Banks worried over private meetings with their auditors
THE Irish banks are objecting to plans for private meetings between their own auditors and the Central Bank at least twice a year to discuss internal issues at each lender.
The Central Bank, in the wake of the financial crisis and the Nyberg report, wants to set up a direct formal channel of communication between its staff and those who audit the banks.
It comes as auditors globally come under close scrutiny for their auditing of banks in the final years of the global boom.
Among issues to be discussed in Ireland will be each bank's overall strategy, changes in business lines and management structure.
However, the Irish Banking Federation (IBF) has outlined concerns about the legal basis for such meetings. It has also questioned why bank CEOs appear to be barred from hearing what is discussed at the meetings.
The Central Bank is considering their concerns, but so far it has made it clear it wants to push ahead with the meetings, which will take place at least twice a year, most likely before an audit is undertaken and then again after.
In a letter to the Central Bank, the IBF, which represents both pillar banks AIB and Bank of Ireland, said: "Some federation member banks have concerns about the legal basis for the sharing of information between the two parties.
"While we welcome the bilateral meetings between the auditors and the Central Bank, we are concerned there does not appear to be any mechanism for the CEO or chief risk officer of the financial institution to be briefed on the content of meetings,'' it added.
"Confidentiality among all parties, Central Bank, auditors and relevant bank personnel is critical, especially given the nature of the topics for discussion.''
In a document released a few weeks ago, the Central Bank said a range of issues would be discussed at bilateral meetings with auditors, including:
•The risk profile of the firm -- for example, changes in business lines, drivers of income, strategy.
•Weaknesses identified in previous audits.
•Overview of weaknesses identified through the supervisory process.
•Changes in the corporate governance and internal governance structures of the lender.
•Observations on the risk management functions of the bank
While not setting down an obligation on the number of meetings each year, the bank seemed to suggest at least two were necessary.
"It is expected that there will be at least two formal bilateral meetings per year. These meetings will take place at the pre- audit stage and the post-audit stage."