The Bank of Portugal blames KPMG for flaws in BES

The Bank of Portugal has moved forward with a formal accusation to KPMG Portugal, namely for not having complied with auditing rulings in 2011 and 2012, as well as for omitting losses identified in the credit portfolio of BESA in 2013 and 2014. According to the Portuguese newspaper Público, if the consultancy firm is convicted, it may have to pay fines up to 2.5 million euros.

The proceeding from the banking regulator began in October of 2014 and it was closed last month, with formal accusations made to the auditor and three people in charge, including the CEO Sikander Sattar. The Bank of Portugal claims, among other things, that the auditor should have made BES state, in its 2011 and 2012 accounts, that there was not enough information about its exposure to BESA (BES Angola).

Carlos Costa accuses KPMG of another flaw. In 2013, BES exposure to BESA was out of control, and the auditor should have channeled that information to the supervisor, which would have allowed the bank’s true capital needs to be ascertained. If KPMG had done so, the regulator could have identified the problems before BES went under.

The newspaper Público states that KPMG has defended against both accusations. Concerning the first one, KPMG states that communication between KPMG Angola and KPMG Portugal was banned, because they are two different companies with different supervision entities. As for the second accusation, the auditor says that only in January of 2014 did it become aware of the situation and, by then, the “hole” in BESA was already covered by Luanda’s all-clear, which caused BES to take on impairments — that is why it didn’t hold reserves.