Improving Banking Supervisory Mechanisms
In the OIC Member Countries
51
Table 17: Private Monitoring Index (Selected OIC Countries)
Source: World Bank, Bank Regulation and Supervision Survey
Table 18: Private Monitoring Index
Source: World Bank, Bank Regulation and Supervision Survey
External governance is an important part of corporate governance and include aspects of
regulations such as efficiency and conduct of external auditors, information disclosure to
public and supervisory authorities, implementation of international standards of accounting
and external rating agencies. The specific questions in the survey regarding these aspects are:
(1) Is an audit by a professional external auditor required for all commercial banks in your
jurisdiction? (2) Are specific requirements for the extent or nature of the audit spelled out? (3)
Are auditors licensed or certified? (4) Do supervisors get a copy of the auditor’s report? (5)
Does the supervisory agency have the right to meet with external auditors to discuss their
report without the approval of the bank? (6) Are auditors required by law to communicate
directly to the supervisory agency any presumed involvement of bank directors or senior
managers in illicit activities, fraud, or insider abuse? (7) Can supervisors take legal action
against external auditors for negligence? (8) Does accrued, though unpaid, interest/principal
enter the income statement while the loan is still performing? (9) Are financial institutions
required to produce consolidated accounts covering all bank and any non-bank financial
subsidiaries? (10) Are off-balance sheet items disclosed to the public? (11) Must banks
disclose their risk management procedures to the public? (12) Are bank directors legally liable
if information disclosed is erroneous or misleading? (13) Does accrued, though unpaid,
interest/principal enter the income statement while the loan is still nonperforming? (14) Are
accounting practices for banks in accordance with International Accounting Standards (IAS)?
(15) Are accounting practices for banks in accordance with US Generally Accepted Accounting
Standards (GAAS)? (16) Is subordinated debt allowable as part of capital? (17) Is subordinated
debt required as part of capital? (18) Do regulations require credit ratings for commercial
Private
Monitoring
Index
Survey Indonesia Kazakhstan Malaysia Nigeria Pakistan Turkey UAE Saudi Arabia Algeria
Selected
OIC
Average
2000 8 6 9 7 N/A. 7 N/A. 11 N/A. 8,0
2003 N/A. 6 10 9 8 8 11 10 8 8,8
2007 9 8 9 N/A. 9 N/A. N/A. 11 6 8,7
2011 10 N/A. 7 N/A. 10 8 N/A. N/A. N/A. 8,8
Private
Monitoring
Index
Survey
OIC
Average
OIC-High
Income
Average
OIC-
Upper-
Middle
Income
Average
OIC-
Lower-
Middle
Income
Average
OIC-Low
Income
Average
EU-27
Average
United
States
2000 8,0 8,50 8,36 8,77 8,77 7,4 8
2003 7,9 8,95 8,96 8,77 9,05 7,9 10
2007 7,8 8,37 8,55 8,40 8,40 8,2 10
2011 8,0 8,24 8,33 8,32 8,32 8,1 11