Four foreign exchange dealers at National Australia Bank (NAB) were suspended yesterday after running up losses of $180 million Australian dollars (€110 million) through unauthorised derivatives deals in just three months.
After an emergency board meeting yesterday, Australia's largest bank said it had asked regulators including the Australian Securities and Investments Commission and the UK's Financial Services Authority to help investigate what is thought to be the country's biggest scandal of its kind.
It is believed the unauthorised trades in options in Australian and New Zealand dollars began last October and escalated after one of the four dealers asked three of his colleagues to help get him out of trouble. Three of the traders were based in Melbourne, where NAB has its headquarters, while the fourth operated from London.
The losses occurred when the Australian and New Zealand dollars were performing unexpectedly strongly. Both have appreciated against the US dollar by almost 15 per cent since the beginning of October and by 10.3 and 8.1 per cent against a trade-weighted currency index.
NAB operates National Irish Bank and Northern Bank and employs more than 2,000 in Ireland.
A spokesman said the trading fraud would have no impact on the group's Irish operations.
The scandal is the latest controversy to hit NAB, which has underperformed Australia's other "big four" banks over the past three years.
Investor confidence in the senior management was severely eroded by problems at Homeside, its former US mortgage subsidiary, that led to Aus$4 billion of writedowns and the sale of the business two years ago.
More recently, it has suffered higher pension costs than expected in the UK and has been forced to pay Aus$67.2 million in compensation to about 235,000 customers in Australia who suffered pricing and other irregularities on pension products.
NAB said the affair had come to light only on Monday after a tip-off from another bank employee.
"Our internal audits would have caught them eventually but we were lucky that another staff member reported what had happened. We had the right systems in place."
The problems are the latest of several similar difficulties at other banks around the world. Unauthorised trading by so-called rogue traders cost Allied Irish Banks $691 millon two years ago while Nick Leeson's $1.4 billon in losses caused Barings to collapse in 1995.
The losses to NAB, are far less substantial. - (Financial Times Service)
