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Bank of England

Bank of England Targets Wall Street Financial Giants Over Reporting Habits

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The Bank of England has launched an investigation into a number of Wall Street financial giants.

They are looking into the financial reporting habits of several firms including Goldman Sachs and Morgan Stanley.

PRA Review of US Firm Financial Reporting

The Prudential Regulation Authority (P.R.A.), which is the Bank of England’s supervisory division, has launched a data review of the U.K. arms of American banks.  The P.R.A. is examining a number of vital measures such as the banks’ capital buffers. The goal is to determine the quality of the firms’ regulatory reporting.

There are several firms currently being investigated.  These include Goldman Sachs and Morgan Stanley as well as Bank of America Merrill Lynch.  It will also include the Canadian bank, Scotiabank.

On the Heels of the Citi Probe

The investigation was launched following the outcome of another probe into U.S. rival, Citi.  That investigation concluded in November 2019, when the P.R.A. fined Citi a record £44 million for “serious and widespread” governance and reporting failures.

The investigation concluded that Citi had failed to meet reporting standards starting in 2014, through 2018.  Beyond those “serious” failures, it stated that the financial firm had overstated its capital and liquidity. Citi responded by saying that it had made “a high priority on meeting its regulatory reporting requirements and has devoted significant resources to UK financial reporting before, during and after the period to which the PRA notice relates.”

Now, the P.R.A. has expanded its investigations as it suspects that the reporting and governance issue is more widespread.

“Citywide” Skilled Person Reviews

The P.R.A. has commissioned Section 166 reports – also known as skilled person reviews – of the banks.  The launch of these preliminary reviews did not come as a surprise to the American banks, which were in receipt of an open letter last year suggesting that the probe would be on its way.

According to an unnamed source cited by the Financial Times, the investigation is a component of a “Citywide review” into the stability and integrity of the banking system.  It will include an examination of banking sheets, among other details. The source, who is close to the matter, also stated that more similar investigations and reports will be commissioned throughout 2020.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.