LETTER TO THE SEC

Dated: March 4, 2003

Mr. Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609

RE:   Proposed Rules Concerning Standards Relating to Listed Company Audit Committees
File:   No. S7-02-03

Dear Mr. Katz:

As a follow-up to our letter to you dated March 4, 2003, the American Association of Bank Directors submits the following additional comments

In recent days, several of our bank director members have asked us whether service on an audit committee of a listed company would be barred as a result of the person or his or her related interest obtaining an arms-length loan made in compliance with the Federal Reserve's Regulation O. In addition, if an extension of credit made to an audit committee member in conformity with Regulation O later becomes a "problem" loan, or if the bank forgives a portion of the loan principal as a result of the workout of such problem credit, could that affect the "independence" of the person for purposes of Section 10A(m) of the Exchange Act and your implementing regulations?

I believe that the proposed definition of audit committee member "independence" would not preclude a member from serving on an audit committee for any of the reasons set forth above, nor do we believe that the definition of "independence" should be amended to bar the member from serving for these reasons. We recognize that the listing requirements of the national securities exchanges may address these issues, and we intend to comment on those proposals once they are published for comment.

It would be helpful to our members that in the final rule promulgated by the SEC, it clearly spells out in the prefatory material that lending and other similar relationships with the reporting company would not bar a director from serving as an audit committee member.

Sincerely,

David Baris
Executive Director