'Long overdue' probe into KPMG's role in HBOS collapse
A fresh investigation has been ordered into accountancy giant KPMG's handling of HBOS's financial affairs at the time of the bank's collapse.
Industry watchdog the Financial Reporting Council (FRC) is to instigate a disciplinary investigation into how the big four firm failed to spot massive problems which forced the bank to seek a taxpayer rescue and a hurried merger with Lloyds in 2009.
The FRC has already investigated KPMG over its role, but this is the first time there has been a disciplinary procedure.
So far just one former executive – Peter Cummings – has been brought book for his part in HBOS's downfall and apart from the role of bank directors questions have been asked about the auditors and other advisers who failed to spot ensuing dangers.
The FRC said it had been waiting for the publication of two reports before deciding on what steps to take.
It said: "We are doing what we said we would do all along. The HBOS report in November indicated concerns about HBOS’ going concern assumptions, which need to be looked into. We are doing that."
A KPMG spokesman said: "We will continue to co-operate with the FRC as it makes its preliminary enquiries. In the interests of everyone, it is now important that final conclusions are reached in a timely fashion." The Institute of Directors welcomed the FRC's decision to instruct its executive council to look again at KPMG's audit of HBOS group but has urged the regulator to conduct the inquiry in a timely fashion.
Simon Walker, director general of the IoD, said: "The failure of HBOS was one of the bleakest events in Britain’s corporate history. While the financial services industry, and the health of Britain’s economy, has come a long way since then, it is essential that every possible lesson is learnt from what happened at HBOS. "It is clear that the bank’s senior executives fostered a toxic culture of short-termism which ultimately brought the organisation to its knees. However, this is far from the full picture. "Shareholders and customers deserve to know what role the firm’s auditors, KPMG, played in this scandal.
The announcement of this long-overdue inquiry, therefore, is better late than never. "External audits must be rigorous and fit for purpose, especially when it comes to systemically important and bewilderingly complex financial institutions. It is absolutely right, therefore, that the FRC will look hard at HBOS’s financial statements at the appropriateness of the ‘going concern’ statement offered by the bank in 2007. "There is more at stake here than just the integrity of a few regulators and the inquiry cannot just be about spreading blame. It is critical that the FRC review is rigorous and transparent, and that it provides relevant and timely updates to key stakeholders. "We urge the FRC to dedicate sufficient resources to conduct this inquiry as quickly and thoroughly as possible and not dilly-dally. Shareholders need confidence in the financial statements offered by companies and they have a right to know that auditors are properly scrutinising the books."