City bank denies it will sue KPMG

Troubled investment bank Deutsche Morgan Grenfell has denied reports it is set to sue KPMG over its role as auditor of the three scandal-hit European funds run by its asset management arm.

A spokesman for Morgan Grenfell said the bank would not make a decision until it had established for itself how management controls were breached in relation to the three funds run by former fund manager Peter Young.

KPMG claimed the reports, in several newspapers, were ‘without foundation’.

Accountancy Age understands that Morgan Grenfell will embark on a clear-out of senior staff in the asset management arm within the next two weeks.

Then it will focus on the role played by trustees who oversee the funds.

Until July, insurance company General Accident was paid u377,000 as trustees before the current trustees, Royal Bank of Scotland, took over. KPMG could still face criticism for its role in valuing the shares held by the funds.