The supervision of banks relies heavily on accounting data and accounting rules; high quality bank audits are also a valuable input in the supervisory process.

The recent financial crisis not only revealed weaknesses in risk management, control and governance processes at banks, but also highlighted the need to improve the quality of audits of banks. 

In respect of financial stability, the accounting frameworks applied by commercial banks cannot only affect their behavior, but also that of financial markets. Banking supervision, regulatory reporting and key supervisory ratios are based on accounting data. Under the new regulatory framework for banks in the European Union (EU), bank supervisors are highly reliant on accounting data. 

The ECB is promoting sound and high quality accounting and disclosure standards for the banking and financial industry, as well as transparent and comparable financial statements that strengthen market discipline. The articles featured in this section cover what we are hearing from the ECB regarding their expectations of banks, and the key questions we are discussing with market participants.