Sir: The revelation that a trader at the Daiwa Bank has carried out more than 30,000 unauthorised deals, losing more than pounds 700m over an 11-year period, highlights the gross inadequacies of the global financial trading system's ability to detect rogue trading ("Rogue trader's deals cost Japanese bank pounds 700m", 27 September).
Following hard on the heels of the Barings Bank collapse, it also emphasises the point that banks' internal accounting systems are incapable of realising the losses that can be incurred. Either the losses are so great that they destroy the bank (as in the case of Barings), or the rogue trader owns up to his activities (as in the case of Daiwa). This calls into question the issue of self-regulation.
The European Parliament has called upon the European Commission to take the lead on the issue of self-regulation. The Parliament has proposed that the Commission be given a broad mandate to look at the recommendations of professional organisations that have come up with self-regulatory texts, and to bring forward a report that will form the basis of European-wide supervisory guidelines.
The guidelines would provide rules for the purchase and sale of financial products, but would also include accountancy rules, which, for example, would compel institutions to include off-balance sheet items. The aim would be initially to harmonise regulation across Europe, and, eventually, to harmonise with North America and Japan to provide a stable global framework for the trading of financial products.
MEP for Lancashire Central
The writer is Labour spokesperson on economic and monetary affairs.Reuse content