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March 12, 2008
Some City banks not reviewing security after SocGen scandal
Financial Services Authority report shows most have taken action
By Computerworld UK reporter
Some UK investment banks have not instituted reviews of their trading controls and IT systems in the aftermath of the SocGen banking scandal, according to the Financial Services Authority, the industry watchdog.
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The FSA has spoken informally to some 50 of the largest trading banks in London since SocGen reported £3.6bn losses following a prolonged period of unauthorised trading by a Paris-based employee.
The FSA reported that of these banks, “Almost all had discussed internally the relevance of this case to their own business, and many had already put in place reviews to ensure they identify any gaps in trading controls and close them as soon as possible.”
The statement, however, reveals that some banks told the FSA they had not yet discussed the implications of the world's biggest ever trading fraud for their own organisation.
In its Market Watch 25 report, the FSA said "We recognise that, in view of the criminal investigation in France, and of the ways in which the 'rogue trader' appears to have disguised his activities, there is likely to be more to learn in the future," said the report.
Sally Dewar, FSA MD of Wholesale and Institutional Markets, said: "We are encouraged that many firms in London with significant trading activities are working to satisfy themselves that their basic controls and governance surrounding trading, risk management and settlement are effective.
“But the risks remain, and we would urge firms to remain vigilant on unauthorised trading, especially in current market conditions."
The FSA advice highlights on systems and control, risk management, organisational culture, basic management information, the segregation of jobs and elementary IT security such as password controls.
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