Confluence of interest
The future of audit and the future of bank reporting could coalesce around a significant change, says John Mongelard.
The mood music has definitely changed. Recently we have seen three incidents hit the headlines that could mean change is coming.
Firstly, Metro Bank had a hiccup in January with what was initially called an accounting error. Some commercial loans were misclassified, resulting in a lower risk-weighted asset (RWA) calculation. All other things being equal, if a bank reports lower RWAs, its regulatory capital requirements are lower and there is more capital to invest in new branches etc. It is a critical number to get right. Initially the bank said the errors were “something we found as we went through our end-of-year reviews”. However, it has subsequently emerged that the errors were spotted by the Prudential Regulation Authority.