The move, first predicted in Accountancy Age in February, will see KPMG lose up to £25m, which it earns each year in audit and advisory fees from NatWest.
But now PwC which audits RBS will also lose out.
PwC earned £2.4m in audit fees last year as well as £9.4m in consultancy and other fees.
The move is reported to have come about because had PwC retained the contract, it would have audited three of the biggest clearing banks. It already audits Lloyds TSB and Barclays Bank while KPMG is auditor to HSBC and Halifax.
RBS is said to have chosen Deloittes because it did not present conflict of interest problems and it wanted to be audited by a Big Five firm.
RBS chief executive Fred Goodwin is a former Touche Ross partner from the days before its merger with Deloittes.
Months of wrangling between hostile bidders RBS and Bank of Scotland ended dramatically in January when RBS chief executive Sir George Mathewson secured the backing of NatWest’s financial advisors, creating the UK’s third largest bank.
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