The National Australia Bank has sold its shareholdings in St George Bank, AMP Limited and HHG Plc. The markets were notified of the disposals within minutes of a bank statement itemising total pre-tax losses from rogue options trading at A$360 million - nearly double the A$185 million estimated loss announced last week.
NAB chief executive Frank Cicutto says the bank expects to report a post-tax loss of A$252 million on foreign currency options trading.
Commenting, he says: "The foreign currency traders exploited weaknesses in our internal procedures. We have identified those weaknesses and closed them. We are conducting a comprehensive investigation into the matter and we will take whatever other action is necessary."
The bank has moved quickly to shore up its balance sheet with the block sale of the the AMP and HHG shareholdings to Merrill Lynch. The St George shares are being sold in an overnight book-build which has been fully underwritten by Merrill Lynch.
Final details of the sale will be announced following the completion of the book-build.
CEO Cicutto says the bank's priorities going forward will be "further integrating our banking and wealth management businesses, developing our European business and rebuilding market confidence in our risk management systems."
The travails at the NAB and other high-profile losses from alleged fraud or malpractice in the financial markets has moved the ACI Financial Markets Association to remind senior management of their responsibilities for ensuring that systems and controls are robust enough to catch erroneous trades or employee wrongdoing.
The segregation of duties and separate reporting lines should be well documented and implemented, says the ACI, and management information systems should provide clear and unambiguous records of a firm's dealings.
In a statement, ACI says: "ACI's Committee for Professionalism would stress that it is rare for frauds or misdemeanours to be perpetrated through highly complex trading scams or processes, or through the actions of criminal masterminds. More usually it is through a simple exploitation of lax controls throughout the transaction flow process, such as poor confirmation details checking or poor oversight and challenge by a firm's senior management."