Bank of Portugal appeals BES auditors acquittal

 In Banks, Law, News

The Bank of Portugal does not agree with a decision by the Competition Court which absolved the auditing consultancy KPMG and five of its associates from cooking the books at the large private bank BES which subsequently collapsed in 2014, warning that it could lead to a backward step in supervision and regulation given recent bank crises.

In an appeal to the Lisbon Court of Appeal against the Competition Court’s decision given on 15 December (Court of Competition, Regulation and Supervision (TCRS), in Santarém, the BoP has stated that if the decision to absolve the auditor and its five associates is not overturned it will appeal.
The original lawsuit was related to information provided to the auditors to do with the consolidated accounts of Banco Espirito Santo between 2011 and 2013 and could pave the way for jurisprudence which, says the BoP “represents a serious backward step in the direction taken in the wake of recent bank crises”.
In the appeal, consulted by the news agency Lusa, the BdP confirms that the decision to appeal arises because the acquittal “runs contrary to the stepping up of supervision of lending institutions” which had been poorly supervised before, and concealed serious misconduct and reckless lending at some Portuguese banks which were subsequently revealed and exacerbated by the international financial crisis of 2007-2009.
The Competition Court’s ruling, states the BoP, runs the “serious risk, if not overturned, of exonerating the external auditors of lending institutions of their “duty to communicate facts” which if communicated (to the banking regulator) would have led to it rejecting the banks’ accounts certificates or led to the issuance of reservations to the supervisor, information considered by the BoP as “essential to the full and effective exercise” of supervisory powers.
In other words, the auditors had been accused of turning a blind eye to irregularities, or not demanding or taking into account key documentation, or asking for missing documentation, or documentation to substantiate accounts and which throwing up concerns, should have been subsequently reported to the regulator – the Bank of Portugal.
The Bank of Portugal had issued KPMG with fines of €3 million, its president, Sikander Satter with a fine of €450,000, Inês Viegas (€425,000), Fernando Antunes (€400,000), Inês Filipe (€375,000) and Silva Gomes (€225,000).