Pwc Case Study
Investigation into foreign exchange losses at the National Australia Bank
12 March 2004
Mr David Krasnostein Chief Legal Counsel National Australia Bank Limited Level 24 500 Bourke Street Melbourne Vic 3000 12 March 2004 Dear Mr Krasnostein Report on investigation into foreign currency losses Please find attached PwC’s report resulting from our investigation into foreign exchange losses at the National Australia Bank. Your faithfully PricewaterhouseCoopers
Craig D Hamer Partner
P G Rivett Partner
About this report and our investigation
This report presents the findings of the PricewaterhouseCoopers investigation of the $360 million foreign exchange losses (the losses) incurred by National Australia Bank (the National), which were announced to the market in January 2004.
The scope of our investigation
PricewaterhouseCoopers (PwC) was appointed by the National’s Chief Executive Officer which was ratified by the Principal Board. PwC provided status updates to the National’s Principal Board Risk Committee. The terms of reference were to: investigate the sequence of events and trading activities that led to the losses prepare an analysis of the losses and how they occurred, with an initial focus on foreign currency option transactions entered into on or after 1 October 2003 identify key policies, procedures, systems and control failures within the foreign currency options trading business responsible for the losses investigate whether any customer of the National or other third party incurred a direct or indirect loss as a result of the events. During our investigation we provided periodic updates to the National’s Chief General Counsel, the Chief Executive Officer, the Chairman of the Board and the Principal Board Risk Committee. We also liaised closely with APRA and from time to time with Australian Federal Police and ASIC. We were not asked to establish the amount of the losses. This task was conducted by management and audited by KPMG. We were
12 March 2004
Mr David Krasnostein Chief Legal Counsel National Australia Bank Limited Level 24 500 Bourke Street Melbourne Vic 3000 12 March 2004 Dear Mr Krasnostein Report on investigation into foreign currency losses Please find attached PwC’s report resulting from our investigation into foreign exchange losses at the National Australia Bank. Your faithfully PricewaterhouseCoopers
Craig D Hamer Partner
P G Rivett Partner
About this report and our investigation
This report presents the findings of the PricewaterhouseCoopers investigation of the $360 million foreign exchange losses (the losses) incurred by National Australia Bank (the National), which were announced to the market in January 2004.
The scope of our investigation
PricewaterhouseCoopers (PwC) was appointed by the National’s Chief Executive Officer which was ratified by the Principal Board. PwC provided status updates to the National’s Principal Board Risk Committee. The terms of reference were to: investigate the sequence of events and trading activities that led to the losses prepare an analysis of the losses and how they occurred, with an initial focus on foreign currency option transactions entered into on or after 1 October 2003 identify key policies, procedures, systems and control failures within the foreign currency options trading business responsible for the losses investigate whether any customer of the National or other third party incurred a direct or indirect loss as a result of the events. During our investigation we provided periodic updates to the National’s Chief General Counsel, the Chief Executive Officer, the Chairman of the Board and the Principal Board Risk Committee. We also liaised closely with APRA and from time to time with Australian Federal Police and ASIC. We were not asked to establish the amount of the losses. This task was conducted by management and audited by KPMG. We were