The bank also suspended a further four employees over the scandal and announced that Martin Owen, chief executive of NatWest Markets, has agreed to forgo pounds 200,000 of his pounds 500,000 bonus last year as "an act of leadership''.
Meanwhile, the Serious Fraud Office was standing by to go in, even though the investigation into mis-pricing in the bank's interest rate options business has not uncovered any evidence yet that individuals were motivated by personal gain.
A spokeswoman for the SFO said that NatWest and its advisers have been in touch and it was monitoring the situation but had not yet begun an investigation.
The Bank of England and the City regulator, the Securities and Futures Authority, is also being kept informed about the episode, which is a severe embarrassment for the group.
Derek Wanless, the chief executive of NatWest, admitted yesterday that the episode was a "significant setback" for the bank and that it would take several months to unravel fully.
The episode also evokes uncomfortable memories of the Blue Arrow affair, which led to the demise of County NatWest, the bank's previous attempt to become a serious player in international capital markets.
But Martin Owen, chief executive of NatWest Markets, said it would not blow it off course in its determination to become a global investment bank.
Investigators from the lawyers Linklaters & Paines and the accountants Coopers & Lybrand, are confident that the problems are restricted to the London arm of NatWest Markets' interest rate options business.
But they and senior NatWest executives are perplexed that the mis-pricing could have remained undetected for so long and by the precise motivation that lay behind the deception.
"There is no evidence of personal gain having been made except in so far as people wanted to keep their jobs by disguising losses," one source said.
Mr Wanless said he was satisfied that the mis-pricing was not evidence of a wider systemic problem throughout NatWest markets. However, he said that there were urgent lessons to learn. The losses only came to light late last month and were initially expected to cost NatWest pounds 50m. It now appears that the size of the hole is pounds 90m, although pounds 13m of this is covered by an existing provision and the withholding of the bonus payments.
Kyriacos Papouis, the options trader at the centre of the affair, left the bank last year and has since lost his job at the US bank Bear Sterns. NatWest is attempting to interview him as part of the investigation and has made several approaches through his lawyers, Kingsley Napier.
His immediate boss, Neil Dodgson was already on suspension, pending the outcome of the internal inquiry. The four employees suspended yesterday are Mr Dodgson's superior, head of swaps options trading Ian Gaskell, a graduate trainee who joined the bank in 1983 and progressed to its swaps department in 1991; Jean Francois Nguyen, managing director of debt derivatives, who was brought in from Credit Suisse in 199; Christophe Lanson, who also came from Credit Suisse and is global head of rate risk management; and Phil Wise, now NatWest Markets' chief administrative officer but senior managing director of the capital markets division for most of the time that the mis-pricing was going on.
NatWest executives stressed yesterday that the suspensions should not be taken to indicate guilt or responsibility but were designed to allow the individuals to co-operate fully with the continuing inquiry.
As well as establishing that the mis-pricing was not part of wider failures of control within the bank, no flaws had been identified in the models used by NatWest to price the options in which it trades.
NatWest said that the second stage of its review would concentrate on the management issues associated with its failure to detect the losses and the mis-pricing earlier.
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