Babaeva R.F.Saint Petersburg State University of Economics, St. Petersburg, Russian Federation rena@russia.ru
Subject The article considers the new requirements of the Bank of Russia to the internal control system functioning in credit organizations that came into force in 2014. Objectives The objective of the research is to make a critical assessment of the reorganization of the internal control system implemented by credit organizations based on the said requirements. Methods To achieve the objective, I have analyzed the extent of the new rules' compliance with the best international practices formulated in recommendations of the Basel Committee on Banking Supervision on internal controls in banks, which were introduced in 2012, and first of all, the Three Lines of Defense model. I used general scientific methods of knowledge, i.e. the comparative and expert analyses, scientific abstraction and synthesis, the logical approach. Results I propose to enhance the reliability of internal controls of Russian credit organizations through creating a new subdivision responsible for regulatory risk management. I have proved that to reorganize the system of internal control by dividing the control functions between the existing internal control service and the new service of internal audit is too costly. Hence, I offer an alternative, namely, to assign an expert responsible for compliance risk monitoring within the internal control service. Conclusions and Relevance It is reasonable to introduce the Audit Committee under the Board of Directors into the internal control system of systemically important banks. This will help provide additional monitoring of the internal controls efficiency (in addition to the monitoring performed by the internal control service).
Keywords: internal control, system, banks, Three Lines of Defense concept, elements, regulatory risk
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