The UK’s accounting watchdog has cleared KPMG over its audit of collapsed lender HBOS, which was rescued in 2008 by a government-ordained takeover by Lloyds Banking Group PLC (LON:LLOY).
HBOS – the merged Halifax/Bank of Scotland group - had been one of the UK’s biggest lenders but required emergency government assistance to keep it afloat during the financial crisis, and the taxpayer ended up taking a 42% stake in Lloyds after the rescue.
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In a statement, published today, the Financial Reporting Council (FRC) said HBOS’s accountancy firm at the time, KPMG could not have anticipated the chain of events that led to the lender’s failure.
In reaction, KPMG said: “We have always maintained that our audit was robust and undertaken in accordance with the regulations and practice of the time.”
The FRC had previously reviewed KPMG’s audit work on HBOS’s loan-loss provisions within the corporate division, and said it had not found reasonable grounds to suspect misconduct.
However, a 2015 regulatory review into the failure of HBOS sparked renewed political pressure on the accountancy watchdog, and former Treasury Select Committee chairman, Andrew Tyrie then wrote to the FRC calling for a fresh investigation of KPMG’s role.
Today’s announcement followed that review. The FRC also said it will publish in October a report on its actions in audit and corporate reporting developments since the financial crisis, including on the audits of banks.