National Australia Bank has dismissed four traders and four senior managers following the publication of a damning report by PricewaterhouseCoopers into unauthorised trading losses at the bank.
The action follows an investigation by PwC into a rogue trading scandal that has already claimed the scalps of former NAB chief executive Frank Cicutto and chairman Charles Allen. Trading losses, totalling A$360 million, were initially uncovered in late-January when junior employees blew the whistle on dealers working on the bank's foreign currency options desk.
According to PwC, the traders exploited loopholes in the bank's inhouse currency options trading system, Horizon, to cover up illegal trading activity. The traders found that they could smooth their losses and evade detection by easily manipulating transaction records on Horizon. The practice, which had been ongoing since September 2001, escalated from October 2003 when the traders realised the back office had stopped checking internal transactions completely.
PwC criticised the markets division of the bank, which it said had a tendency to suppress bad news rather than be open and transparent about problems, helping to create a culture that enabled the traders to "incur losses, conceal them and escape detection despite ample warning signs".
The sacked traders are: Luke Duffy, David Bullen, Gianni Gray and Vince Ficarra. Gary Dillion, the head of foreign exchange in the markets division and the direct supervisor of the four traders, has also been dismissed.
NAB's new chief executive John Stewart says the bank is consulting with police and regulators to determine whether any civil or criminal action will be taken against these individuals.
Other executives sacked in the purge include the executive general manager of corporate & institutional banking, Ian Scholes, the head of markets division, Ron Erdos, and the executive general manager of risk management, Chris Lewis.
Stewart says the management team are continuing to implement remedial actions to close gaps and loopholes identified in the PwC report. "Weaknesses in control procedures identified by PwC have been or will be rectified without delay," he says. "This includes analysis of daily trading profits and accounts, reporting of all large and unusual transactions, investigation of all off-market rates on high risk transactions, critical review of revaluation rates sourced from third parties and a stronger back office function that properly checks all transactions."