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City traders in £1.4bn bonus scam
Jonathan Prynn, Consumer Affairs Editor20.03.08
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A leading City investment bank has uncovered a £1.4billion scam by rogue traders desperately trying to protect their bonuses.
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.
Reader views (5)
I refer to the article in the ES edition of 21.10.09 pages 6 & 7.
The vice chairman of Goldman Sachs is obviously blinkered
and completely misses the point on a number of issues.
1/ The excessive salaries and bonuses of the banks
Directors and investment managers bears no
relationship to other Directors in industry,
politicians and professions with far more
responsibilities, and far greater stress.
e.g. A great Many small to medium size Ltd company
Directors even with the Governments so called
Finance Initiative are having to risk their
homes as collateral,without any guarantee of being
able to continue with the business and provide
employment for thousands of people.
2/ It very much seems that the banks have no proper terms
and conditions for the bonus schemes they operate.
If they have, then the bonuses payments wrongly made
over the last few years should now to be paid back.
3/ Let these so called top traders, managers and
Directors find employment elsewhere unless they take
a very substantial reduction in their remuneration
package.
The banks employ thousands of staff, they must have
a training programme,and other very competent people
earning a pitance in comparison, promote them.
My experience, speaking to various bank managers is
that they all agree the enormous salaries and bonous
paid is abhorrent.
- Keith,, Tunbridge Wells, UK
Right. And these guys in the City have been pumping prices of homes up in the last 10 years on pure fraud together with the UK banks. Just like in the USA. And I am supposed to buy a home in London for my family with a price that has been inflated up 300% by financial fraud? That's what they call 'prosperity' right? Yeah it is. But for who? A small financial elite that has engaged in a financial fraud of gigantic proportions through the toxic mortgage 'securities' and we people are supposed to pay the bill through bailouts like Northern Rock and rising prices not just of homes but everything like council tax etc.. that have been inflated up as a result of that housing fraud?
- Jim, London, UK
Let's face it the FSA is about as useful as a chocolate teapot!
The FSA is "re-active" rather than "pro-active"!
If there is a "loop-hole in the system" then there will Always be people prepared to take advantage of it! The secrets to ultimate "success" is to plug all the loop-holes early on and to regulate effectively. It would appear that neither has been done effectively in this latest case. So the real question must be, "Who is it that has been incompetant this time around?"
- Fraser, Telford Park
Ooh, Kareem, he was Head of Synthetic Credit Structuring. He was at CS for years and ran a very successful team. Guess the credit crunch bit him a bit hard...
- Headhunter, London
In the USA these alleged 'criminals' would serve tens of years in prison. In the UK the company will get a fine and their (former) employees will keep their large salaries and just continue working for another company.
Just wait and see.
- Adam, Harrow, UK
