The Bank of England would have the power to fine or ban accounting firms from working in financial services under proposals setting out how the UK central bank’s regulation arm will monitor the accounting industry.
The proposals from the Prudential Regulation Authority (PRA), which supervises Britain’s banks, were published yesterday and show how the watchdog plans to oversee the accountants and actuaries hired by banks and use new powers to sanction them.
The accuracy of external audits has come under scrutiny by regulators and governments 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 plans echo measures being taken inside banks to make individuals more directly accountable for their actions.
The 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.