Allied Irish Banks - The Currency Derivatives Fiasco


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : FINC032 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Risk Management
Case Length : 11 Pages
Period : 1997 - 2004
Pub. Date : 2004
Teaching Note : Not Available
Organization : Allied Irish Banks
Industry : Banking
Countries : Ireland / US

Abstract:

The case discusses how John Rusnak (Rusnak), a trader at Allfirst Financial Inc. (Allfirst), the US subsidiary of Ireland's leading bank - Allied Irish Banks (AIB), lost $750 mn in foreign exchange trading operations.

It describes in detail how the fraudulent trading activities and manipulation of records by Rusnak resulted in major losses.

The case brings out the complete sequence of events and also highlights the reasons for the loss, including inadequate supervision, control system deficiency and failure to review policy and procedures.

Issues:

» Risk Management in Banks, Value at Risk (VAR) Model

Contents:

  Page No.
Introduction 1
Background Note 1
Events Leading to the Loss 2
Why Did it Happen? 6
The End Result 7
Exhibits 8

Keywords:

Allied Irish Banks, Currency Derivatives, Corporate Disasters, Value at Risk (VAR) Model, Management Controls, Risk Management in Banks, Asset and Liability Management, Ludwig Report, Arbitrage, Currency Options, Currency Forwards

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