Kyiv District Administrative Court on 29 May cancelled a decision taken by the National Bank of Ukraine to remove auditing firm Pricewaterhousecoopers from the register of audit firms that are authorized to conduct audits of banks. In addition, the court also declared unlawful the NBU’s revocation of the certificate issued to the firm confirming its entry into the register.
The ruling has not yet come into effect, and the NBU intends to appeal against it. The decision to remove Pricewaterhousecoopers from the register was taken by the NBU’s Board on 20 July 2017 after a petition in that regard was submitted by the Committee on the Auditing of Ukrainian Banks.
This decision was taken on the grounds that Pricewaterhousecoopers had cleared false information about PrivatBank’s financial and business operations, in particular concerning the level of the bank’s credit risk and regulatory capital. The audit firm failed to identify PrivatBank’s risks, which later made the bank insolvent, which in turn forced the state to bail out the bank via its nationalization.
The NBU’s powers to remove audit firms from the register of bank auditors were conferred to it under Article 7 of the Law On the National Bank of Ukraine and by Article 70 of the Law On Banks and Banking. The central bank also further defined these powers in its regulations. The practice of regulators banning audit firms from conducting bank audits is in line with international practice, and is based on the 27th principle of the Core Principles for Effective Banking Supervision.
The NBU has expressed concern over the court proceedings on this case, and will continue to defend the legality of its actions.