The European Banking Association’s (EBA) draft technical standards on recovery plans for credit institutions and investment firms need to ensure the independence of internal audit, ECIIA says.
The goal of the EBA’s Draft Regulatory Technical Standards is to establish a framework for the recovery and resolution of problems at credit institutions and investment firms. It sets out a Union-wide framework for crisis prevention, management and resolution. These standards only touch the role of internal audit to a minor extent.
But, says the ECIIA in its response to the EBA’s consultation on the standards, the current wording or suggestions endangers the independence of internal audit and are not in line with Global IIA’s Standards on internal auditing.
“Article 5 seems to regard the function of a risk committee and the internal audit function as being alternatives in the process of approving the recovery plan,” it says. That suggests that internal audit’s involvement is optional, whereas it should be involved on a consultative basis to develop the recovery plan.
“But its role must at no point in time be any part of the approval process,” the response says. “Moreover, internal audit must not officially ‘review’ any plan which later it has to audit and on which it must give judgement otherwise its objectivity and independence might be compromised.”
Internal audit’s review of the recovery plan should occur in the course of its normal auditing activities, the ECIIA adds.