Regional workshop on Financial Reporting and Auditing for Financial Sector Regulators
30 May 2012, Vienna
This workshop, organized in parallel with the REPARIS Ministerial Conference, brought together financial supervisors from the REPARIS countries with experts from the global financial regulators, standards setters and audit practitioners to discuss recent developments in accounting and prudential regulation and how auditors could collaborate with supervisors for better bank supervision.
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The workshop received updates from Barbara Davidson of the International Accounting Standards Board (IASB) on progress in developing a new accounting standard for financial instruments (IFRS 9), which uses an expected loss approach to impairment in place of the incurred loss approach in the present reporting standard (IAS 39), and from Erik van der Plaats of the European Commission on the Commission's proposals to implement the Basel III rules in the EU. Martin Vazguez Suarez, who is now at the World Bank but previously worked as a supervisor at the Bank of Spain, complemented these presentations by describing the Spanish approach to "dynamic provisioning" and the limitations that it showed during the financial crisis. He argued that the buffer provided by the dynamic provisions had given the Spanish authorities more time to act, but that the approach had not prevented the current banking crisis; it also made it more difficult to assess the resilience of Spanish banks, leading to over-confidence. He stressed the importance of bank supervisors having sufficient knowledge of accounting to be able to challenge the managements of the banks that they were supervising.
The workshop also discussed how bank supervisors could develop closer relationships with bank auditors in order to take advantage of the particular knowledge that auditors had of their clients' financial performance and risks. This discussion drew on the experience in Germany, where bank auditors have to prepare a "long-form" audit report for the bank supervisor (BaFin), and in the UK, where the problems revealed by the financial crisis have led to an increased focus on co-operation between the financial regulators and bank auditors. Michael Taylor from the Financial Stability Board (FSB) described how the FSB was seeking global agreement on action to improve the information that audits provide to prudential regulators and also to increase the effectiveness of public oversight of audits of financial institutions.
Presentations for download
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