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Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets

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  • Schenk, Catherine

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.

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  • Schenk, Catherine, 2017. "Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets," Business History Review, Cambridge University Press, vol. 91(1), pages 105-128, April.
    • Handle: RePEc:cup:buhirw:v:91:y:2017:i:01:p:105-128_00
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    Cited by:

    1. Hernandez, Carlos Eduardo & Tovar, Jorge & Caballero/Argáez, Carlos, 2022. "Tunneling when Regulation is Lax: The Colombian Banking Crisis of the 1980s," MPRA Paper 115662, University Library of Munich, Germany.
    2. Thibaud Giddey, 2020. "The Institutionalization of the Fight against White-Collar Crime in Switzerland, 1970-1990," Post-Print hal-03121218, HAL.

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