PricewaterhouseCoopers is facing conflict of interest accusations from the
Lib Dems due to earning bigger fees for helping the crisis-hit lender to sell on
its loans and to borrow funds in the wholesale markets, than for auditing the
The bank’s annual report dislclosed that PwC was paid £500,000 in 2006 for
its audit work compared to £700,000 in ‘non-audit fees’, specifically ‘in
respect of securitisation transactions and the raising of wholesale funding’.
Northern Rock was forced to go cap in hand to the Bank of England after it
was caught out by its dependence on short-term borrowing as the credit crunch,
sparked by the upheaval in the US sub-prime housing market, took hold.
‘This appears to be a serious conflict of interest,’ Vince Cable, LibDem
Treasury spokesman told
Observer. ‘I would worry about the fact that the auditor appears to be
making enormous fees from what turned out to be the most disastrous aspects of
the Northern Rock situation.’
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