THE BANK OF ENGLAND is putting the finishing touches to new “protocols”aimed at improving communication between regulators and auditors which came under scrutiny following the financial crisis.
Under the plans the Bank will stage two to three meetings each year with the heads of individual audit teams which look after major financial institutions.
The Bank is keen establish regular meetings with big banks’ individual audit teams to highlight any serious financial problems at an early stage.
It will also set out standards of best practice for auditors and hold regular trilateral meetings involving banking staff, auditors and regulators, according to those close to the process.
The bank is also seeking to involve senior bank staff, including the chief risk officers, finance directors and audit committee chairmen.
In return, auditors will receive tip-offs from regulators seeking to draw their attention to problem areas.
The Bank is leading the reform agenda, but is also working in partnership with the Financial Services Authority (FSA), according to a senior London auditor.
“The bank is very much in the driving seat but it recognises that, at the moment, supervision is still very much in the hands of the FSA and is very keen that its thinking is part of this dialogue,” he said.
The Bank declined to comment.
A House of Lords inquiry into the audit of banks during the crisis has raised concerns about the relationship between auditors and government and whether shareholders should have received more information on bank finances.
It emerged today that even chancellor George Osborne is concerned about the relationship and how shareholders could be better served with information.
During the inquiry former chancellor Lord Nigel Lawson accused the FSA of failing to watch over and maintain a strong relationship with auditors.
“You were asleep on the job, and to the extent you were half-awake, your eyes were not on the ball,” he said at the time.
The Lords have already hinted they will recommend that auditors and regulators re-establish their close relationship which deteriorated after supervisory powers were stripped from the Bank in 1997.
John Tattersall, a former bank auditor with PwC, said there was “a real willingness” to develop dialogue with auditors in the wake of the Barings Bank and BCCI collapses in the early to mid ninties.
“It has slipped since then,” he said.
“It has perhaps not been forefront at the minds of regulators and perhaps not at the forefront at the minds of auditors,” he said.
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