Move over PricewaterhouseCoopers et al, there’s a new player in town.
Step forward the FSA.
Page 89 of the Turner Review (emphasis ours):
But there is also a strong case for bank regulators such as the FSA to be far more involved than in the past in the review and comparison of accounting approaches to fair value estimates and loan impairment provisions.
Over the last six months the FSA has been intensively involved in the analysis of bank balance sheets to inform decisions on bank recapitalisations and the Asset Protection Scheme (APS). This analysis has revealed significant differences in the marks used by different banks to value similar trading book assets and significant differences in the allocation of assets between trading and banking books. The FSA has not in the past monitored these accounting policies as closely as now seems appropriate.
The FSA is therefore now working to define the information gathering and internal analytical processes which will be required to make APS style analysis of bank balance sheets possible on a continuous and cost efficient basis. And it will bring forward by the third quarter of 2009 proposals relating to its future role in monitoring accounting judgements. These proposals will cover the issue of whether any changes in FSA legal powers are required.
State auditing of banks?
Related links:
The Turner guide – FT Alphaville