Saturday, February 28, 2015

BoE turns up the heat on accountants for banks

BoE turns up the heat on accountants for banks


[LONDON] The Bank of England (BoE) has turned up the heat on accounting firms used by banks, saying they must provide the central bank with written reports from November 2016 on their audits of Britain's main lenders.
Policymakers questioned the accuracy of external audits after banks had to be rescued by taxpayers in the 2007-09 financial crisis just months after accounting firms gave them a clean bill of health.
The BoE's Prudential Regulation Authority (PRA), which supervises Britain's banks, published a consultation on Friday on how it will scrutinise the accountants and actuaries hired by banks and use new powers to sanction them.
The move echoes measures being taken inside banks to make individuals more directly accountable for their actions, making it easier to punish rule breaches.




Britain's big banks, such as HSBC, Barclays , Lloyds and RBS, all use one of the"Big Four" accounting firms, PwC, Deloitte, EY and KPMG. "Although engagement between external auditors and the PRA has improved in recent years, the PRA's monitoring of the quality of auditor-supervisor dialogue has shown that there is more that can be done," the PRA said in a statement.
The watchdog is proposing that accountants for the biggest UK headquartered deposit-taking banks provide written reports to the supervisor annually on financial reporting and the accompanying audit. "These written reports will enable the PRA to gain a better understanding of the risks in banks' financial reporting and help supervisors to focus on the key areas of risk," the PRA said.
The aim is to spot problems early before they get out of hand and so action can be taken in a timely way. The new requirement will be introduced in full in relation to audits ending on or after Nov 1, 2016. "Where auditors and actuaries fail to provide us with the information that we need to supervise firms effectively, we now have disciplinary powers which allow us to take action to rectify this," PRA chief executive and BoE deputy governor Andrew Bailey said.
REUTERS


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