EU audit offices hampered in their ability to audit bank resolution
Supreme audit institutions in the euro area were unable to inspect all the documents they needed to examine to audit the mechanism for resolving medium-sized and small banks in financial difficulties. As a result, they were unable to properly discharge their statutory duty, i.e. to perform independent audits at the national authorities responsible for bank resolution (the central bank in the case of the Netherlands). This is the conclusion drawn by supreme audit institutions in seven EU member states.
Since 1 January 2016, a Single Resolution Board (SRB) has been responsible for resolution planning in the euro area. It was given this role under an EU policy formulated in the wake of the 2008 financial crisis, the aim being to ensure that, in the event of another crisis, there will not be any need to use public funds to prevent banks from collapsing. The idea is that a bank that runs into serious financial trouble should be ‘resolved’, either by being wound up or by being restructured. In the latter case, the bank in question continues to perform some or all of its activities.
On 16 December 2020, the Contact Committee (of Presidents of supreme EU audit institutions) and the European Court of Auditors published a joint report drawn up by the supreme audit institutions of seven euro-area countries, i.e. Austria, Estonia, Finland, Germany, the Netherlands, Portugal and Spain. The Netherlands Court of Audit published its own report on the situation in the Netherlands a year previously.
No full access to documents
One of the conclusions we drew in our own report was that we were hampered in our ability to perform audits. This was because we were not given access to all the SRB documents we had asked the Dutch central bank to pass on to us. The six other audit offices had the same experience with their own national authorities, in that they were not given full and unconditional access to the guidelines adopted by the SRB for the resolution of medium-sized and small banks. Given that this restricted their ability to perform audits, the seven EU audit offices are calling on all the responsible European and national authorities to guarantee that they are given unlimited access to the information they need to carry out their work.
Resolution planning for medium-sized and small banks has not yet been fully completed. The seven EU audit offices found that, although the national authorities have made progress and the resolution planning cycle is largely operational, there are nevertheless both organisational and technical discrepancies between the various national resolution authorities. As a result, the resolution plans for medium-sized and small banks drawn up by the resolution authorities vary from one member state to another. This could result in banks being treated in different ways in the event of a crisis. For this reason, the seven EU audit offices urge the SRB and the national authorities to compile common guidelines for planning the resolution of medium-sized and small banks.
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