Financial Modernization and Regulatory Reform: Year in Review and Future Priorities

1. ulatory Reform Presentation to the INTOSAI Committee on Knowledge Sharing and Knowledge Services Bali, Indonesia August 23-25, 2017

2. Presentation Overview • Background on the Working Group • Year in Review • Key Accomplishments • Fourth Annual Meeting • Future Priorities INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 2

3. Background Working Group Membership (as of August 2017) The Working Group has members from 26 SAIs: INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 3

4. Background (cont.) Subgroups Subgroup One: Exchange information about audit methodologies and experiences Led by China National Audit Office Subgroup Two: Outreach to international financial bodies Led by Office of the Auditor General of Canada Subgroup Three: Review and analyze international reform efforts and potential emerging risks Led by U.S. Government Accountability Office INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 4

5. Year in Review Key Accomplishments • Produced and delivered annual report in December 2016 to the INTOSAI Governing Board that, among other things, examined • Progress made by international organizations and their member countries in implementing the G20’s financial regulatory reforms in response to the financial crisis and • Risks and challenges to financial stability at the global and national levels • Expanded membership to SAIs of Germany and Pakistan INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 5

6. Year in Review Key Accomplishments • Strengthened working relationships with the International Monetary Fund (IMF), the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision (Basel Committee) • Met separately with FSB and the Basel Committee at their headquarters to further educate them about INTOSAI and discuss information-sharing opportunities • Had IMF, FSB, and Basel Committee deliver presentations about their activities at Working Group’s 4th annual meeting • Developed and conducted a training workshop for SAIs on the use of criteria for financial sector audits to enhance their knowledge, skills, and abilities INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 6

7. Fourth Annual Meeting Part I. Full Working Group Member Presentations and Discussions • SAIs presented information about their recent financial regulatory audits: • Austria Court of Auditors—Audit on the Austria Banking Supervision • European Court of Auditors (ECA)—Audit on the Single Supervisory Mechanism (SSM) • Germany—Parallel Audit of Banking Supervision Post-SSM • Netherlands Court of Auditors—Experiences with Parallel Audits • China National Audit Office—Recent Developments of China’s Financial System Audits • GAO—Audit on Federal Reserve Stress Tests • Discussed first steps for updating Terms of Reference in 2018 • Announced that the 2018 annual meeting will be held in China INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 7

8. Fourth Annual Meeting (cont.) Part II. Subgroup Discussions - Key Topics • Subgroup 1: Exchanging audit experiences • Challenges facing SAIs in conducting financial regulatory audits, such as SAIs’ limited mandates and difficulty recruiting skilled staff • Subgroup 2: Outreach to international financial bodies • Ways to enhance relationships and share information with the Basel Committee, FSB, and IMF and establish relationships with other international organizations • Subgroup 3: Monitor financial system reforms, emerging risks • Assessing impact and effectiveness of international financial regulatory reforms • Approaches to monitoring emerging financial stability risks, including through parallel audits INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 8

9. Fourth Annual Meeting (cont.) Part III. Insights from Outside Experts • Nigel Jenkinson discussed IMF’s methodology for conducting Financial Sector Assessment Program (FSAP) assessments • Xavier-Yves Zanota discussed the Basel Committee’s mandate for setting international standards for the prudential regulation of banks • Tara Rice discussed FSB’s policy evaluation framework, including tools and data, for evaluating benefits, costs, and effects of regulatory reforms • Donald Kohn, Brookings Institution, and Thaya Brook Knight, Cato Institute, discussed changes in the financial markets and their potential public policy implications INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 9

10. Future Priorities Working Group Focus 2017-2018 • Update Terms of Reference, focusing on developing and implementing new work streams to achieve objectives • Increase information sharing or collaboration between the Working Group and the Basel Committee, FSB, and IMF and establish working relationships with other international standard setting organizations • Investigate effects of international financial reforms in individual countries (e.g., costs and benefits) • Continue to develop methodology for assessing emerging risks to financial stability • Continue to explore ways to incorporate the U.N.’s Sustainable Development Goals into Working Group activities INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 10

11. Conclusion Questions and discussion INTOSAI Working Group on Financial Modernization and Regulatory Reform Page 11