April 8, 2015 / 5:01 PM / 5 years ago

Bulgaria charges KPMG auditors over Corpbank activities

SOFIA (Reuters) - Prosecutors charged two auditors from the Bulgarian unit of consulting firm KPMG [KPMG.UL] on Wednesday with not reporting shortcomings in the activities of Corporate Commercial Bank (Corpbank) to the central bank.

Customers wait to clarify details on their deposits outside the main office of Bulgaria's Corporate Commercial Bank (Corpbank) in Sofia December 4, 2014. REUTERS/Stoyan Nenov

The Bulgarian prosecutors said in a statement that they had also charged the head of Corpbank’s internal audit unit with neglecting her duties, which they said resulted in significant damage to the lender and helped precipitate a liquidity crisis.

KPMG did not immediately respond to requests for comment, while the head of Corpbank’s internal audit unit could not be immediately reached for comment.

Corpbank, Bulgaria’s fourth-largest lender, collapsed last year following a run on deposits in June, triggering the biggest banking crisis the Balkan country has seen since the 1990s. A subsequent independent assessment ordered by the central bank pointed to major failings in the way the lender was run.

Corpbank’s fall raised serious concerns over the quality of banking supervision in the European Union’s poorest member state.

In Wednesday’s statement, prosecutors said about KPMG’s auditors: “Despite established violations in the activities of Corpbank, of which they became aware in the course of audit engagements, they did not report these in writing and promptly to the central bank.”

“These violations, found during the period 2009-2014 were not reflected in the audit reports for supervisory purposes, in accordance with the regulations,” they said.

A Bulgarian regulator in December found KPMG’s audits of Corpbank were marked by “significant gaps and inconsistencies” and later fined the firm.

The charges came a day after prosecutors accused a former central bank deputy governor of abuse of office, saying he failed to act on a report showing failings in how Corpbank was run. Another central bank deputy was also investigated for abuse of office last year and subsequently charged.

The central bank revoked Corpbank’s license in November and a court is expected to decide whether to declare the lender insolvent later in April.

Writing by Matthias Williams; Editing by Pravin Char

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