Banks Again (Number 2,461)

Hardly a day goes by without the banks being in the news for something or other.  Last week, we started with the government’s second bail out on the Monday swiftly followed with immaculate timing by RBS’s spectacular presentation of the worst results in UK corporate history.


Despite my support for this government, its got to be pretty bad timing to have the two events take place on the same day which inevitably led to a massive slide in the whole banking sector’s share prices and further decline in confidence in UK Plc.


During the thrashing that the banks took both in the media and in the stock-market, Barclays were one lone voice who consistently bleated that everything was “hunky dory” yet the share price continued to slide that is until yesterday when the market realised that they had all along been telling the truth and the price reversed steeply upwards.


Throughout all this debacle in the banking sector, lets face it, that’s one major part of the reason we are al in such a mess, little has been mentioned about the auditor’s role in all of this.  Thankfully, I now have started to read that the big four accountants are starting to be questioned as to their role.


Of course, this is a familiar theme that I have visited before.  Just like with BCCI, Enron, Polly Peck and other corporate scandals, I simply fail to understand how the auditors can be absolved of any responsibility.  It cannot be that long ago that these banks accounts were signed off with a clean audit report yet patently, they were carrying billions of pounds of toxic debt. 


Even I know, despite my relative lack of recent audit experience, that an impairment review of goodwill is a major part of the audit process and for RBS to write off something in the region of £20bn of goodwill makes you question how this could have happened in so short a period.  Of course the truth of the matter is that the corporate power of these banks, results in auditors simply paying lip service to them.  If they were truly independent and fulfilling the role that the legislation intended, there is no way that a proper review of the banks assets less than a year ago would be so significantly different.


I don’t have any answers for any of this but it just simply confirms my suspicion that in general, large organisations are inefficient, badly run, potentially corrupt, misguided, and any other adjectives that I’d like to use but won’t for the fear of litigation.