Corruption and financial fraud are very challenging issues within the banking system that can infect irreparable harm to a nation’s development and growth.
The potential widespread and destructive effects can reduce social capital and increase poverty, social injustice and class divisions. The banking system will continue to face these issues far into the future until successful counteraction initiatives are implemented. Basic banking oversight concepts and principles have been expressed in the Basel III framework, an internationally agreed upon set of measures created in response to the financial crisis of 2007-2009 that aim to strengthen bank regulation, supervision and risk management. A multifaceted issue, oversight in the banking sector requires the cooperation of various regulatory bodies, each performing tasks according to individual organization mechanisms and objectives. While these regulatory agencies and various monitoring structures are in place, the world economy remains exposed to financial abuse, and evidence points to inefficient banking systems and weak regulatory procedures and guidance.
This article discusses appropriate frameworks through a study, “Surveillance Authority of Supreme Audit Institutions (SAIs) in the Banking Sector,” that assessed the status quo and identified potential mechanisms to achieve favorable situations.
The study used a qualitative approach to identify, analyze and report patterns within the data. An open-ended interview of 21 local experts (selected using the snowball sampling method) was the primary tool to gather data. The research was conducted using a four-phase process: 1. Identify goals and identify the status quo; 2. Formulate concepts governing regulatory framework design; 3. Analyze pathology and problems in the banking field; and 4. Gather additional data through expert interviews and reach a consensus on a financial monitoring framework.
Study Findings. Every oversight system requires determining specific objectives and identifying the responsibilities and activities necessary to achieve them. Study results showed that a key challenge for SAIs within the banking sector tends to be unidentified goals, which means associated tasks and responsibilities are also unclear. The study also identified several factors resulting in, hampering, or completely preventing successful banking sector oversight, including:
• Auditors lacking a comprehensive understanding of bank operations;
• The volume of regulatory bodies;
• Organizational expansion cost reduction measures negatively impacted efficiency and effectiveness; and
• Oversight authorities potentially limited by mandates, available human resources and facilities, and participating in investigations and/or audits having no real purpose (simply justifying existence or creating false needs for expansion).
Study findings, combined with extensive research, resulted in developing an oversight framework that incorporates conditions, concepts, activities and potential consequences attributable to, and affecting, SAI audit work in the banking sector.
Supreme Audit Court of Iran (PHAN THU HIỀN dịch)