Calls for FCA chairman to resign over KPMG links
There are calls for the Chairman of the Financial Conduct Authority (FCA), John Griffith-Jones, to resign due to his connections with KPMG, which has recently been linked to auditing scandals such as FIFA, HSBC and Bank of New York Mellon.  
The watchdog’s woes: Calls for Financial Conduct Authority chairman to resign over KPMG links

When the Treasury announced the chairman of its flagship new City regulator back in the summer of 2012, it could not have suspected quite how troublesome the choice of John Griffith-Jones would turn out to be.

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An Old Etonian and Cambridge economics graduate, Griffith-Jones had spent his entire professional life at audit firm KPMG. He started out as an eager bean-counter in 1975, toiling away at audit and corporate finance, until he became chief executive in the UK in 2002, then chairman and senior partner in 2006.

Given the reputation of accountants for being boring grey men, he may have seemed a safe pair of hands. As events unfolded, Griffith-Jones turned out to be anything but.

Through his role at KPMG, he is linked to a lengthening list of corporate disasters the auditors failed to spot – hardly ideal for the chairman of the new Financial Conduct Authority.

KPMG did not spot anything amiss in a daunting catalogue of cases including money-laundering and foreign exchange rigging at HSBC, the hundreds of millions of pounds of bad loans that almost sank the Co-op Bank and the near-collapse of HBOS.

Tim Bush, head of governance and financial analysis at shareholder group Pirc, said Griffith-Jones should stand down. ‘On too many occasions, clean KPMG audit opinions have masked a multitude of sins,’ he added.

More recently, it emerged that KPMG was the long-term auditor of Fifa and did not wave red flags despite the openly lavish lifestyles of some officials. This is despite the fact that one of the first things young trainee accountants are taught is: high living by executives is a loud warning bell.

In the past couple of weeks yet more possible conflicts of interest came into focus. Accountancy regulators announced they will investigate KPMG and its role as auditor to parts of Bank of New York Mellon, only weeks after the FCA doled out fines on two units of the bank for failing to ring fence its own assets from those belonging to clients.

Shortly after, when the FCA announced its latest investigation into whether technology firm Quindell misled the stock market, it seemed almost inevitable that the auditor should be none other than KPMG.

Supporters of Griffith-Jones say he gives every sign of enjoying a tough job and that he has no intention of stepping down.

The argument is that he has recused himself from discussions on the HBOS report and that he personally did not sign off on any of the audits in question.

Audit firms generally claim they cannot be held responsible for failing to spot fraud, and, as one Griffith-Jones ally says, it is hard to find any senior figures from the private sector that are totally untainted by the financial crisis.

Nonetheless, the pile of problems involving KPMG is making his position increasingly uncomfortable.

‘John Griffith-Jones should step down now,’ says Professor Prem Sikka of Essex University Business School. ‘His position is at the root of the problem. He should never have been appointed in the first place. He is part of the problem, not the solution.’

The question marks over Griffith-Jones and his chief executive Martin Wheatley could not come at a worse time for the fledgling regulator. The watchdog was set up in April 2013 and was meant to play a key role in making the City safer after the financial crisis.

But while the other new regulator, the Prudential Regulation Authority that supervises the system as a whole, has won respect, brickbats are raining down on the FCA. It can, however, boast a record number of fines, and while the previous watchdog was often accused of going after small fry and leaving serious offenders unscathed, the FCA has aimed for some big targets.

But there is a sense of lingering contempt towards the organisation over a botched media briefing that wiped billions of pounds off insurance company shares.

It was not meant to be like this. As the Treasury Select Committee noted at the time of Griffith-Jones’s appointment, his task was to ‘restore the credibility’ of the watchdog. But in his rare public utterances, he can seem superior and out of touch. With patrician hauteur, he told the Treasury committee at the time of his appointment that ‘there are some people – quite a sizeable part of the population – who are really quite innumerate, at least in the terms of what you and I might describe as innumerate’.

The FCA can point to some success stories, not least in the massive crackdown on payday lending, where it has curbed some unforgiveable practices aimed at vulnerable borrowers.

But it is a long way from fulfilling the Chancellor’s hopes of a regulator that would restore the public’s trust in the financial system.

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