Bonuses lost in NatWest scandal

The Serious Fraud Office was last night standing by to go into NatWest after bonuses worth pounds 1m a piece were docked from a handful of executives over a scandal in its investment banking arm.

The Bank of England and City regulators were also being kept informed as it emerged that the affair has left a pounds 90m black hole in NatWest Markets. The losses centre round the mis-pricing of a complex financial instrument known as interest rate options.

Four senior employees of NatWest Markets were yesterday suspended from duty pending further inquiries by lawyers and forensic accountants brought in by the bank.

Meanwhile, pounds 8m in bonuses due to a small group of executives in its debt derivatives business, thought to number about eight, will not now be paid.

The chief executive of NatWest Markets, Martin Owen, has also agreed to forgo pounds 200,000 of his pounds 500,000 annual bonus for last year as "an act of leadership."

The trader responsible for the loss, Kyriacos Papouis, has already left NatWest and his immediate boss has also been suspended. A spokeswoman for the SFO said last night: "NatWest and its professional advisers have been in touch with us concerning their review of NatWest Markets interest rate options trading. We are monitoring the situation and are in touch with the regulators but we have not yet begun an investigation."

The internal investigation has not uncovered any evidence that the mispricing was carried out for personal gain. But investigators have established that the trades in question were transferred between different accounts, making them more difficult to detect.

NatWest said the practice had been going on since late 1994 but had only come to light this February.

Reports, page 20