Rogue traders are an unavoidable part of doing business, and banks should concentrate on being able to keep trading even after they are discovered, Deutsche Bank's chief risk officer, Hugo Banziger, told a London conference yesterday.
Speaking at a conference organised by the London School of Economics, Banziger said: "It is vital to keep the ability to trade even if you have found fraud in the system. You will always have rogue traders - Deutsche Bank has one or two every year."
However, banks should tighten up central reporting of suspicious trades, because traders like Société Générale's Jérôme Kerviel tend to conceal their unauthorised trades "in lots of different small corners", he added.
Banziger also argued for faster communication between traders and risk officers. "Twenty-four hours is too long to get market data," he said. "The risk office must link directly to the front office", rather than receiving data through the middle office, which tends to strip out some of the details. Introducing such a system at Deutsche Bank would cost €20 million, but this would be "paltry" compared with the writeoffs caused by poor and untimely risk measurement, he argued.
Topics: Deutsche Bank
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