“LONDON (Reuters) – Britain’s accounting watchdog said it won’t take any action against Ernst & Young (E&Y) over the way it checked the books of Lehman Brothers, the U.S. bank whose failure triggered a near meltdown in global markets in 2008.
The Financial Reporting Council (FRC) probe focused on how E&Y, one of the world’s “Big Four”accounting firms, audited the London-based European arm of Lehman.
“Following the conclusion of the investigation, the FRC’s executive counsel, Gareth Rees, has decided that no action should be taken against E&Y or any individuals in connection with their conduct in this matter,” the FRC said in a statement.
E&Y had no immediate comment.
Lehman’s collapse, along with bank rescues by taxpayers across Europe and in the United States, prompted policymakers to question why lenders had been given clean bills of health by their auditors in the run up to the 2007-09 financial crisis.
The FRC’s decision not to take action against E&Y was agreed despite its finding that administrators had identified a “significant shortfall in the pool of money held on trust for clients” after Lehman failed in September 2008.
UK rules in force at the time of the Lehman collapse already required banks to segregate funds that could be handed back to customers in the event of their failure and the watchdog said E&Y had signed off to the effect that Lehman had complied with these rules….”
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