City traders in £1.4bn bonus scam

Credit Suisse, which employs hundreds of people in Canary Wharf, discovered the problem last month. But today is the first time it has revealed that traders had cooked the books.

It is the latest blow to confidence in the world's banking system and raises concerns over the seemingly unstoppable activities of rogue traders. Meanwhile, the global credit crunch continued to impact on the British economy. Kate Barker, a member of the Monetary Policy committee, warned of falling house prices this year.

It is believed that the Credit Suisse traders - most of whom are based in London - deliberately tried to cover up the scale of their trading losses, probably to boost their year-end bonuses.

Originally the bank said that the traders had accidentally "mismarked" the prices of complex financial instruments. But today it said that it had "determined that the pricing errors were, in part, the result of intentional misconduct by a small number of traders". The news raises fears other banks are sitting on huge losses which have yet to come to light. Credit Suisse said all the traders involved had now either been fired or suspended.

Credit Suisse has always refused to name the traders but it was revealed by the Evening Standard the team was headed by Kareem Serageldin, a managing director at the bank who left last month. Credit Suisse admitted an internal review "found that controls ... were not effective". It also warned today all profits made in the first two months of this year are likely to have been wiped out during March.