Look Who Fell Into the First Republic Rut
The rescue reinforces concerns about long-run audit relationships. But the tenure of the bank’s directors bears similar scrutiny.
You’ve gotten to be a habit with me.
Photographer: Jason Henry/BloombergIf KPMG LLP’s near-30-year tenure auditing the collapsed Silicon Valley Bank seemed excessive, consider the entrenched relationships on display at First Republic Bank. The lender rescued by JPMorgan Chase & Co. not only engaged KPMG just as long, but also retained directors with unusually protracted tenures.
First Republic’s accounts point out that KPMG was auditor since 2010. The actual term is longer. The audit firm was signing off the books from 1989 to 2007, prior to First Republic’s brief ownership by Merrill Lynch (later bought by Bank of America Corp.). Long-running relationships can threaten objectivity. In the US, this risk is managed by periodically changing the lead audit partner so auditor and audited don't get too close.