1. How can we help your bank?
Grant Thornton LLP services
to the industry
2. Contents
2 Regulatory compliance programs
4 Regulatory reform
6 Loan portfolio reviews and stress testing
7 Foreclosure reviews
8 Internal audit services
10 Corporate governance and internal control
12 Enterprise risk management
13 Mergers and acquisitions
16 Corporate advisory & restructuring services
17 Performance improvement
18 Problem bank services
19 Mortgage banking and securitization services
20 Valuation services
21 SSAE 16/SAS 70 reviews
22 Forensic accounting and fraud investigations
23 Tax
26 Audit
28 Accounting
30 Grant Thornton resources
31 Contact us
32 About Grant Thornton
3. In an era of increased public scrutiny and complex financial Because of this experience with financial institutions and
reform and regulatory demands, banks, thrifts, credit unions industry organizations, we can help you assess issues that are
and other financial institutions need straightforward business important to your bank. Moreover, we can provide you with
guidance delivered ethically and professionally. practical insights to help you improve your overall strategy.
At Grant Thornton LLP, our Audit, Tax and Advisory We offer a full range of banking industry services, providing
Services professionals are among the most experienced in personalized attention and the highest-quality service to public
the industry; we have been serving bankers for more than 80 and private banks around the world.
years. Our dedicated Banking professionals bring unparalleled
industry knowledge and insight, while our accessibility
and responsiveness mean that relevant business guidance is
provided in a timely manner and that issues are addressed
appropriately.
We are also strategically committed to the industry. Our
professionals are involved in a variety of industry organizations,
including ABA, ICBA, NACHA, RMA, MBA, Bank Tax
Institute, the AICPA and its Depository Institutions Expert
Panel, among others.
We are strategically committed to the banking
industry worldwide. Our professionals excel and
take pride in helping financial institutions with their
critical business needs.
Jack Katz
National Managing Partner, Financial Services
4. Regulatory compliance programs
We can assist in the development of a complete compliance Fair lending compliance
program, as well as keep you informed of emerging regulatory We can help your bank comply with fair lending regulations,
developments and share best practices for establishing related including the Fair Housing Act and Equal Credit
policies and procedures. Opportunity Act.
Bank Secrecy Act/Anti-money laundering services Red Flags Rule compliance
We offer leading Bank Secrecy Act/Anti-Money Laundering Businesses are required to comply with the Red Flags Rule
(BSA/AML) advisory services. Our Certified Anti-Money regulation (FTC 16 CFR 681) of the Fair and Accurate Credit
Laundering Specialists (CAMS) provide assistance to regional, Transactions Act of 2003 (FACT Act), which aims to prevent
national and international financial institutions, whether public identity theft. The Federal Trade Commission (FTC) now
or private. requires compliance from all businesses that meet its definition
Our BSA/AML practice also works with businesses and of a creditor. Any entity — including a bank — that allows a
government institutions as they navigate the current regulatory customer to defer payment for goods or services is a creditor
environment and develop comprehensive and effective BSA/ under the rule.
AML programs, including implementing Office of Foreign Our Red Flags compliance services are designed to gather
Asset Control (OFAC) sanctions programs. Our BSA/AML the information banks need to know in order to maintain
services include: compliance. Using a combination of automated surveys,
• BSA/AML compliance program development structured interviews, and reviews of available documentation,
• Program assessment and review for recommended we can deliver the necessary information you need to evaluate
enhancements your Red Flags compliance program.
• Independent program testing
• Look-back investigations as part of regulator-mandated
actions or internal requirements
• AML software readiness assessments
Recommended reading
Beginning Dec. 31, 2010, all companies that send invoices will need to have a red flags compliance strategy in place to help combat
identity theft. The Red Flags Rule, a component of the Fair and Accurate Credit Transactions (FACT) Act signed into law in December
2003, requires that financial institutions and creditors implement a plan to identify, detect and respond to attempts to use stolen identity
information. Read The Red Flags Rule: What you need to know to find out more about the rule and what to consider when forming a
compliance strategy. Visit www.GrantThornton.com/redflags for more.
2 How can we help your bank?
5. Regulation AB
Regulation AB addresses three significant areas:
• Disclosures required to be made during the securities
registration process
• Exchange Act reporting requirements for asset-backed
securities
• Annual servicing assertion and accountant’s attestation
report requirements
Our professionals have considerable experience advising entities
on the requirements of Regulation AB, as well as performing the
services required in order to issue an attestation report.
How can we help your bank? 3
6. Regulatory reform
The Dodd-Frank Wall Street Reform and Consumer Protection Banks will receive updates on new developments from our
Act mandates sweeping changes across the banking industry. Financial Regulatory Reform Task Force and can also read about
We can help banks as they maintain compliance with heightened them on our online Financial Regulatory Reform Resource
regulatory requirements and related issues including: Center at www.GrantThornton.com/financialreform. Learn
• New disclosure and reporting requirements more about our numerous resources at the end of this document.
• Swaps trading regulations (especially for those designated as
“major swap participants”)
• Spinning off of derivatives units onto broker-dealer affiliates
(and related systems/procedures assessments)
• Regulatory examination readiness and remediation
• Volcker Rule (pertaining to proprietary trading and fund
investments)
• Establishment of risk management committees
• Reporting responsibilities to the new Financial Stability
Oversight Council for large banks
• Whistleblower rules
• New and enhanced compensation and governance oversight
• New or revised capital standards
Recommended reading
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act). The Act is
significantly reshaping financial regulation in the United States. Our Financial Regulatory Reform Resource Center provides key information
about the legislation, its effects and updates on new developments. Visit www.GrantThornton.com/financialreform.
4 How can we help your bank?
7. Our team of dedicated professionals provide
a unique perspective on the issues financial
institutions face in the current environment.
We have the global resources to help meet
your needs on a broad range of industry-
related matters, wherever you do business.
Nichole Jordan
National Banking and Securities Industry Leader
How can we help your bank? 5
8. Loan portfolio reviews and
stress testing
Regulators now require many banks to stress test their loan Loan reviews are performed using our established
portfolios using multiple economic scenarios. Our professionals methodology, which is consistent with current regulatory
can assist with modeling a variety of scenarios. objectives. We can tailor the scope of this review to fit your
We can also help your bank conduct loan portfolio reviews, bank’s needs, or we can perform a full-scope assessment of your
perform remediation activities and train personnel. loan portfolio if necessary. Examples of loan reviews include the
following:
• Watch list review and assessment
• Review and assessment of insider loans and processes
• Sampling of loans by type and/or loan officer
• Review of the institution’s top lending relationships
• Review of specific attributes of the loan portfolio, including
concentrations
6 How can we help your bank?
9. Foreclosure reviews
We can assist banks by evaluating their foreclosure processes We can assist with any remediation efforts, particularly for
and controls and helping them address related accounting and public banks subject to SOX 404 and Federal Deposit Insurance
tax planning issues. Our professionals can help banks apply Corporation Improvement Act (FDICIA) requirements, and we
the Federal Housing Finance Agency (FHFA)’s foreclosure can coordinate with other reviewers.
process framework by conducting risk assessments to identify In addition, our foreclosure issues task force is monitoring
deficiencies in documentation. By choosing a third party to this ever-changing situation and can keep our clients up to date
conduct a foreclosure review, banks can instill confidence and on emerging developments.
thus minimize the possibility of conflicts with the FHFA or
other regulators.
Recommended reading
Mortgage foreclosures have been making headlines after regulators identified improper foreclosure proceedings for defaulted borrowers.
Numerous investigations have been launched into whether homeowners have been subjected to improper foreclosures. Some banks
have temporarily halted their foreclosure proceedings in order to review their documentation and processes. This issue of Currency,
Strengthening the foundation for foreclosures, explores current foreclosure issues, financial and regulatory issues, FHFA framework
and next steps. Visit www.GrantThornton.com/financialservices to learn more.
How can we help your bank? 7
10. Internal audit services
Our internal audit services can help you backstop the internal Benefits of an internal audit include:
controls that safeguard your bank’s valuable business assets and • Increased efficiency, effectiveness and functionality of the
processes, including data and IT systems. Our professionals can internal audit function
work with you to assess your corporate-level risk, identify the • Reduced costs of hiring, training and retaining quality
areas of greatest risk, and develop appropriate workplans and personnel
audit programs that you can use to mitigate those risks. • Compliance with applicable laws and regulations
• Assessment of the risks associated with SOX as it pertains to
Following are examples of the internal audit services we offer: internal controls
• Full outsourcing of internal audits • Improved risk management, controls and governance
• Co-sourcing with the existing internal audit function processes
• Internal audit transformation • Implementation of internal controls that help banks achieve
• IT auditing their goals and minimize surprises along the way
• Process mapping and process reviews • Enhanced communication with the audit committee
• Operational audits
• Quality assurance reviews
• Internal control documentation and testing
• Specialized audits
• Startup and development advice
• Internal audit training
8 How can we help your bank?
11. Staff augmentation Information technology audit services
For complex projects, we offer staff augmentation so your Banks today depend upon information systems for nearly all
bank will not have to hire additional full-time employees aspects of their financial and operational functions. Accordingly,
for temporary needs and special projects. Having external the security of this information is very important to a bank’s
professionals conducting your internal audit will also provide fiscal and organizational health, as well as to its shareholders,
a new perspective in assessing your operations and bring regulators and compliance examiners.
technical knowledge to efficiently reach your project goals. Staff With the aid of our IT services, your bank can protect its
augmentation will also allow you time to interview potential data and overall system architecture from internal and external
candidates to find the right person or people for your team. threats, while improving its overall IT functionality. Our team
Staff augmentation is a cost-effective alternative to of dedicated professionals can help your bank take stock of
temporarily adding staff or adding the wrong staff. Our its current information security environment and develop and
professionals can complement your internal staff by implement best practices and optimal techniques.
providing open communication, schedule flexibility and fresh We can offer you a variety of services, including business
recommendations and insights. continuity planning, testing, solution selection, cyber security
(network security), IT security, IT strategy, IT assessment, IT
due diligence, and SAS 70/SSAE 16 reporting assistance.
How can we help your bank? 9
12. Corporate governance and
internal control
Public banks must comply with the financial disclosure and With experienced professionals that specialize in monitoring
internal control requirements of the Sarbanes-Oxley Act of 2002 risks and controls, Grant Thornton facilitates constructive
(SOX) and related SEC rules. Private banks preparing for an interaction among your audit committee, management
IPO or seeking to improve their internal controls would also team, existing external auditor and internal audit group. Our
benefit from SOX compliance. knowledgeable and accredited professionals help banks reap a
Grant Thornton can help banks address their compliance number of benefits:
needs and assist audit committees and boards of directors • Effective evaluation, documentation and sign-off procedures
with the establishment of appropriate corporate governance to support management’s design and operation of the internal
procedures. Related services include the following: control system
• Internal control documentation and evaluation services — • A foundation from which to start looking at enterprise-wide
Documentation of the internal control environment, testing risks, based on recognized COSO standards
and evaluation of control effectiveness, assessment of risks, • Improved oversight by the audit committee and board of
remediation of inefficiencies, and recommendations for directors
improvement and continuous monitoring. • Increased efficiency, effectiveness and overall functionality of
• Board of directors/audit committee services — the internal audit function
Effectiveness assessments, director education, whistleblower • An industry-recognized framework and risk-based
programs, evaluation of codes of conduct, and compensation methodologies
structure reviews.
Recommended reading
In the midst of economic recovery, a major factor in determining future success may lie in one key consideration: risk. Enterprise risk
management (ERM) helps align risk with strategy, although its implementation can be a daunting task. Find out what bank executives
polled for the 17th Bank Executive Survey view as major risks and how ERM can help manage them in this issue of Currency.
Visit www.GrantThornton.com/financialservices for more.
10 How can we help your bank?
13. ComplianceSet® software for governance, risk and
compliance
Achieving cost-effective compliance with the requirements
of SOX is beneficial regardless of where your bank is within
the compliance life cycle. Grant Thornton’s ComplianceSet®
software can help. ComplianceSet® is a Web-based software as a
service, or SaaS, solution that serves as the technical foundation
for a process-based approach to governance, risk and compliance
requirements related to SOX, internal audit and enterprise risk
management.
The ComplianceSet® application provides management with
a real-time view of a bank’s system of internal controls over
financial reporting (ICFR). The application incorporates proven
SOX compliance best practices, work approaches, thought
leadership, methodologies, accelerators, training materials and
process-based tools to help banks manage and measure their
ongoing compliance processes.
How can we help your bank? 11
14. Enterprise risk management
In today’s business environment, with its increased market Our ERM methodology is customizable to a bank’s
complexity, rapid globalization and heightened investor particular situation or needs. To help develop a strategy that
expectations, managing risks while providing value is more works, we ask several specific, probing questions about current
important than ever before. All banks — big or small, public or risk management processes:
private — have risks that they must manage proactively to succeed. • What are your bank’s strategic objectives, risk management
Enterprise risk management (ERM) serves as the leading philosophy, risk appetite and risk tolerance?
approach to managing and optimizing risks. This approach • How does management identify strategic, operational,
involves strategically identifying, analyzing, overseeing and reporting, compliance and other risks?
monitoring the potential risks to a bank. ERM enables a bank to • How does management assess and respond to risks? Does
determine how much uncertainty and risk are acceptable when management avoid, reduce, share or accept them?
adding value. • What controls are in place to meet management’s risk needs
and how does management monitor these controls?
Our Professional Standards Group is dedicated to
the details. We can help your bank understand how
technical accounting issues affect the big picture.
Dorsey Baskin
National Technical Banking Partner and
Central Region Partner-in-Charge of the Professional Standards Group
12 How can we help your bank?
15. Mergers and acquisitions
Financial reform may prompt institutions to consider selling You’ll get the benefit of our experience with various
in order to avoid shouldering additional regulatory burdens. transaction structures:
Our professionals can help with all aspects of M&A activity, • Acquisition or divestiture of entire banks
including integration, due diligence, valuations, regulatory • Carve-outs or spinoffs of specific divisions or product lines
application process, combined strategic and capital plans, • Leveraged ESOPs
combined pro forma financials, and accounting and tax
compliance. In addition, we can assist thrifts with mutual-to- Our professionals can also assist with all due diligence
stock conversions. matters in the compressed timeframe required by the FDIC in a
failed bank acquisition:
Due diligence • Conducting loan reviews and assisting in the identification of
Balancing your strategic and financial goals with opportunities areas of risk and portfolio valuation
and exposures when executing mergers and acquisitions can • Using loan sampling techniques to assist with identification
put a strain on your people and your budget. Our Transaction of risk in the loan portfolio during due diligence
Advisory Services team can provide the support you need so that • Inquiries and assessment of management, credit practices and
you can maximize value for the price paid. banking operations
Our team members draw from their extensive experience • Preparing a report or presentation of due diligence results for
with operating businesses and executing transactions to provide management and the board
practical insight into each transaction. You can expect to work
with professionals who have a solid foundation in accounting,
finance and tax, along with significant consulting and banking
industry experience. You will have instant access to resources
and quick responses to your needs. We offer you:
• Valuable transaction experience
• An integrated service offering that covers every phase of the
transaction process
• A standardized methodology
• Easy access to international resources and to banking
industry and subject-matter professionals
• Strong experience with both financial and strategic buyers
How can we help your bank? 13
16. Failed bank acquisitions and FDIC-assisted transactions Our failed bank acquisition and FDIC-assisted transactions
Failed banks can present growth opportunities for healthy experience includes the following:
institutions, with the risk mitigated by FDIC-assisted • Assisting in targeting and negotiations with the FDIC in a
transactions. Our professionals can help acquirers with due failed bank transaction
diligence, purchase accounting, and systems and tax issues. After • Preparing regulatory filings, such as the application and
an acquisition, we can assist with the integration process, as well business plan
as compliance with FDIC agreements. • Consulting with respect to determining the elements of the bid
• Consulting on all matters related to the due diligence process
• Preparation of pro forma financial statements to present to
the FDIC
• Assisting with the closing weekend and settlement process
• Providing integration and valuation services
Recommended reading
These white papers explore the accounting and tax issues associated with the complexities of FDIC-assisted transactions.
Visit www.GrantThornton.com/troubledbanks to learn more.
14 How can we help your bank?
17. Our professionals also have experience working on a contractor Our professionals can assist acquiring banks with reviewing
basis as part of the Receivership Assistance Contract (RAC) loans assumed from a failed bank for potential fraudulent
program to provide a full range of bank closing support functions: activity. Such a review will include interviewing various bank
• Valuation services — Upon acquisition, we can help the personnel and reviewing loan documents, bank policies and
acquirer determine the fair value of the assets acquired and board minutes for compliance with loan requirements, as well as
liabilities assumed. reporting any fraudulent activity to the appropriate authorities.
• Pro forma and settlement services — We can assist in the
reconciliation of the FDIC’s pro forma financials to the bank’s
Day 1 balance sheet and assist in the settlement process.
• Support — We can assist with the integration of the acquired
bank by offering accounting, tax and systems services.
• Loss-sharing agreement compliance — We can assist the
acquiring bank with the establishment of internal controls
and processes for loss-sharing agreement (LSA) reporting
as required by the FDIC. Additionally, we can provide
monitoring services on an ongoing basis in order to provide
a third-party assessment of LSA reporting. We can also help
implement the processes and controls necessary for ongoing
FDIC LSA reports.
• Accounting for indemnification assets and SOP 03-3 —
Accounting for FDIC-assisted transactions can be extremely
complex. Our professionals can assist with accounting
for indemnification assets and compliance with AICPA
Statement of Position 03-3, Accounting for Certain Loans or
Debt Securities Acquired in a Transfer (SOP 03-3 or
ASC 310-30), and other issues.
• Loan-level tax basis reporting — We can determine relevant
tax issues related to failed bank acquisitions and evaluate
the impact of an acquisition on income tax positions, capital
ratios and other key metrics.
How can we help your bank? 15
18. Corporate advisory &
restructuring services
In stressful economic situations, banks must carefully measure,
report and forecast results, manage cash flow, and monitor
compliance with loan covenants. Our cash management and
financial modeling specialists address these issues, and develop
both short-term and long-term solutions, as well as assist lenders
and borrowers in the following areas:
• Review and development of business plans
• Benchmarking and competitive risk analyses
• Cash flow management
• Interim financial management
• Optimization of capital structure
• Assessment and implementation of strategic alternatives and
initiatives
• Valuation of businesses and assets
• Post-merger integration
16 How can we help your bank?
19. Performance improvement
Our performance improvement services can help your bank Regulatory examination readiness and remediation
improve the value of its operational and back-office business Tightened regulatory requirements make it increasingly
processes. Our comprehensive approach addresses the performance important for any issues arising from regulatory examinations
of people, processes and technology, focusing on methods for to be addressed thoroughly and promptly. We assist banks
improving efficiency, reducing costs and creating value. We help with remediating issues noted in regulatory examinations. This
banks improve their business in a number of core areas: assistance includes participating in the development of remedial
• Finance transformation — Creating substantial benefits for action plans and testing to determine whether issues have been
the entire bank by reinventing the finance and accounting addressed properly.
organization. In addition, with the OTS being eliminated and its powers
• Business process re-engineering (BPR) — Streamlining being distributed among the Federal Reserve, the OCC and the
operational and back-office business processes to create FDIC, we help banks that are currently regulated by the OTS
efficiencies and reduce costs. as they prepare for examinations by a new regulator. We also
• Capital adequacy and strategic planning — Preparing and assist banks in evaluating charters that will change. And because
monitoring your bank’s strategic plan, capital adequacy plan the Bureau of Consumer Financial Protection will be able to
and budget. examine community banks at its discretion, we assist those banks
• Planning, budgeting and forecasting — Improving your that are preparing for this new regulatory oversight.
bank’s ability to execute its strategy by aligning operational
and financial plans.
• Business intelligence — Making informed, proactive
business decisions by obtaining relevant, timely information.
• Working capital management — Analyzing cash flow and
developing recommendations for enhancing liquidity.
• Portfolio profit improvement — Analyzing and quantifying
your portfolio in order to identify where profit growth and
potential can be attained.
• Business transformation assessment — Identifying
opportunities for reducing costs of processes while increasing
the value they provide to the bank.
• Project management office — Improving your bank’s
ability to identify, address and mitigate risks related to the
management, execution and control of key business projects.
• Systems planning — Assisting with systems planning,
selection and integration, including key systems associated
with regulatory reporting, credit, capital and risk
management, and data management.
How can we help your bank? 17
20. Problem bank services
Institutions on the FDIC’s list of problem banks will need
to take a number of steps to return to a healthy state. Our
professionals can help you:
• Establish and monitor strategic and capital plans
• Create liquidity management policies with contingency
funding plans
• Develop a lending policy with plans to reduce classified
assets, and conduct a concentration analysis
• Evaluate management’s plans and assist in talent acquisition
of new management if necessary
18 How can we help your bank?
21. Mortgage banking and securitization
services
We offer state-of-the-art audit, tax and advisory services designed We also offer structured finance services to meet the various
to add value and improve the operations of mortgage banks. needs of your transactions. From securitization due diligence
Our professionals understand the need to differentiate your services to bond administration and payment verification
bank from competitors that also provide mortgage financing and services, our professionals work with clients through all phases
securitization services. Through established procedures, we help of the capital markets/structured finance process.
mortgage banks implement a systematic, disciplined approach to
evaluating and improving the effectiveness of their governance,
risk management and control processes.
Our professionals understand the accounting, valuation and
regulatory implications related to various securitization vehicles,
such as asset-backed securities (ABS), mortgage-backed securities
(MBS), collateralized debt obligations (CDOs), collateralized
loan obligations (CLOs), collateralized bond obligations (CBOs)
and collateralized mortgage obligations (CMOs).
Recommended reading
Over the past few years, private investors have lost their collective appetite for most mortgage-backed securities, particularly those in the
nonconforming or “jumbo” category (those too large to be guaranteed or secured by a government entity, such as Fannie Mae or Freddie
Mac). In April 2010, Redwood Trust, a California-based REIT, sponsored a $238 million residential prime jumbo mortgage securitization
— the first deal of its kind since August 2008 — and breathed new life into a dormant market. Learn more about this transaction and how
it may shape future securitizations in this issue of Currency: Private market for mortgage-backed securities shows signs of life.
Visit www.GrantThornton.com/financialservices.
How can we help your bank? 19
22. Valuation services
Understanding what contributes to the value of your bank or its Following are some key questions to consider during a
business assets can put you on the right track toward preserving business valuation:
or growing that value. Valuations relate to investment analysis, • Is there goodwill on the balance sheet?
capital budgeting, purchase price allocation, financial reporting, • Are there intangible assets with indefinite lives on the balance
fresh-start accounting, taxable events, litigation support, and sheet?
many other business and legal applications. • Has a merger or an acquisition been completed within the
There are inherent financial, regulatory and legal factors that past year?
should be considered carefully during the valuation process. • Is a merger or an acquisition contemplated over the next 12
A thorough, supportable valuation requires the application to 18 months?
of objective, accurate and advanced valuation methods • Could there be an impairment charge under ASC 360
balanced with the education, training and experience that only (formerly SFAS 144)?
accomplished valuation professionals can provide. Our insights, • Have stock options been granted in the past 12 months?
coupled with our industry experience, can help you identify • Are key executives undertaking estate or gift tax planning?
value drivers, maintain compliance with the latest U.S. and • Is a Code Section 338(h)(10) or (g) acquisition contemplated?
international accounting standards, and demonstrate unbiased If so, and if foreign entities are involved, have statutory
credibility and transparency to your stakeholders and depositors. capital issues been addressed?
Our Valuation Services professionals provide a full range of • Are there complex options or derivatives that have market
general and banking industry-specific valuation services to public exposure?
and private banks, private equity firms, governments, insurance • Does a complex tax structure exist, or are there tax changes
carriers, attorneys, fiduciaries, private investors, family-owned that may entail moving intangible assets or equity from
interests, and high-net-worth individuals. subsidiary companies?
Recommended reading
Business Valuation Monitor is a newsletter covering value creation perspectives for corporate executives and the investment community
in the areas of financial reporting, transaction support, damage calculations in disputes, intellectual property, bankruptcy proceedings and
corporate tax planning. Visit www.GrantThornton.com/thinking and select “Newsletters.”
20 How can we help your bank?
23. SSAE 16/SAS 70 reviews
Since April 1992, Statement on Auditing Standards No. 70 As banks make the transition from SAS 70 to SSAE 16, we
(SAS 70) has been the U.S. standard for reporting on controls can help them navigate the process:
at a service organization. In April 2010, the American Institute • Determine whether multiple service auditor reports will be
of Certified Public Accountants (AICPA) issued Statement on necessary
Standards for Attestation Engagements (SSAE) 16, Reporting on • Review their existing monitoring and testing processes to
Controls at a Service Organization. SSAE 16 supersedes SAS 70 determine whether they are sufficient to support the written
for reports with periods ending on or after June 15, 2011. management assertion
• Identify risks that threaten the achievement of control
objectives
Today’s banking landscape is more complicated
than ever before. We have the experience to help
your bank navigate issues from compliance with
financial reform to failed bank acquisitions.
Molly Curl
Bank Regulatory National Advisory Partner
How can we help your bank? 21
24. Forensic accounting and fraud
investigations
When conducting an investigation or responding to allegations Our experienced investigators are trained to respond quickly
of fraud or a regulatory inquiry, a swift, strategic approach to and confidentially to allegations of white-collar crime, fraud,
discreetly control damage is paramount. waste and abuse. Our credentialed specialists use established
Grant Thornton’s multidisciplined Forensic professionals forensic investigation methods, such as interviews, digital
perform forensic accounting and use data analytics techniques forensics, forensic data analytics, financial analysis, records
to gather, analyze and interpret financial and economic evidence research and background searches to reveal the root cause and
to assist others in making informed decisions about business impact of the fraud.
concerns and coordinate litigation support to prosecute for the We produce reliable findings, conclusions and
retrieval of missing assets. recommendations that have been used successfully in civil,
We can support institutions and their attorneys if they criminal and bankruptcy proceedings; corporate actions;
become involved in litigation, dispute resolution or other legal governmental inquiries; regulatory investigations; and insurance
proceedings. Our team combines the diverse skills of CPAs, claim cases, among other matters.
auditors, credentialed forensic technology specialists, Certified
Fraud Examiners (CFEs), and Certified Anti-Money Laundering
Specialists (CAMS).
22 How can we help your bank?
25. Tax services
Our Tax professionals can assist institutions with tax compliance Compensation and benefits
and are familiar with provisions for income taxes and remodeling Our Compensation and Benefits professionals have considerable
and repair expenditures for banks. We are available for both experience assisting boards of private and public banks with
outsourcing and co-sourcing of an institution’s tax function. In executive and board compensation issues. We work with boards
addition, we can help banks identify federal and state tax savings and their compensation committees as they develop effective
opportunities, as well as international tax complexities. We can programs focused on executive pay, director pay, retainers and
also assist banks as they navigate compensation and benefit equity compensation. We offer an array of services:
issues, especially in light of new regulations. • Executive compensation review
• Review and design of short- and long-term incentive plans
• Benchmarking
• Review of compliance with incentive compensation guidance
• Review of compliance with control and governance policies
related to compensation design and implementation
• Nonqualified deferred compensation and supplemental
executive retirement plan analysis
• Board compensation review
• Employment and change in control agreement review and
diagnostics
• Proxy consulting
• Change in control and golden parachute tax gross-up
diagnostic review
• Performance metric analysis
In addition to providing compensation services, our
professionals can provide plan design and regulatory compliance
services for employee benefit plans.
How can we help your bank? 23
26. State tax savings opportunities Federal tax savings opportunities
• Analysis of apportionment factor to determine proper • Assistance in reviewing debt modifications and restructurings
compliance and tax savings opportunities, including (deemed tax exchanges under IRC Section 1001), including
consideration of market-state sourcing and distinctive rules analysis of accelerated tax deductions and deferred revenue
applicable to financial institutions recognition versus FAS 118 treatment
• Determination of apportionment factor and potential • Analysis of conformity election associated with bad debt
tax savings opportunities associated with the use of loan deduction, including possible revocation
securitizations • Analysis of distressed asset acquisitions, including
• Review of the financial institution classification for a nonperforming loan interest, contractual interest and market
taxpayer, or for each member of a combined or affiliated discount calculations
group • Determination of tax planning and structural opportunities
• Review of combined return membership, including for FDIC-assisted acquisitions that maximize tax deferrals
consideration of techniques to force or break a particular and identify basis deductions
combined group • Analysis of fixed assets for accelerated deductions via cost
• Review of financial institution corporate structure, including classifications and rebranding opportunities
location of foreign entities • Review of federal tax credits such as low-income housing and
• Analysis of state income and franchise (net worth) tax new market credits
treatment of owners of real estate mortgage investment • Analysis of strategies with respect to tax-exempt income that
conduit (or REMIC) residual interests complement recent case law and legislation
• Analysis of state income tax impact of federal reorganizations • Development of tax hedging and investment strategies that
and other transactions are consistent with regulatory financial reform
• Review of gross receipts-based taxes, including the Texas • Transfer pricing reviews
margin tax, Ohio commercial activity tax and Michigan • IRS audit assistance
business tax
• Review of state tax credit opportunities
• Review of the sales and use tax procurement function
to identify potential savings opportunities via structural
planning
• Review of sales and use tax treatment of computer software,
digital products, and soft-dollar purchases
• State and local tax audit controversy assistance
24 How can we help your bank?
27. Remodeling and repair expenditures for banks International tax services
On March 10, 2008, the IRS and Treasury withdrew prior Each new offshore location and international business
proposed regulations and issued new proposed regulations transaction requires appropriate tax strategies to address global
under Section 263 governing the deductibility of costs incurred risk, new regulations and varying tax rates. If your bank wants
in connection with the acquisition, production, or improvement to design an efficient tax structure or financing for an overseas
of tangible property. The new proposed regulations clarify and acquisition, an existing venture or worldwide restructuring,
expand upon rules contained in the existing final regulations Grant Thornton’s International Tax Services team can provide
under Sections 263(a) and 162 as well as existing case law and the advice you need. We can also guide you through the
administrative guidance. increasingly complex U.S. reporting requirements for outbound
Remodeling expenditures: deduct or capitalize? Among foreign operations and inbound activities.
the issues addressed in the proposed regulations is whether While you concentrate on growing your business, our
certain types of repair and maintenance costs are capitalizable International Tax professionals can assist you with:
or deductible. The proposed regulations contain an example • Foreign business investments — Structure investments in
that raises the possibility of deducting certain costs incurred to offshore businesses to manage U.S. and host country taxation by
remodel and reconfigure branch locations and other facilities analyzing host country deductions, exemptions and incentives.
when those remodeling and reconfiguration costs are undertaken • Cash management — Plan for the tax-efficient repatriation
to provide for better merchandising, cosmetic alterations, and offshore use of foreign profits.
rebranding and general “refreshing.” Because many taxpayers • Global tax compliance — Leverage our web-based
have capitalized such costs for both financial statement and tax management tool and global tax resources to assist with
purposes, a review of capitalized remodeling costs might uncover proper compliance in the U.S. and abroad while keeping key
significant deduction opportunities. information at your fingertips.
Our Tax professionals will work with you to identify • Transfer pricing — Optimize intercompany transfers for
potential deduction opportunities by conducting a goods, services, royalties, intellectual property and loans
comprehensive capital expenditure review. This review may between companies in a cross-border context.
identify items that were capitalized for GAAP and tax purposes, • Employee taxation — Manage U.S. and host country tax
but which qualify as current tax expenses. At your direction, we benefits for expatriate employees and their employers.
will prepare an accounting method change request to help you • Regional specialty consulting — Structure your business
claim the benefit of a deduction for such costs. activities as you pursue business in Asia, Latin America,
We are respectful of your time. Recognizing that you and your Europe and other regions.
staff have your own responsibilities, Grant Thornton’s approach • Cross-border acquisitions and reorganizations — Structure
minimizes the time and effort required in compiling and analyzing cross-border acquisitions and reorganizations in a
information necessary to prepare the method change request. tax-efficient manner.
We have successfully completed many large-scale
capitalization review projects for major retailers and franchisees,
financial institutions, distributors and manufacturers.
Grant Thornton’s experience and our tax-oriented approach
enable us to help you take advantage of this potential opportunity.
How can we help your bank? 25
28. Audit services
We understand how important audited financial statements IPO services
are to businesses, shareholders, owners, lenders, investors Grant Thornton has extensive experience providing accounting
and other stakeholders. Our professionals have extensive and tax services to companies launching IPOs. We work closely
experience performing bank audits, and we work with some with your securities counsel, underwriters and other advisers to
of the country’s most successful private and public banks. Our facilitate the process and help minimize the disruptive effects it
approach is first to understand the business of your bank and can have on your accounting staff.
the risks it faces and then to focus our attention where it matters We also use our experiences in working closely with the
most. Our method is both effective and cost-efficient. SEC to guide you through the process and assist in identifying
Ultimately, we see an audit as more than just numbers areas of focus ahead of the filing in an effort to reduce the time
and compliance; our goal is to help our clients have a better spent on resolving matters during the review process. Our team
understanding of their business. We consider it our job to keep consists of both SEC regulatory specialists, including former
our clients informed all year long of accounting, financial and SEC staffers, and technical accounting specialists.
regulatory developments that may affect their business.
You can also visit our Audit Committee Resource Center at
www.GrantThornton.com/auditcommittees to learn about
emerging issues and to sign up to receive technical updates.
We offer products and services designed for banks like yours,
and our experienced professionals are dedicated to providing
you with distinctive client service. Our command of banking
industry practices and technical issues will result in prompt
responses to your questions. Grant Thornton can help your
bank maximize its potential.
Recommended reading
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) will change the landscape for financial services firms and
financial institutions. Although central elements of the Act focus on regulating the financial services sector, the legislation also includes
provisions affecting every public company, including enhanced SEC enforcement authority and additional corporate governance
requirements. This white paper, Financial reform: What public companies and their audit committees need to know, outlines
key financial reform issues that public companies and their audit committees should understand and actions they can take.
Visit www.GrantThornton.com/financialreform for more.
26 How can we help your bank?
29. Managing the filing requirements can be difficult and time-
consuming. Our approach is designed to help you meet your
timetable for filing and to deliver high quality by:
• Strictly adhering to the Public Company Accounting
Oversight Board (PCAOB) independence standards
• Performing an audit of your financial statements
• Providing consent to the use of our audit reports in offering
documents as needed
• Reviewing your accounting policies and financial statement
disclosures for compliance with U.S. GAAP and SEC-related
requirements
• Working closely with securities counsel and other advisers in
the review of the offering document
• Reviewing your responses to SEC comment letters, questions
or concerns prior to their submission
• Working with other accounting firms that provide non-audit
services or may have been involved in prior periods
• Providing benchmark accounting policies and disclosures
from comparable public companies
• Providing comfort to underwriters on certain financial
amounts disclosed in the registration statement upon request
Grant Thornton has earned Wall Street’s trust and has also
worked with, and been accepted by, the major underwriters that
are involved with our clients.
How can we help your bank? 27
30. Accounting services
We offer banks practical advice about a number of technical In addition, our Accounting Guidance Resource Centers
issues related to accounting guidance: offer a wealth of information on a range of topics, from fair value
• The completeness and determination of critical accounting and International Financial Reporting Standards to business
policies, including the allowance for loan losses, fair value combinations and lease accounting. Visit www.GrantThornton.
and lease accounting com/accountingguidance.
• The applicability of new accounting pronouncements
• The formulation and improvement of accounting policies and
practices
• Areas of significant accounting and disclosure risk
• Drafting of financial statement disclosures and regulatory
filings
• Preparation of your tax provision under U.S. GAAP,
International Financial Reporting Standards (IFRS) and other
foreign reporting standards
Recommended reading
Financial Bulletin covers regulations and developments affecting the financial services industry. This February 2010 issue, FASB update
clarifies fair value measurement, explores how the amendments made by Accounting Standards Update (ASU) 2010-06, Improving
Disclosures about Fair Value Measurements, clarify a fund’s process for applying valuation techniques to its fair-valued securities.
Visit www.GrantThornton.com/financialservices for more.
28 How can we help your bank?
32. Grant Thornton resources
Bringing meaningful information to our clients Accounting Guidance Resource Centers
Grant Thornton Thinking webcasts, white papers and From fair value and IFRS to business combinations and lease
publications will keep you plugged in to what you need to accounting, our Accounting Guidance Resource Centers offer
know about both your industry and the complex regulatory a wealth of information on a range of accounting topics. Visit
environment you face. Here are just some of our online www.GrantThornton.com/accountingguidance.
resources and publications.
Bank Executive Survey
Financial Regulatory Reform Now in its 18th year, this Grant Thornton
Resource Center survey, conducted in conjunction with Bank
On July 21, 2010, President Obama Director magazine, takes the pulse of bankers
signed into law the Dodd-Frank Wall Street on the state of the economy, top concerns,
Reform and Consumer Protection Act (the plans for growth and more. Visit
Act). The Act is significantly reshaping www.GrantThornton.com/banksurvey.
financial regulation in the United States. Our
Financial Regulatory Reform Resource Center provides key FDIC-assisted transactions series
information about the legislation, its effects and updates on new These white papers explore the accounting
developments. Visit www.GrantThornton.com/financialreform. and tax issues associated with the complexities
of FDIC-assisted transactions. Visit
Audit Committee Resource Center www.GrantThornton.com/troubledbanks.
At a high level, audit committee members
need to navigate through ever-changing SEC
and other regulatory standards in today’s
financial environment. Our Audit Committee
Resource Center houses guides, tools and
thought leadership to help audit committee
members understand the latest financial standards while
highlighting the overall implications for public companies. Visit
www.GrantThornton.com/auditcommittees.
Visit www.GrantThornton.com/subscribe
to learn more about our publications.
30 How can we help your bank?
33. Contact us
Jack Katz Nichole Jordan
National Managing Partner National Banking and Securities
Financial Services Industry Leader
Grant Thornton LLP Grant Thornton LLP
T 212.542.9660 T 212.624.5310
E jack.katz@us.gt.com E nichole.jordan@us.gt.com
Molly Curl Dorsey Baskin
Bank Regulatory National Advisory National Technical Banking Partner and
Partner Central Region Partner-in-Charge of the
Grant Thornton LLP Professional Standards Group
T 214.561.2450 Grant Thornton LLP
E molly.curl@us.gt.com T 214.561.2328
E dorsey.baskin@us.gt.com
How can we help your bank? 31
34. About Grant Thornton
Grant Thornton LLP was founded in 1924 and has 49 offices the world’s leading organisations of independently owned and
nationwide, with more than 5,200 professionals serving more managed accounting and consulting firms. These firms provide
than 24,000 clients. Grant Thornton LLP is the U.S. member assurance, tax and advisory services to privately held businesses
firm of Grant Thornton International Ltd, one of the six global and public interest entities. More than 2,500 partners provide
audit, tax and advisory organizations. In the U.S. visit clients with distinctive, high quality and personalised service
www.GrantThornton.com. in over 100 countries. Grant Thornton International Ltd and
The people in the independent firms of Grant Thornton its member firms are not a worldwide partnership, as each
International Ltd provide personalized attention and the member firm is a separate and distinct legal entity. For more
highest quality service to public and private clients in more information visit www.gti.org.
than 100 countries. Grant Thornton International is one of
Offices of Grant Thornton LLP
National Office Georgia New York Utah
175 West Jackson Boulevard Atlanta 404.330.2000 Long Island 631.249.6001 Salt Lake City 801.415.1000
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Edison 732.516.5500 San Antonio 210.881.1800
32 How can we help your bank?
35. This Grant Thornton LLP document is based on general concepts and terms is not a comprehensive analysis of the subject matters
covered, and may be subject to change in part because any existing or proposed accounting and other literature summarized herein
may be amended or may change before it is issued in final form. The views and interpretations expressed in the document are those of
the authors, and the document is not intended to provide accounting or other advice or guidance with respect to the matters covered.
All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions
that comply with matters addressed in this document. Accordingly, this document should not be used as a basis for any decision
or action that may affect your business. Grant Thornton LLP, its affiliates, and related entities, shall not be responsible for any loss
sustained by any person or entity relying on this document. For additional information on matters covered in this document, contact
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In accordance with certain professional standards, we inform you that this document supports Grant Thornton LLP’s marketing
of professional services, and is not written tax advice directed at the particular facts and circumstances of any person. If you are
interested in the subject of this document, we encourage you to contact us or an independent tax advisor to discuss the potential
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