Several US Banks To Sever Ties With Auditors Under New European Rules

Josh O'Neill

16 October 2017

Some US banks will be forced to cut ties with their current auditors in the wake of new European rules that seek to end often decades-old relationships between financial firms and accounting behemoths.

The rules, which entered into force last year, require listed companies operating in Europe to name a new auditor at least every 20 years, in what is perceived as an effort to extinguish cosy relationships which could lead to favorable treatment.

Citigroup, Goldman Sachs, Wells Fargo and Morgan Stanley are among the big banks that will be required to change their auditor to comply with the regulations, meaning that auditing contracts potentially worth hundreds of millions of dollars could be up for grabs. The story was first reported by the Financial Times.

US financial institutions with a large European presence and longstanding auditor relations will have to appoint a new accounting house to audit their entire business or select a second firm to oversee their European arm, accounting experts have said.

Richard Sexton, global head of assurance at PricewaterhouseCoopers, one of the Big Four firms, told the FT that US financial institutions have 18 months to decide how to respond to the reforms. “This is a big deal for the institutions, and for the auditors. It is very high on their agenda,” he said.

Wells Fargo has used KPMG for 86 years, while Citigroup has used KPMG for 48 years and Morgan Stanley has used Deloitte for 20 years, according to MSCI.