U.S. financial institutions are generally in compliance with internal control reporting obligations under Sarbanes-Oxley’s controversial Section 404, according to a survey from Standard & Poor’s Ratings Services.

The report, which was released yesterday, said that although a few financial institutions reported material weaknesses in their internal controls, these weaknesses are not material enough to result in negative rating actions.

As of early March 2005, Countrywide Financial Corp., Providian Financial Corp., CIT Group Inc., SunTrust Banks Inc., HSBC Finance Corp., and Riggs National Corp. are among the financial institutions that have reported they have discovered or are expected to report such a material weakness. Standard & Poor’s says its conclusions are based on reports filed to date with the SEC and responses from rated issuers surveyed by Standard & Poor’s.

“It appears to date that the bond market reaction has been relatively mute in response to financial institutions’ reporting material weaknesses, the most severe of the control deficiencies described in Section 404 of Sarbanes-Oxley,” said Joyce Joseph-Bell, Standard & Poor’s accounting specialist, who coordinated the survey. “Based on current disclosures, we do not expect these material weaknesses to have a credit ratings impact on the financial institutions that have disclosed weaknesses. Standard & Poor’s will continue to closely monitor Sarbanes-Oxley related developments during 2005.”

In Canada, regulators recently proposed a rule that would impose similar obligations on Canadian issuers. In a speech last week, David Brown, outgoing chair of the Ontario Securities Commission, called the internal control reporting issue one of the toughest of his tenure atop the OSC.