Why External Auditors Will be Assuming a More Prominent Role in 2013: The 'Old Lady' Makes her Much Anticipated Comeback (with Greater Powers)
Posted: 23 Dec 2012
Date Written: December 23, 2012
Abstract
One reason put forward for the decision to grant the Bank of England greater powers is the opinion that 'Technocrats are thought to do a better job of ensuring financial and price stability than politicians, because their decisions are not distorted by the pressure to win elections.' Even though various other reasons persist and constitute valid (as well as solid) grounds for endowing the Bank with greater powers, there is no doubt that the relationship between bank supervisors and external auditors has deteriorated since the more politically inclined Financial Services Authority took over in 1997.
Will Mark Carney's era signify the return of the prominent role to be assumed by external auditors in bank supervision – as intended under the Banking Act 1987? The Bank of England has also been quoted as acknowledging that: 'The working relationship between external auditors and the prudential supervisors had broken down in the period prior to the financial crisis. Prior to 2007, formal meetings between supervisors and external auditors no longer formed part of the routine supervisory framework and the informal channels of communication that existed when the Bank had responsibility for supervision had fallen away.'
Will 2013 signify the dawn of greater and much required developments in the area of external auditing – or the dawn of a new and radical Banking Act? It is certain that a lot will be expected from the Bank as well as from the new Governor. The role assumed by external auditors in financial supervision is without doubt, increasingly becoming appreciated - particularly in the aftermath of the recent Financial Crisis.
Keywords: LIBOR rate rigging, financial supervision, bank supervision, central banks, monetary policy, Mark Carney, Bank of England, Financial Services Authority
Suggested Citation: Suggested Citation