US saw three bank failures in last two months and all of them have one thing in common– KPMG. The auditor gave financial statements of Silicon Valley Bank, Signature Bank and First Republic Bank a clean bill of health as recently as the end of February.
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UK’s Financial Times on Wednesday reported that KMPG audits a larger proportion of US banking system by assets than any other firm. Apart from being auditor to Wells Fargo, Citigroup, Bank of New York Mellon and three dozen other listed banks, KPMG also audits the Federal Reserve, the report said.
Silicon Valley Bank failed just 14 days and Signature Bank went down 11 days after KPMG LLP signed off on its audit.
KPMG signed the audit report for Silicon Valley Bank’s parent, SVB Financial Group, on February 24. Regulators seized the bank on March 10 after a surge of withdrawals threatened to leave it short of cash.
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In April, KPMG LLP was sued as Silicon Valley Bank’s auditor, along with underwriters including Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley & Co. in an investor lawsuit based on alleged misstatements leading to the bank’s collapse.
KPMG’s audit report “was silent” about whether there was “substantial doubt” about the bank’s ability “to continue as a going concern for a reasonable period of time”, the lawsuit said.
Signature’s bet on the crypto industry led to a surge in deposits, which went into reverse as that market struggled. A large amount of its deposits were uninsured, making it more likely the customers would flee at any sign of trouble.
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On Monday, JPMorgan Chase & Co struck a deal with the US Federal Deposit Insurance Corp (FDIC) to take control of most of the San Francisco-based First Republic’s assets.
Last month, First Republic Bank was sued by shareholders who accused the beleaguered US regional bank of concealing how rising interest rates threatened its business model by prompting an exodus of deposits.
The lawsuit filed in San Francisco federal court accused First Republic and its auditor KPMG of misrepresenting the strength of the bank’s balance sheet and liquidity.
