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NAB to reopen options desk
National Australia Bank (NAB) hopes to reopen its currency options desk in the "near term", said chairman Graham Kraehe last week, reports RiskNews' sister publication, FX Week .
In order to reopen the desk, NAB had to address a series of risk management failings, including introducing a new policy on limits, routinely breached by the four traders responsible for the losses. Among other requirements, NAB had to improve oversight of risk positions, independent sign-off on pricing models for outstanding currency options, tighter control around internal trades and back-office confirmations, and a reliable procedure for sourcing revaluation rates.
Kraehe said last week the bank is making "good progress" in making the required changes. He said these include: imposing tighter control over market trading; appointing a new head of market risk; adding more staff in risk and redefining their roles; and implementing a new risk limits policy for trading. A spokesperson added that the bank has improved the process by which employees can raise points of concern with the bank.
NAB has also implemented a new bonus structure amid speculation that the four sacked traders entered into ever more risky and unauthorised trades to protect their annual bonus payouts, totalling A$790,000 for all four for the 2003 financial year.
Despite NAB's efforts to get its currency options desk back on track, some feel the bank is facing an uphill struggle after being out of the market for nearly nine months. One options specialist in London said it would need to price very competitively to win back business that will have moved elsewhere.
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