Last Friday, Silicon Valley Bank (SVB) was closed by California regulator DFPI due to a bank run and placed under FDIC control. The DFPI stated that SVB had been financially sound until a few days before. The WJS reports that KPMG issued a clean bill of health to SVB just 14 days before. The New York-based Signature Bank went down 11 days after KPMG signed off on its audit. This raises the question of whether KPMG has overlooked something.
What KPMG knew about the two failed banks’ financial situation and what it missed will most certainly be the subject of regulatory scrutiny and lawsuits. KPMG signed the audit report for SVB’s parent, SVB Financial Group, on Feb. 24. Regulators closed the bank on March 10 after a bank run.
Sure, KPMG audited the banks for 2022. They did not audit the banks’ books for the first months of 2023 when they ran into their sudden death. However, even if the bank wasn’t struggling last year, KPMG was required to evaluate developments that occurred after the balance sheet date to make sure the companies financials were presented fairly. In a statement, KPMG said it isn’t responsible for things that happen after an audit is completed.
The U.S. and U.K. governments implemented a bail-out plan over the weekend to prevent further damage to the financial industry and prevent bank runs. Depositors should get their money back and be made whole, according to the plan. Whether it succeeds remains to be seen. In any case, the culprits are already being sought.
