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The role of the external auditor in bank regulation and supervision: A comparative analysis between the UK, Germany, Italy and the US

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  • Ojo, Marianne

Abstract

This comparative analysis discusses the differences between the structure and systems of bank regulation operating in the UK, Germany, Italy and the US. The importance of harmonisation in achieving stated supervisory objectives is also emphasised. The main objective of this chapter is to illustrate how the external auditor's role could be harnessed more efficiently in the UK banking regulatory and supervisory process. This is of particular importance given the reduced supervisory role which the Bank of England has assumed since banking regulatory and supervisory powers and functions were transferred to the Financial Services Authority. External audits and in particular external auditors, have a greater role to play in bank regulation and supervision than was the case over 20 years ago. This is so mainly as a result of globalisation. The need for a single regulator which regulates not just the banking sector, but also the insurance and securities sectors, has arisen principally because of the rise of conglomerate firms. Single regulators are able to manage more effectively cross sector services' risks. Correspondingly, the functional overlaps between banking, insurance and securities business and their universal scope make it more difficult for a regulator to observe and comprehend such businesses. The difficulty of measuring and assessing risk within such institutions along with the speed with which assets can be adjusted in derivatives markets has led to more emphasis being placed on internal managerial control. Consideration is also being given to the structures that can be put in place to re inforce the incentives of all parties involved – not just to management but all parties including auditors and regulators. Because banking has evolved to a stage where conglomerates now have a significant presence and provide a range of services (and not just banking services), and because of the growing presence of international firms, the role of the external auditor has become so important.

Suggested Citation

  • Ojo, Marianne, 2007. "The role of the external auditor in bank regulation and supervision: A comparative analysis between the UK, Germany, Italy and the US," MPRA Paper 32614, University Library of Munich, Germany, revised Jan 2008.
    • Handle: RePEc:pra:mprapa:32614
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    References listed on IDEAS

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    1. Alessandro Goglio, 2001. "Sectoral Regulatory Reforms in Italy: Framework and Implications," OECD Economics Department Working Papers 294, OECD Publishing.
    2. Marco Moscadelli, 2004. "The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee," Temi di discussione (Economic working papers) 517, Bank of Italy, Economic Research and International Relations Area.
    3. Holger Vieten, 1995. "Auditing in Britain and Germany compared: professions, knowledge and the state," European Accounting Review, Taylor & Francis Journals, vol. 4(3), pages 485-514.
    4. Polizatto, Vincent P., 1990. "Prudential regulation and banking supervision : building an institutional framework for Banks," Policy Research Working Paper Series 340, The World Bank.
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    Cited by:

    1. Ojo, Marianne, 2009. "Regulating the International Audit Market and the removal of barriers to entry: The provision of non audit services by audit firms and the 2006 Statutory Audit Directive," MPRA Paper 18624, University Library of Munich, Germany.

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    More about this item

    Keywords

    comparative; analysis; external; auditor; US; UK; Germany; Italy; bank; regulation;
    All these keywords.

    JEL classification:

    • K29 - Law and Economics - - Regulation and Business Law - - - Other

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