Lords tell FSA to monitor banking system

Regulators at the FSA have been told to resume meetings with bank auditors to keep themselves better informed about the banking system by a Lords committee probing the crisis.

Peers on the House of Lords Economic Affairs Committee said it was ‘regrettable’ that supervisors ceased meeting with auditors, who told them that information sharing had become less effective when the FSA took responsibility for supervising the banking system.

The report, on the causes of the banking crisis, said there was ‘no evidence that bank auditors failed in their statutory duty to make a going-concern judgment on their clients’ and made it clear they ‘should not be required to make a more general judgment on the quality of their client’s’ strategies’.

It added: ‘It is unlikely that auditors would be more able than financial supervisors to identify structural problems in the financial sector.’

The report also defended ‘mark-to-market’ accounting and urged supervisors to ‘identify ways to ensure that it does not amplify the economic cycle’.