Rogue trading at Lloyds Bank International, 1974: operational risk in volatile markets

Schenk, C. (2017) Rogue trading at Lloyds Bank International, 1974: operational risk in volatile markets. Business History Review, 91(1), pp. 105-128. (doi:10.1017/S0007680517000381)

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Abstract

Rogue trading has been a persistent feature of international financial markets over the past thirty years, but there is remarkably little historical treatment of this phenomenon. To begin to fill this gap, evidence from company and official archives is used to expose the anatomy of a rogue trading scandal at Lloyds Bank International in 1974. The rush to internationalize, the conflict between rules and norms, and the failure of internal and external checks all contributed to the largest single loss of any British bank to that time. The analysis highlights the dangers of inconsistent norms and rules even when personal financial gain is not the main motive for fraud, and shows the important links between operational and market risk. This scandal had an important role in alerting the Bank of England and U.K. Treasury to gaps in prudential supervision at the end of the Bretton Woods pegged exchange-rate system.

Item Type:Articles
Additional Information:ESRC RES-062-23-2423
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Schenk, Professor Catherine
Authors: Schenk, C.
College/School:College of Social Sciences > School of Social and Political Sciences > Economic and Social History
Journal Name:Business History Review
Publisher:Cambridge University Press
ISSN:0007-6805
ISSN (Online):2044-768X
Published Online:12 April 2017
Copyright Holders:Copyright © 2017 The President and Fellows of Harvard College
First Published:First published in Business History Review 91(1): 105-128
Publisher Policy:Reproduced under a Creative Commons License

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Project CodeAward NoProject NamePrincipal InvestigatorFunder's NameFunder RefLead Dept
524121The development of international financial regulation and supervision 1961-1982Catherine SchenkEconomic & Social Research Council (ESRC)ES/H026029/1SPS - ECONOMIC & SOCIAL HISTORY