Big 4 Firm KPMG Gave SVB and Signature Bank Clean Bills of Health Days Before Banks Collapsed
Auditor KPMG is in the news for its audits of failed Silicon Valley Bank (SVB) and Signature Bank. How could the auditors report that these banks were going concerns two weeks before they failed?
Big Four firm KPMG was the auditor for SVB and Signature Bank. It recently gave these companies clean bills of health in their 10K filings. Two weeks later, SVB became the second largest bank in US history to fail and Signature Bank the 3rd largest bank in history to fail. .
CFO Dive reports:
There are two notable dates that stand out to corporate finance experts who have been following the collapse of Silicon Valley Bank and looking for clues as to whether or how KPMG — one of the so-called Big Four audit firms — may have slipped up in failing to flag risks that led to the biggest U.S. bank failure since 2008.
The first is Feb. 24, the date of the 10-K filing that included KPMG’s latest auditing opinion, which was just about two weeks ahead of the bank’s March 10 collapse.
While KPMG did identify an issue related to credit losses and unfunded loan commitments as a critical audit matter it discussed with the company’s audit committee, it did not flag risks related to the ability of the bank’s parent, SVB Financial Group, to continue as a “going concern,” according to a review of the filing…
KPMG has defended its work, including as the auditor of New York-based Signature Bank which failed two days after SVB. On Tuesday at an event, Paul Knopp, chief executive of KPMG US, said the company stood behind the reports it issued and believes it followed all professional standards, according to The Financial Times.
It’s difficult to believe that the auditors couldn’t have seen the dire situation these banks were in at the time of their audits.
This is no small deal.
In the early 2000’s Arthur Andersen was the auditor for Enron. That firm went under when the DOJ, led by Andrew Weissmann issued an indictment against the firm which caused it to go under. Weissmann’s actions were later overruled by the US Supreme Court but by that time the firm was long gone.
https://www.thegatewaypundit.com/2023/03/big-mistake-big-4-firm-kpmg-gave-svb-and-signature-bank-clean-bills-of-health-days-before-banks-collapsed/
Credit Suisse bondholders blast ‘insane’ UBS takeover: ‘Against the law’
Investors who purchased $17 billion worth of Credit Suisse bonds were outraged after Swiss regulators approved a $3.2 billion rescue by rival UBS which left them holding the bag.
Holders of so-called “AT1,” or additional tier 1 bonds, purchased through Credit Suisse were shocked to learn that their investments were wiped out in the deal — a move that some claimed is illegal.
“In my eyes, this is against the law,” Patrik Kauffman, a fund manager at Aquila Asset Management, a firm that invests in AT1 bonds, told the Financial Times.
The “shotgun wedding” sale of the 166-year-old Credit Suisse to its historic arch-enemy is the latest shock to the global financial system — with analysts wondering whether more European banks were due to fall.
Shares of UBS rebounded in European markets on Monday afternoon — reversing an earlier slide. UBS stock was up some 2% in Zurich while Credit Suisse shares cratered by some 60%.
As a result of the deal, UBS has seen its total assets balloon to a whopping $5 trillion.
The lender will also benefit from a special government waiver allowing it to keep Credit Suisse’s profitable unit that was purchased at a discount.
UBS also managed to secure billions of dollars worth of guarantees from the Swiss government aimed at covering losses.
AT1 bonds, which are also known as “contingent convertibles,” are bonds that were created after the 2008 financial crisis.
These debt instruments, which count towards banks’ regulatory capital, are considered riskier.
While they typically provide a higher yield than most other bonds, they can also be either converted into equity or written down entirely if a lender goes under.
Kauffman described the writedown as “insane,” telling FT: “We’ve never seen this before. I don’t think this would be allowed to happen again.”
The takeover by UBS, which was pushed by Swiss authorities who were looking to shore up confidence in the shaky global banking system in the wake of the collapse of Silicon Valley Bank and Signature Bank of New York, also resulted in a loss for Credit Suisse shareholders.
https://nypost.com/2023/03/20/credit-suisse-bondholders-blast-insane-ubs-takeover/