The South African Reserve Bank (Sarb) has denied that it told the country’s big four banks that they cannot fire KPMG, stating categorically on Friday that it had not instructed banks on what steps they should or should not take with regards to their contracts with the embattled auditing firm.

“As stated by Governor Lesetja Kganyago in a statement issued at the Monetary Policy Committee media conference on September 21, the Sarb’s interest in the KPMG matter stemmed from a public policy perspective, arising from the Sarb’s mandate to regulate banks and ensure the stability of our financial system,” the reserve bank said in a statement.

“The Sarb stated that it would engage banks and auditing firms primarily to understand the context so that it is better placed to manage any potential financial stability risks that may arise from the issues around KPMG. These engagements have taken place but at no point did the Sarb instruct banks on how they should deal with KPMG.”

KPMG in South Africa failed to flag monies allegedly laundered through businesses owned by the controversial Gupta family which the firm audited.

Last month, KPMG International admitted the work done by its South African unit for the Gupta family “fell considerably short of KPMG’s standards”. The audit firm also announced that it intended to withdraw its report on the so-called “rogue spy unit” within the South African Revenue Service (SARS).

The reserve bank said its position on the KPMG matter was further expanded on by deputy governor Francois Groepe in a speech delivered two weeks ago at a workshop on the impact of International Financial Reporting Standard 9 on banks and regulators in Africa.

Groepe said that though Sarb as a regulator does not comment on individual firms, recent developments involving KPMG may compel it to consider policy changes to further strengthen governance and transparency within the auditing and accounting professions.

“Groepe stated that developments around KPMG called for ‘thoughtful leadership and restraint’ as the South African economy would be better served if further market concentration within the auditing and auxiliary professional services sector could be avoided,” Sarb said.

“Section 61 of the Banks Act states that no person shall be appointed as an auditor of a bank unless the appointment has been approved by the Registrar of Banks. Section 61 also sets out conditions under which the registrar may withdraw the approval of the appointment of an auditor.”