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09/12/2016

Commission urged to fire auditors PwC from bank transparency study

Euro & Finance

Commission urged to fire auditors PwC from bank transparency study

Internal Market Commissioner Michel Barnier was told to fire PwC from the country by country reporting impact assessment. January 2010. [European Parliament/Flickr]

Development aid organisations today (2 July) called on the European Commission to oust auditors PwC from an impact study on country reporting for EU banks, saying the company has lobbied against the legislation and therefore has a conflict of interest.

Despite having lobbied against the transparency initiative, PwC was employed to assess the economic consequences of making public data from banks regarding their turnover, staff numbers, taxes paid and subsidies received in each country they operate in.

PwC saw off competition from two other tenders in June to win the contract, which is worth €395,000.

The company formerly known as PricewaterhouseCoopers told a recent OECD consultation on the issue it wanted “a more stringent confidentiality regime” and called for “real sanctions for countries that violate confidentiality provisions” (see here).

The firm is also employed by large European banks, which has raised concerns over conflicts of interest from members of the European Parliament. The Commission said the contract with PwC had clear provision to avoid any such conflicts.

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.  

Civil society organisations argue the information is vital to fight corporate tax dodging and must be public.

The European Network on Debt and Development (Eurodad) wrote to Internal Market Commissioner Michel Barnier, urging him to sack PwC. The letter was sent yesterday on behalf of 32 civil society organisations, including Oxfam, Christian Aid, the Tax Justice Network and Action Aid.  

Tove Maria Ryding, tax coordinator for Eurodad, said, “PwC has shown itself as a hardline opponent of public country by country reporting, but at the same time the company holds itself up to be a neutral and unbiased assessor. 

“The company clearly faces an impossible conflict of interest and will not be able to deliver a credible impact assessment. We have urged the European Commission to terminate the contract with PwC and either find a neutral institution to do the impact assessment, or simply do the work themselves.”

Europe’s Greens warn of conflict of interest

The European Greens have also written to Barnier about PwC’s potential conflict of interest in carrying out the impact assessment study. Belgian Green Philippe Lamberts and Germany’s Sven Gielgold argued last week 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. 

Barnier’s spokeswoman Chantal Hughes said, “The Commission was tasked by co-legislators to do a review to assess the possible effect of country by country reporting by financial institutions on issues like competitiveness, investment and credit availability and financial stability. To do this extensive review well, and considering limited resources, it needs the expertise and contributions of outside consultants.

“A normal competitive tendering process was held in accordance with the rules on public procurement, following which PwC was selected. Their factual input will be important; however the report itself will of course be written by the Commission and the Commission will draw its own conclusions, which will be based on the report but also on other information.”

“The contract with PWC has clear provisions dealing with conflict of interests,” she added.

PwC is one of the “big four” auditors. When asked for comment, it said it had been asked to refer all such requests to the Commission.

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

  • 2015: Public country by country reporting for EU banks comes into force

Further Reading