'Rogue trader' suspended after losing Morgan Stanley £60m

A rogue trader has lost one of the City's biggest banks around £60million.

Morgan Stanley has suspended the dealer, who allegedly inflated the value of his work in an apparent attempt to boost his pay packet.

The trader is Matthew Piper, a mid-ranking British executive in his mid to late 30s on a six-figure salary.

News of his dealings will further damage the reputation of the British banking industry, which is still reeling from the Northern Rock debacle and the credit crunch.

It will also prompt fresh questions over the lax internal policing systems at many City firms and comes days after Chancellor Alistair Darling announced a crackdown on unscrupulous hedge funds spreading disarray.

Mr Piper worked for Morgan Stanley's Canary Wharf office in East London and was given free rein to take punts on company and government debt.

He was also allowed to estimate the profits he had earned from his investments at the end of each trading session.

Jerome Kerviel: The Paris-based trader lost Societe Generale £3.8billion

Morgan Stanley said it noticed marks in the trader's book in mid-May that were 'inconsistent' with its policies.

It has informed the Financial Services Authority, the City's watchdog, and is also ' conducting a full internal review' of the matter. The rogue trading came to light yesterday as the bank revealed quarterly profits had sunk 60 per cent to £525million.

Experts say greed was almost certainly behind the attempted fraud.

On City trading floors, annual bonuses are closely tied to how much profit each dealer generates over the year. Morgan Stanley, which employs around 5,000 in the City, uncovered the scandal during a routine audit.

But the fact Mr Piper was effectively his own supervisor will concern the FSA.

His dealings are similar to the scandal unearthed at Credit Suisse in February.

Credit Suisse booked a £1.4billion loss after it found a black hole in a division that specialised in complicated assets linked to U.S. subprime mortgages.

Financial monitors at its Canary Wharf office failed to spot that traders had placed wildly optimistic valuations on their trading book.

A few weeks before the Credit Suisse scandal, trader Jerome Kerviel chalked up a loss of nearly £4billion at French bank SocGen.

Bank officials say he tried to trade ahead of anticipated falls in stock prices. It said he had exceeded his authority but Mr Kerviel claims he was a scapegoat.