Internal audit must satisfy principles of Basel Committee

Date 28 March 2013

DNB expects banks to ensure that their internal audit systems satisfy all 15 principles outlined by the Basel Committee on Banking Supervision by the end of the year.


In June 2012, the Basel Committee on Banking Supervision published a list of principles governing internal audits. DNB stresses that banks must, in particular, strengthen their compliance with the Basel principles governing effectiveness, scope and governance.
Requirements governing internal audit
DNB expects banks to complete the following actions:

  • The audit committee must measure the effectiveness of the internal audit (IA) function based on specific, all-embracing criteria (principle 1);
  • The IA function must guarantee an appraisal of regulatory aspects such as ICAAP, ILAAP, Financial Supervision Act compliance status, risk appetite and the second-line functions (principle 7);
  • In a dynamic banking environment, banks must carry out more regular external quality appraisals of the IA function (principle 9);
  • The audit committee must strengthen its role in respect of the IA function and the IA function must, in general, more emphatically guarantee accountability to the audit committee (principles 10 and 12).

Progress and expectations
During the fourth quarter of 2012, DNB studied the extent to which banks were meeting the requirements of the Basel Committee on Banking Supervision. The study concluded that full compliance was not yet universal, partly due to the non-standard Dutch context and the recent publication date of the BCBS principles.
DNB expects banks to satisfy all 15 BCBS principles by the end of 2013. In 2014,it will examine whether each bank's internal audit system complies with all the Basel Committee’s requirements.
Basel Committee on Banking Supervision
The Basel Committee on Banking Supervision wants to offer banks a series of guidelines for strengthening their internal control function. In June 2012, it published The internal audit function in banks, which presents a large number of principles relating to the IA function. These principles were agreed internationally by banking supervisors, following consultations with the sector. DNB expects the internal audit function of Dutch banks to comply with these principles as a minimum requirement. 
More information?
More information about the Basel principles can be found in the Basel Committee publication The internal audit function in banks. 


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