Deloitte Excluded From ECB´s Examination on Spanish Banks´Balance

20/02/2014 – El Confidencial

At the recent assignment of Spanish banks to large auditing companies in order to conduct the AQR, asset quality review, Deloitte was left outside. The Bank of Spain, named by the European Central Bank, has divided the sector practically into two groups and handed them out to PricewaterhouseCoopers (PwC) and KPMG, whereas Ernst & Young got only one bank but the “big fish” one: Santander.

The ECB has called up the four world´s largest auditing firms in Frankfurt on February 17th in order to assign to each of them asset revision in a part of the group of 130 European banks (16 Spanish entites among them). During the process, the “big four” will profoundly examine balance sheets of their entities. (…).

At the meeting, technical guidelines for the task have been explicated and the final distribution proposed by the Bank of Spain approved. The institution split the banks among three groups; in the first, there are two multinational giants, Santander (to be revised by Ernst & Young) and BBVA (by KPMG). The next group embraces four purely domestic entities: CaixaBank and Bankia (PwC) and Popular and Sabadell (KPMG). In the third group are found the ten remaining banks, divided between PwC (KutxaBank, BMN, Ceiss, NCG and Liberbank) and KPMG (Ibercaja, Bankinter, Catalunya Banc, Unicaja and Cajamar). (…).

Summing up, KPMG was given eight institutions, PwC seven, Ernst&Young one and Deloitte… none. Why the exclusion? First of all, the company already audits a great number of firms within the financial sector so due to possible conflict of interests it could not revise the same firm twice.

There do exist institutions not audited by Deloitte, like Popular, Sabadell, Ibercaja, Cajamar and Unicaja, except for Bankia for which it works as an auditor. As it is known, in 2011 the company refused to sign accounts of the entity, which provoked nationalization of the bank. (…) In 2012, Deloitte supported Oliver Wyman in account revision for Sabadell and Popular.

According to sources with knowledge of the selection strategy chosen by the Bank of Spain, there were three criteria: inexistence of conflict of interests deriving from previous cooperation, that none of the companies could audit 50% of a group and the service price offered. (…).

The Bank of Spain informed that the budgetary framework for the task is €20.6 million. (…) Despite the fact that Oliver Wyman advises the ECB about the examination and was the main originator for the Spanish banking bail-out, the work execution will lay in hads of the auditing firms. (…).

Original article: El Confidencial (Eduardo Segovia)

Translation: AURA REE