WASHINGTON—The accounting firm KPMG ignored several flaws at Silicon Valley Bank and two other banks before their collapse in 2023 and had other shortcomings in their auditing oversight, according to a report from Senate Democrats.
According to Democrats on a Senate Homeland Security and Governmental Affairs subcommittee, KPMG had years-long awareness of problems Silicon Valley Bank, Signature Bank and First Republic Bank SVB, Signature Bank and First Republic Bank before they failed, but the firm provided lean audit reports for all three.
Caught Flat-Footed
The banks were caught flat-footed when interest rates rose, which weakened the value of their securities and loans and led to deposit flight.
The report “exposes KPMG’s willful blindness and stresses that significant reforms to the auditing industry are needed to promote transparency and better protect consumers,” Sen. Richard Blumenthal (D.-CT), ranking member of the U.S. Senate Permanent Subcommittee on Investigations, said in a statement.
In response, a KPMG spokesperson told the Wall Street Journal the report is a “misguided and erroneous opinion” and omits critical context, adding that the firm stands by its audit opinions. KPMG previously told the subcommittee that it isn’t responsible for assessing a client’s “risky or even reckless business strategy,” the Journal added.
What Report Alleges
According to the committee report:
- KPMG identified no risks to Silicon Valley Bank’s ability to continue operating over the next year just 14 days before its collapse,
- At Signature Bank, KPMG dismissed credible allegations of widespread fraud and justified shortcomings in the bank’s record-keeping, the report said.
- KPMG didn’t alert First Republic Bank’s board of directors to concerns the auditor had about its ability to survive just before its failure.
Silicon Valley Bank, Signature Bank and First Republic each had between roughly $100 billion and $200 billion in assets and resulted in significant losses to the FDIC.
Deposit Insurance Proposal
As the CU Daily has reported, the failure of the banks, which left many businesses which huge amount of deposits above the deposit insurance cap—which the FDIC eventually covered—has led to recent proposals to raise deposit insurance coverage to $20 million per account for certain commercial accounts.
