The Bank of England is demanding that accountants hand over written reports on the major banks, as it receives new powers to punish auditors and actuaries.
Threadneedle Street is turning its focus to auditors after they faced criticism during the financial crisis for failing to flag up problems with banks which were later rescued by taxpayers.
The bank is attempting to address concerns about the role of auditors following the concerns raised by the parliamentary commission on banking standards, which found a weakness in the relationship between auditors and accountants.
“We need the relationship between external auditors and supervisors to work effectively,” said Andrew Bailey, deputy governor of the Bank of England, and head of its regulation arm the Prudential Regulation Authority.
“This needs to be supported by high quality, thorough auditors, who can help mitigate emerging issues and risks that threaten both the safety and soundness of individual firms and financial stability more broadly,” said Bailey.
If auditors and actuaries fail to provide information to the Bank of England they face sanctions from the central bank in addition to their existing oversight body, the Financial Reporting Council.
Hywel Ball of accountants EY said the new disciplinary powers were “part of a wider trend on increased accountability being introduced across all senior roles relating to financial services”.
The accountancy body the Institute of Chartered Accountants in England and Wales called for the Bank to use its powers in conjunction with other regulators.
“These bodies must co-ordinate any disciplinary action to ensure auditors do not face double or triple jeopardy as a result. That would only further muddy waters we are all trying to clear,” said Iain Coke, head of ICAEW’s financial services faculty.
