KPMG cleared over audit of failing HBOS

TAINTED KPMG has been cleared of wrongdoing over its failure to spot the collapse of toxic bank HBOS.

The auditing giant signed off the lender’s 2007 accounts before the financial crisis – but months later HBOS was teetering on the brink and was bought by Lloyds in a £12bn rescue deal.

The disaster then engulfed Lloyds resulting in a £20.5bn taxpayer-funded bail-out.

As HBOS’s auditor, KPMG was meant to be a gatekeeper, protecting shareholders and customers from reckless behaviour. But despite widespread criticism of the accountant, the Financial reporting Council watchdog yesterday said it had done nothing wrong.

The decision is likely to enrage Lloyds’ 2.5m small shareholders who have seen their bank’s value cut in half since the deal was pushed through. Tory MP Nicky Morgan, chairman of the Treasury Select Committee, demanded to know why the FrC had closed its case.

The watchdog only agreed to open its investigation in 2016 – eight years after HBOS’s collapse – after the committee accused it of failing in its duty to the public.

Morgan said: ‘ When it publishes its detailed report next month, the committee will expect the FrC to provide a full explanation of its decision not to take further action against KPMG.’

The FrC said it had dropped its probe because there was no realistic prospect of a tribunal finding against KPMG.

A KPMG spokesman said: ‘We have always maintained that our audit was robust and undertaken in accordance with the regulations and practice of the time.’