Traders at top investment bank 'covered up losses to protect their bonuses in £1.4 bn scam'


Last updated at 00:24 21 March 2008

Canary Warf based Credit Suisse discovered a £1.4 billion scam by traders trying to protect their bonuses

A top investment bank said yesterday that some of its traders had tried to protect their massive bonuses with a £1.4billion scam.

Credit Suisse was forced to admit it will pay the price for the traders' ruthless scheming by sinking into the red.

All the traders involved - some of them based in London - have been fired or suspended.

Shares in the bank, which is based in Zurich, tumbled 7.5 per cent yesterday.

Credit Suisse admitted it had discovered intentional "pricing errors" by a small number of traders involved in complex investments linked to the mortgage market.

The latest revelations sent more shockwaves around stock markets still reeling from the collapse of Wall Street banking giant Bear Stearns over the weekend.

In London the FTSE 100 Index fell 50.4 points to 5495.2 as investors digested the latest round of grim news. The seemingly relentless series of financial scandals are badly damaging the reputation of the banking sector.

Worryingly, many banks appear to have only a slender grasp of the activities of their trading floors, sparking fears that there are more financial timebombs waiting to go off.

The news is also a fresh blow to the reputation Switzerland's conservative and secretive banking sector, which has long been seen as one of the safest places for the wealthy to stash their money.

Credit Suisse said yesterday it will slash £1.4billion from the valuation of its assets following its investigation.

It has refused to name the individuals responsible. But the team involved was reportedly led until recently by Kareem Serageldin, a managing director who left the bank last month.

Brady Dougan, chief executive of Credit Suisse, said the bank was taking a number of steps to bring its traders under control.

And he insisted the firm's finances were robust.

Mr Dougan said: "This incident is unacceptable and it does not represent the high standard of Credit Suisse.

"Our overall control framework remains sound. We are taking strong action to move forward.

"Credit Suisse continues to be well positioned through the challenging and volatile markets that have existed since the middle of 2007."

But in a further sign of the crisis afflicting the industry, it emerged that Citigroup is planning a new round of job cuts.

Around 2,000 investment banking and trading positions will be slashed at the world's largest financial firm, most of them in New York and London.

This comes on top of 4,200 job cuts announced in January.

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