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PRA - Disciplinary Powers over External Auditors and Actuaries

Response to the consultation

Our response to this consultation is limited to those aspects which are of immediate relevance to credit unions, i.e. the proposed new powers to discipline external auditors and actuaries.

We are in favour of the proposals for the PRA to take disciplinary and enforcement powers in respect of firm auditors and actuaries.  In too many instances where credit unions have sadly failed there are serious questions of effectiveness and competence which arise in respect of the auditor’s confirmation of the credit union’s financial position in the period leading up to the failure. 

While in many cases these questions do not necessarily lead to the conclusion that there are failings warranting disciplinary action, there may well be cases where repeated and persistent failures to live up to regulatory standards has resulted in failures that might otherwise have been avoided.  If PRA were able to draw on disciplinary powers to discourage such failures, some credit unions that have sadly suffered long periods of unaddressed decline may well have survived.

However, we would also like to strike a note of caution and urge proportionality in the use of these powers.  While we do not anticipate that they would be used widely in a credit union context given the limited scope that credit union failures have to disrupt UK financial stability, we do think – as detailed above – that there are instances in which their use may well have significantly improved the prospects for certain credit unions.  That said, it is important to ensure that a balance is struck in the use of the powers in order to ensure that they do not unduly hamper the market for credit union audits which is particularly fragile given the limited range of firms which have the requisite skills and are pitched at a price which is affordable for small firms like credit unions.

Disproportionate and inappropriate use of audit disciplinary powers could inadvertently disrupt the market for credit union auditors which would be counter-productive.

You can download the PDF version of the consultation response on the right hand side.