Graubündner Kantonalbank is under pressure because of the Benko investments. A report by EY was supposed to bring salvation, but it went awry.
Sometimes you can’t believe how naive certain managers think the public is.
A current example is the “independent” investigation by auditors Ernst & Young (EY) into the Graubündner Kantonalbank GKB’s investments in René Benko’s crumbling real estate empire.
Only positive assessments
“Independent audit confirms correctness of lending” was the headline of a media release issued by the Graubünden-based bank on Thursday.
The audit report confirms the correctness of lending and classifies the bank’s lending policy as conservative and the loan book as healthy, it said.
The report also states that the role of bank president Peter Fanconi was limited to establishing business contacts and that he was not involved in the credit approval processes, GKB was pleased to report.
Report remains secret
The audit also showed that, despite the bank president’s private investments, there was no evidence of any improper use or conflicts of interest and that the bank president had complied with all reporting and disclosure obligations.
However, GKB is keeping the full report under lock and key, which sends out bad signals.
But even those who look at the summary can barely believe their eyes, because there’s by no means any question of it being an ‘independent’ investigation.
Extra money for expert opinions
Firstly, EY is not completely independent because the firm is also the bank’s auditor, as muula.ch has already reported on this investigation.
In fact, the auditor would have been better off rejecting such an additional investigation.
In this context, the price that GKB paid EY for the ‘expert opinion’ should be interesting.
Based only on bank information
Secondly, EY itself provides the main argument as to why the investigation is merely a fig leaf.
“We did not conduct any forensic investigations and relied on the documents provided and requested”, the EY summary states.
This makes it clear that EY was unable to find anything, as the bank is unlikely to provide any dubious clues, thereby incriminating itself. EY therefore did not carry out any actual research of its own.
Security at Bahnhofstrasse
According to the report, GKB granted two loans to companies in the Signa Group led by failed real estate mogul Benko. In January 2021, GKB invested 60 million Swiss francs in a syndicated loan secured by real estate.
The syndicate is led by a major Swiss bank and a prime property on Zurich’s Bahnhofstrasse serves as collateral.
In addition, the Graubündner Staatsbank granted another Signa company a loan of 3 million euros in October 2021 as part of an unsecured promissory note loan.
To date, the syndicated loan has been duly serviced and all interest and amortizations have been paid on time, according to the statement.
Millions already written off
The commitment currently amounts to 58.3 million Swiss francs.
However, the promissory note loan was completely written off in October 2023 due to the borrower’s insolvency, explained EY, who also audited this information in the annual financial statements.
And then EY itself also severely restricts its statements and keeps a loophole open for the investigation.
Major restriction mentioned
“The members of the Bank Council were not involved in the loan approval process and, based on the available documents, there are no indications that the Chairman of the Bank Council or the Bank Council influenced the decisions,” the auditor explained.
The words “based on the available documents” are a major limitation. If new information emerges, EY will be off the hook.
Research by muula.ch has revealed just how much of a risk the audit firm EY already poses to the Swiss financial market.
Alongside the monster bank UBS, it is probably the biggest cluster risk in the country.
And so called ‘independent investigations’ do nothing to mitigate this fact.
18.04.2024/kut/ena.
