GLOBAL BANKING regulators have published guidelines to strengthen the in-house audit of banks' internal control, risk management and governance systems and processers.
The rules, published by the Basel Committee on Banking Supervision, require internal auditors to report directly to the bank's board and audit committee rather than senior management. The new guidance should also make it harder for board members to ignore advice given by their internal auditors or claim they were not told about something.
By forcing banks to take their internal audit functions more seriously, the guidance is expected to help plug the gap in checks and balances exposed by revelations that Barclays had been rigging Libor interest rates – the rates at which banks lend to each other.
"[The] Basel Committee guidelines up the ante on internal audit in banks. It's an absolutely vital function in banks, but it hasn't always had the attention it needs," said Ian Peters [pictured], chief executive of the Chartered Institute of Internal Auditors.
"Ethics and culture in banks are set at the very top; this guidance helps internal auditors build better relationships with those at board level. It forces bank boards to take their internal audit functions seriously."
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