* Two sets of accounts to tighten bank scrutiny
* Crackdown on auditors after financial crisis
By Huw Jones
LONDON, May 7 (Reuters) - Banks in Britain may have to publish two sets of accounts, one for shareholders, the other showing how they comply with rules from their supervisors, a top UK regulator said on Wednesday.
Win Bischoff, chairman of the Financial Reporting Council (FRC), the watchdog that polices accountants in Britain, told lawmakers he backed their recommendation for two sets of accounts to tighten scrutiny of lenders.
Policymakers are cracking down on auditors after they gave banks a clean bill of health only to be rescued by taxpayers soon after when the 2007-09 financial crisis unfolded.
"As far as the FRC is concerned, I know it's very happy to work together with the Prudential Regulation Authority in relation to that," Bischoff told a hearing at the Treasury Select Committee on his appointment, which he took up on May 1.
The PRA is the banking supervisory arm of the Bank of England and it would decide what a regulatory audit should contain.
The former chairman of Lloyds, a lender UK taxpayers had to rescue during the financial crisis, said the FRC would be happy to help the regulator set standards for regulatory audits.
Such audits would be published, Bischoff added.
"I don't have a reservation. I have very great sympathy for it," Bischoff said.
He said there was concern over the dominance of the "Big Four" auditors - PricewaterhouseCoopers, KPMG, Deloitte and EY - who check the books of nearly all blue chip companies.
But it was also difficult to find among the next tier down accountancy firms who "really feel" they have the competence to check the books of a global, complex company.
Mergers among the Big Four was be "disastrous", Bischoff said.
Michael Izza, chief executive of the ICAEW, an accounting body, said there is quality also below the Big Four audit firms.
"The companies, and especially the audit committees of corporates, have a responsibility for looking for this quality and considering all options when appointing an auditor," Izza said in a statement.
Bischoff told lawmakers accounting firms' scores in regular reviews by the FRC may also be published to encourage higher auditing standards.
One committee member challenged his ability to be a credible regulator as a former senior banker during the financial crisis.
Bischoff said he was answerable to a board and while at Lloyds had helped taxpayers get back at a profit the money they were forced to put into the lender. (Editing by Keiron Henderson)