NAB credit rating unaffected by FX options losses, says S&P

The credit rating of National Australia Bank is unaffected following the disclosure of unauthorised foreign exchange transactions, rating agency Standard & Poor’s (S&P) said today. The losses, expected to result in pre-tax forex option losses of A$180 million ($140 million), were disclosed by the Australian bank yesterday.

“S&P will closely monitor the bank’s investigation of its risk management practices so as to better understand the nature of the risk management breakdown and the extent to which this incident is indicative of the strength of the bank’s overall risk management capability,” said S&P credit analyst Craig Bennett.

S&P said the disruption to risk management processes, at a time when the bank’s trading risk management is being centralised to Melbourne from offshore, could have contributed to the unauthorised actions not being detected earlier.

“Although the size of the loss is manageable given the bank’s earnings generation and capital adequacy, S&P is concerned about the breakdown of formal risk management controls,” said Bennett.