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11/12/2016

Barnier rejects calls to sack PwC from bank transparency study

Euro & Finance

Barnier rejects calls to sack PwC from bank transparency study

Internal Market Commissioner Michel Barnier faced calls to fire PwC. December 2013. [EU Council/Flickr]kr]

The European Commission will not sack PwC from a study on making bank data public, despite allegations from campaigners and politicians the “Big Four” auditor has conflicts of interest.

Michel Barnier, the Internal Market Commissioner, has instead decided to launch a “short public consultation” and organise “an outreach event” for stakeholders to dampen fears over PwC’s impartiality, according to letters obtained by EurActiv today (14 July).

Despite having lobbied against the transparency initiative, PwC won the €395,000 contract to assess the economic consequences of making public information from banks regarding their turnover, staff numbers, taxes paid and subsidies received in each country they operate in.

Country by country reporting

Public country by country reporting for EU banks is part of the fourth Capital Requirements Directive. From 2015, this information should be made public, unless there are significant economic disadvantages to its publication. In that case, the Commission can delay publication.  

A fortnight ago, the European Network on Debt and Development (Eurodad) wrote to Internal Market Commissioner Michel Barnier urging him to sack PwC. Eurodad is a network of 48 non-governmental organisations in 16 countries including Oxfam, Christian Aid, the Tax Justice Network and Action Aid. 

The European Greens argued separately that because PwC was employed as an auditor for big European banks such as Barclays and Commerzbank, it shouldn’t have been given the job by the Commission.

http://www.euractiv.com/sections/euro-finance/commission-urged-fire-pwc-auditors-bank-transparency-study-303243

Public country by country reporting is vital in the fight against corporate tax dodging, according to Eurodad, which will take part in the consultation. PwC should also participate, but only as a stakeholder, “and not in the role of neutral assessor,” it said.

PwC could not be neutral, Eurodad said, because it had called in an earlier OECD consultation for “a more stringent confidentiality regime” and called for “real sanctions for countries that violate confidentiality provisions”.

Tove Maria Ryding, Eurodad’s tax coordinator, said, “We still don’t have an answer to our question about how PwC can state strong political opinions on an issue and then act as a neutral assessor of the same issue.

“We’d also like to know whether PwC still maintains its hardline position that data from banks through country by country reporting should be hidden from the public, or have they since changed their mind?

Letter 

In a letter dated 10 July, Barnier told Eurodad the Commission needed the expertise of outside consultants to carry out the “extensive and technical review well”. He said the 31 December 2014 report deadline was “extremely tight” and mentioned the Commission’s “limited resources”.

“Please be assured of my continued support for greater transparency in respect of multinationals’ activities,” he wrote.

He said PwC’s contract had clear provisions regarding conflict of interest and that the report would be just one element of the Commission’s analysis.

“I should like to stress that the report itself will be written by the Commission, who will make its own assessment and draw its own conclusions,” he added.

PwC, who were asked by the Commission not to comment on EurActiv’s 2 July story, wrote to Barnier on 4 July.

They cited the conflict of interest clauses in their contract and the fact they were bound to respect the code of ethics of the Institute of Chartered Accountants for England and Wales.

“We are clear that our relationships with financial institutions and any views previously expressed by PwC do not present a conflict of interest to the current project,” they told the commissioner.

Background

The fourth revision of the Capital Requirements Directive is largely concerned with increasing banks' resilience to financial shocks by compelling them to hold greater reserves of capital but it also will increase banks' disclosure requirements. 

Public country by country reporting for EU banks is part of the fourth Capital Requirements Directive. Data from banks regarding their turnover, staff numbers, taxes paid and subsidies received in each country they operate in must be made public from 2015, unless there are significant economic disadvantages to its publication. In that case, the Commission can delay publication.

The Commission has employed PwC to carry out an impact assessment study on the possible economic consequences of the public reporting. But civil society organisations and MEPs believe the auditor, which has opposed the initiative and is employed by large European banks, cannot be neutral and should be replaced.

Timeline

  • 31 December 2014: Report deadline
  • 2015: Public country by country reporting for EU banks comes into force

Further Reading