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RBS Leans Towards Naming EY As New Auditor(Sky News (UK) Via Acquire Media NewsEdge) Royal Bank of Scotland (RBS) is leaning towards appointing the smallest of the big four accountancy firms as its new auditor, a move that would spell the end of its relationship with Fred Goodwin's erstwhile employer. Sky News understands that RBS is closing in on an agreement to hand EY its lucrative audit mandate, although insiders insisted that a final decision had not yet been made and that a rival could yet emerge as the winner. KPMG is also in contention for the role, and an announcement is not expected to be made alongside RBS's third-quarter results on Friday. Sources confirmed that RBS, which is 80%-owned by taxpayers, would set aside hundreds of millions of pounds to prepare for an impending penalty from regulators following their probe into misconduct relating to foreign currency benchmarks. It will also allocate a substantial sum to other prospective litigation costs, the sources added. Sky News revealed on Wednesday that Barclays, HSBC and RBS would collectively allocate around £1bn for foreign exchange settlements, with Barclays setting aside £500m. RBS has worked with Deloitte since 2000, with their relationship coming under close scrutiny in the wake of the bank's £45.5bn taxpayer bail-out in 2008. Mr Goodwin worked for Deloitte prior to his tenure at RBS, which culminated in the disastrous takeover of Dutch bank ABN Amro and his subsequent ousting by the Labour Government. If it lands the audit role, EY will probably take it on after next year, a source said. As well as its Government rescue, the period of Deloitte's audit work included the £12bn rights issue in 2008 that is now the subject of extensive shareholder litigation. Under new rules aimed at promoting competition, major companies must rotate their auditors at least every 20 years, and conduct a tender process at least once a decade. FTSE-100 audit mandates command multimillion pound fees for the Big Four auditors, which exert an iron grip on the sector. RBS signalled in its annual report earlier this year that it intended to tender its audit contract for 2016 onwards. RBS is not the only major UK bank reviewing its audit relationship, with Barclays undertaking its own review. These audit changes have, however, fuelled criticism that the sector remains a closed shop which mid-tier challengers find it impossible to break into. RBS declined to comment. (c) Sky News 2014 |