The failing banks in the United States all had KPMG as their accountant

Following the bankruptcy of three American banks, the audit of their auditors was also reviewed. For all three, it was KPMG.

Not only the FinancialTimesbut now also the Volkskrant it is striking that Silicon Valley Bank (SVB), Signature Bank and First Republic Bank, in addition to their recent bankruptcy, also have their auditor as an agreement.

The three failed US banks received KPMG’s approval prior to their failure. “You can’t expect listeners to make a bank rush can predict,” an assistant professor of accounting told the FT. “But it’s good to ask an accountant for their risk assessment and the correct control procedures.

red flags

Were KPMG employees sufficiently independent of the banks they audited, did they pay enough attention to red flags, and did they have the knowledge to assess the quality of financial reporting in an environment changed by the rise in interest rates, wonder the experts of the British economic newspaper.

A recent FED report points to weaknesses in SVB’s risk management and internal audit, which must be assessed by the auditor. De Volkskrant also reports this and refers to signals from BlackRock consultants regarding SVB’s “substantially” weaker risk management. KPMG should have acted accordingly, experts say.

KPMG has audited the books of the three banks for more than 20 years and is the principal auditor of the American financial sector. The company controls Wells Fargo, Citigroup, Bank of New York Mellon, “three dozen other publicly traded banks” and the Federal Reserve, among others, according to the FT. This gave the US office a total of over $325 million in 2021.

Former partners as administrators

Also note: the leaders de Signature and First Republic were former partners of KPMG. And Signature appointed KPMG’s senior audit partner as chief risk officer in 2021, less than two months after signing that bank’s 2020 audit report. This appears to contradict the chilling rules for such transfers by the Securities and Exchange Commission (SEC).

KPMG had previously said it supported the audit work of SVB and Signature and did not wish to respond further to the FT, under confidentiality. A spokesperson only highlights the firm’s extensive experience as a financial sector auditor and specifies that the audits are carried out “according to professional standards”.