Bank watchdog asks PwC to probe Goldman reporting

The PRA has drafted in PwC to assess the quality of Goldman Sachs International’s regulatory reporting, Sky News learns.

Britain’s banking watchdog has drafted in accountants to scrutinise the quality of Goldman Sachs’ regulatory reporting at its vast London-based operations.

Sky News understands that the Prudential Regulation Authority (PRA) has appointed PricewaterhouseCoopers (PwC) to undertake a “skilled person’s report” on Goldman Sachs International.

The appointment comes amid concerns about supervisors’ oversight of some of the City’s biggest bank balance sheets and the quality of information being supplied to the PRA.

Goldman’s London-based investment bank is not the only institution to be the subject of a PRA investigation.

Sky News revealed last month that Morgan Stanley and Bank of America Merrill Lynch were among the other Wall Street lenders being assessed on a similar basis.

The PRA’s decision to commission the so-called S166 reviews emerged weeks after Citi, the giant Wall Street lender, was handed a record £44m fine by the PRA for inadequate internal controls and governance arrangements relating to regulatory reporting obligations.

The penalty reflected the fact that Citi had consistently overstated its capital and liquidity coverage ratios over a four-and-a-half-year period.

If it had not settled, Citi would have been fined £62.7m, the regulator said last November.

City sources said the PRA, which operates within the Bank of England, had become increasingly concerned that other major investment banks were guilty of similar errors.

Commissioning the S166s does not in itself mean the firms will be found to have been negligent in their filings with the watchdog, but it does raise the spectre of potential fines for some of the world’s biggest financial institutions.

Large investment banks operate vast balance sheets in London, having historically used the City as a hub for their trading and investment banking activities in Europe and beyond.

That status has been the subject of incessant speculation since the UK’s vote to leave the European Union in June 2016, amid predictions that London risked being downgraded as one of the world’s leading financial centres.

An anticipated exodus of investment banking staff has yet to materialise, although the progress of talks about the extent of divergence between the UK and EU on trade will be crucial to the City’s future access to European markets.

In a letter to major firms in October, PRA officials warned that they would “consider the full range of supervisory responses” if it had concerns about the quality of their financial reporting.

Sarah Breeden, the PRA executive director for supervision of UK deposit-takers, and David Bailey, executive director for international banks supervision, said they expected to commission S166 reports but did not name the firms that would be subject to them.

“The production and integrity of a firm’s financial information and its regulatory reporting is a prescribed responsibility,” they wrote.

“We have therefore copied this letter to the relevant senior manager at your firm, although this should also be an area of focus for the executive team and the board.

“We expect you to take action as necessary to ensure the integrity of your firm’s returns.

“Such action could, for example, include regular, comprehensive reviews of the effectiveness of the governance, controls and other processes around regulatory returns to ensure they are fit for purpose, and to carry out deep dives that look at the accuracy of the returns themselves.”

The PRA, Goldman Sachs and PwC declined to comment on Tuesday.


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