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

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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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

James Taylor , Boardroom Scandal: The Criminalization of Company Fraud in Nineteenth-Century Britain (Oxford, 2013)

Ian Greener , “Nick Leeson and the Collapse of Barings Bank: Socio-Technical Networks and the ‘Rogue Trader,’ Organization 13, no. 3 (2006): 421–41

Mark N. Wexler , “Financial Edgework and the Persistence of Rogue Traders, Business and Society Review 115, no. 1 (2010): 125

Forrest Capie , The Bank of England: 1950s to 1979 (Cambridge, U.K., 2010)

Catherine R. Schenk , “Summer in the City: Banking Scandals of 1974 and the Development of International Banking Supervision, English Historical Review 129, no. 540 (2014): 1129–56

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Business History Review
  • ISSN: 0007-6805
  • EISSN: 2044-768X
  • URL: /core/journals/business-history-review
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