Is there an audit gap in EU banking supervision?

David Baez ()
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David Baez: European Central Bank

Journal of Banking Regulation, 2022, vol. 23, issue 1, No 7, 66-78

Abstract: Abstract Since 2015 European and national audit offices have been expressing discontent with their audit powers regarding banking supervision. Key to this discontent is the European Court of Auditor’s limited mandate vis-à-vis the ECB’s supervisory activities, which in practice means that the former does not have towards the ECB’s Single Supervisory Mechanism the same full audit powers it has vis-à-vis all other EU institutions and agencies. This limitation is ultimately based on the principle of central bank independence as enshrined in Article 130 of the Treaty on the Functioning of the European Union. In addition to the above, national auditors have recently criticized their alleged difficulty to access all relevant information concerning supervision of less significant banks, since some documents may be considered by the ECB to be not accessible to national audit offices. These two aspects limiting the power of European and national audit offices (also identified as the first and second audit gap) seem to be related since the latter gap arises in part from the restricted mandate regarding the supervision of the ECB’s supervisory function. This article explores the conditions for the existence of an audit gap and its real significance, mainly by assessing whether national audit offices had a mandate to audit their banking supervisor in the first place. It also addresses the formula of a memorandum of understanding agreed between the ECA and the ECB with the purpose of enhancing the cooperation between both institutions in the context of an audit to the ECB’s supervisor function, and the role of the L-bank judgement in the understanding of the relations between the European Court of Auditors, the ECB, the national audit offices and national banking supervisors.

Keywords: Audit; Central bank; European court of auditors; European Central Bank; Single supervisory mechanism; Supreme audit institutions; Banking supervision (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41261-021-00171-3

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