All KPMG: Failed banks, Foot Locker, and Skechers
KPMG may be the Big 4 firm with the most bank audits but it also has significant exposure to retail, sneakers to be specific and, therefore, to the latest tariff scares.
Nothing's right, I'm torn. I'm all out of faith. This is how I feel… Torn, Natalie Imbruglia
Today is an all KPMG day. Originally I was going to write exclusively about Skechers, exclusively for paid subscribers.
Two more stories that are KPMG adjacent popped up in the meantime, so I decided to throw it all together.
The moral of today’s story: The Big 4 global audit firms survive and thrive, and get paid, regardless of whether their clients continue to exist independently or at all.
Former NYT opinion columnist Peter Coy wrote in the New York Times DealBook newsletter, May 17 (gift link):
What Has Changed Since Silicon Valley Bank Collapsed? Not Much.
Two years later, no major legislation or regulation has passed, and the basic problem that caused the crisis persists.
Even before the 2023 crisis, the biggest U.S. bank holding companies were required to have a certain amount of “high-quality liquid assets” that could be quickly turned into cash to satisfy a surge in withdrawals. One obvious option — although it would go against Bessent’s thrust — would be to require a broader spectrum of banks to keep high-quality liquid assets on hand.
Stronger capital requirements, such as those that regulators sought in 2023, could also make banks safer. Capital is assets minus liabilities. If a bank’s capital cushion shrinks because its assets lose value (as happened to Silicon Valley Bank), regulators can order the bank to raise more money by selling shares.
The worst combination is too little liquidity and too little capital. Silicon Valley Bank, Signature Bank and First Republic Bank, which failed in rapid succession in 2023, “had too little usable liquidity relative to their runnable funding” along with “too little capital given the magnitude of their interest rate risk,” two Fed staff members, Shawn Kimble and Matthew Seay, wrote last year.
Those three banks and three others that failed or nearly failed in early 2023 all had a high concentration of customers in crypto, venture capital or both fields, Steven Kelly of Yale and Jonathan Rose of the Chicago Fed wrote in a working paper in March. In contrast, New York-based Amalgamated Bank also suffered from poor solvency and high dependence on uninsured deposits but avoided a run because its customers were mainly unions and nonprofits, which were less likely to bolt, Kelly and Rose wrote. That indicates that regulators need to pay attention to banks’ customers, not just their balance sheets.
What Coy doesn’t mention is an important common element in all of these bank failures: KPMG.
Yale's Steven Kelly, Associate Director of Research at the Yale Program on Financial Stability, posted the story on LinkedIn and I commented:
Regular readers know I have written extensively about KPMG and its three banks — Silicon Valley Bank, Republic Bank, and Signature bank — as well as KPMG's relationships to the Credit Suisse failure.
Also mentioned in Peter Coy's story is Amalgamated Financial Corp., audited by Crowe LLP, just like the bank that lit the 2023 bank failures match, Silvergate.
What some may not know is that the bank that bought the remains of Silicon Valley Bank, First Citizens BancShares, is also audited by KPMG. KPMG billed $4.2 million more, 60 percent more, for the new bigger First Citizens, in 2024. (KPMG replaced Dixon Hughes in 2021 after it got much bigger and more complex after acquiring CIT Group.)
After the jump, we'll take a walk down memory lane with former KPMG client Skechers but, first, an autopsy of current KPMG client Foot Locker.