The incoming Labour administration in 1997 caused a stir when it gave the Bank of England additionaludmonetary policy powers but removed the Bank’s powers to regulate banking. Up till 1997, bankingudregulation had been the function of the Bank of England while other areas of financial services had beenudregulated by bodies such as: The Securities and Investment Board (for investment business) and theudDepartment of Trade and Industry (for insurance). Section 21 of the Bank of England Act 1998 effectivelyudtransferred banking supervision to the Financial Services Authority (then known as the Securities andudInvestments Board). This paper amongst other objectives, aims to explore how the Financial ServicesudAuthority ( the FSA) as a regulator, could benefit from the expertise of the external auditor as a middleman,udto avoid regulatory capture. As an efficient system of accountability would also help prevent regulatoryudcapture, the issue of accountability will also be discussed. A consideration of developments leading to theudadoption of a single regulator in the UK, will illustrate how the type of regulator can contribute toudknowledge of how the external auditor can assist the regulator. Furthermore, not only does this paperudconsider how the introduction of the FSA has improved transparency and accountability within the bankingudregulatory and supervisory system, but also the claim that the external auditor could further employ hisudexpertise to help the regulator avoid regulatory capture.
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