By Mark Maurer

KPMG ignored several flaws at Silicon Valley Bank and two other banks before their collapse in 2023, signs of shortcomings in their auditing oversight, according to a report from Senate Democrats.

The Big Four accounting firm had yearslong awareness of problems at SVB, Signature Bank and First Republic Bank before they failed, but it provided clean audit reports for the regional banks, Democrats on a Senate Homeland Security and Governmental Affairs subcommittee said Wednesday. The banks were unprepared for higher interest rates, which weakened the value of their securities and loans and led depositors to seek higher rates.

The report "exposes KPMG's willful blindness and stresses that significant reforms to the auditing industry are needed to promote transparency and better protect consumers," said Sen. Richard Blumenthal (D., Conn.), ranking member of the U.S. Senate Permanent Subcommittee on Investigations.

A KPMG spokesman said the report is a "misguided and erroneous opinion" and omits critical context, adding that the firm stands by its audit opinions. KPMG previously told the subcommittee that it isn't responsible for assessing a client's "risky or even reckless business strategy."

The subcommittee cited several areas in which it said KPMG ignored concerns or justified risky actions at the banks. KPMG identified no risks to Silicon Valley Bank's ability to continue operating over the next year just 14 days before its collapse, the report said. Auditors are required to raise any issues that present substantial doubt about a company's ability to continue as a going concern.

At Signature Bank, KPMG dismissed credible allegations of widespread fraud and justified shortcomings in the bank's record-keeping, the report said. The subcommittee also said KPMG didn't alert First Republic Bank's board of directors to concerns the auditor had about its ability to survive just before its failure.

Silicon Valley Bank, Signature Bank and First Republic each had between roughly $100 billion and $200 billion in assets. Some bankers have called for the expansion of deposit insurance, particularly in the wake of the bank failures. Meanwhile, the Trump administration has been fast-tracking broader deregulatory efforts in the banking industry and elsewhere.

The subcommittee declined to take a stance on whether KPMG's audits of the banks violated auditing standards. "No regulatory assessment suggested that KPMG played a role in the failures of the banks," the report said. The U.S. audit regulator, the Public Company Accounting Oversight Board, declined to comment.

PCAOB leadership is undergoing a shake-up in President Trump's second term, as Chair Erica Williams stepped down in July at the request of Securities and Exchange Commission Chairman Paul Atkins.

Write to Mark Maurer at mark.maurer@wsj.com

(END) Dow Jones Newswires

September 17, 2025 12:51 ET (16:51 GMT)

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