KPMG Bulgaria avoids licence loss, faces fine for CCB audits – reports

KPMG Bulgaria avoids licence loss, faces fine for CCB audits – reports

Sofia, January 9, 2015/ Independent Balkan News Agency

By Clive Leviev-Sawyer of The Sofia Globe

Auditing firm KPMG Bulgaria will be fined 100 000 leva, or about 51 100 euro, but will not lose its licence for giving clean bills of health to the Corporate Commercial Bank (CCB), Bulgaria’s fourth-largest lender that was put under special supervision of the central bank last year and later had its banking licence stripped, reports in Bulgarian media said on January 9.

KPMG Bulgaria will be fined the maximum amount possible, 20 000 leva, for each year between 2009 and 2013, when it carried out audits of CCB, the reports quoted Vanya Doneva, head of the Commission for Public Oversight of Statutory Auditors, as saying. The individual auditors who worked on CCB’s reports will be fined the same amount, Doneva said.

Doneva was quoted as saying that a vote to suspend KPMG Bulgaria’s licence did not get the necessary qualified majority, with three commissioners in favour, one short of the number stipulated by law. KPMG Bulgaria can appeal the fines within seven days of the regulator formally issuing the ruling.

In December 2014, the regulator completed its review of KPMG Bulgaria’s audits on CCB, concluding that the firm’s reports had “significant gaps and inconsistencies”. KPMG Bulgaria rejected the accusations, saying that its audits were carried out in line with international auditing standards.

The audits painted a rose-coloured picture at CCB, which claimed only one per cent in non-performing loans, when the overall figure for the Bulgarian banking system was closer to 20 per cent.

After CCB was put under the administration by the Bulgarian National Bank (BNB), a more comprehensive audit found that the bank’s books were full of impaired assets, requiring a write-down of 4.22 billion leva (about 2.16 billion euro).

The auditors found numerous bad practices at CCB, including no in-depth checks on loan applicants, lax analysis of business plans presented by applicants, a lack of oversight concerning loan collateral and the loan recipient’s current activity, lax book-keeping of loan documentation, BNB said in October 2014.

As a result, the central bank stripped CCB of its banking licence in November 2014, although that decision is now being appealed in Bulgaria’s Supreme Administrative Court, which is due to hold its next hearing in the case on February 9.