Institutions with assets below the new thresholds could benefit from reduced compliance costs and reporting obligations. Evaluate these benefits against your risk mitigation strategies.
Larger institutions
Institutions above the new thresholds would continue to be subject to the same audit and ICOFR requirements, reinforcing financial transparency and risk management.
Audit committees
The changes may ease recruitment challenges for audit committee members in smaller markets.
Effective date
The final rule is effective January 1, 2026. An insured depository institution need not comply with the applicable FDICIA requirements in effect as of December 31, 2025, if the institution won’t be subject to part 363 requirements under the updated thresholds in effect as of January 1, 2026.
Other considerations
There may be other reasons why a financial statement audit may still be required, regardless of these rule changes. Reasons include regulatory frameworks (such as FNMA, HUD, the Federal Reserve, and state bank regulatory requirements), debt covenants, etc. Consider that during 2024, just over 50 percent of institutions not subject to part 363 still obtained a financial statement audit.
How CLA can help with the FDICIA requirement changes
CLA’s financial services professionals can help you assess the implications of these changes and develop strategies to adjust to the new rule.