The effectiveness of regulatory and technological mechanisms of banking internal control: An exploration based on the origins of banks

Abstract

Over the last few decades, the news about banks has been dominated by scandals that reflect a lack of inadequate internal control (IC), whereas information technology (Diard & Dufour, 2022b) and banking regulations (Dufour & Yacoub, 2021) are seen as the main tools for effective banking IC. This article aims to understand the role of regulatory measures and information technology in the effectiveness of banking IC. To achieve this, we use a qualitative approach based on the multiple-case method. The study covers six banks (African and Western) and the data is collected through semi-structured interviews with internal controllers, internal auditors, and risk managers. The verbatim technique is used for analysis. The results show that IC regulations mainly benefit Western subsidiaries from countries where regulatory standards are more advanced. However, the role of IC information technology (IT) remains unclear. Local banks need to step up investment in IT and regulations need to take account of the diversity of banks’ origins. The relevance of the study lies in the need for the regulator to pay more attention to local banks, which appear to be more fragile.