Below are the recommendations with respect to improving the control environment at Allfirst and AIB. The controls in AIB should be benchmarked against these to ensure consistency First, business strategy in the trading areas should be reconsidered, specially proprietary trading. … Continued
FRM Exam
Early Warning Indicators: AIB Currency Trading Losses
There were many early warning indicators or missed opportunities for AIB or Allfirst to have detected Mr. Rusnak’s fraud. These missed opportunities are discussed below: 1. Failures of Rusnak’s superiors to adequately supervise his activity Mr. Rusnak’s supervisors— his departed … Continued
Control Deficiencies at Allfirst Treasury That Led to Fraud
There were many control deficiencies in Allfirst Treasury that made the fraud by Mr. Rusnak possible. The key control deficiencies are listed below: 1. The failure of the back office to attempt to confirm bogus options with Asian counterparties This … Continued
AIB: Discovery of Fraud, and Magnitude of Losses
Discovery of the Fraud Mr. Rusnak’s fraud scheme started unravelling in early December 2001. This happened when the back office supervisor came to know that the option trades were not being confirmed and the back office employee explained to him … Continued
AIB Currency Losses: John Rusnak’s Role and the Fraud
John Rusnak’s Role In July 1993, Allfirst hired Mr. Rusnak. The hiring process was led by the head of treasury funds management for Allfirst, Mr. Ray. Mr. Rusnak had extensive experience in currency trading. Mr. Rusnak promoted himself as a … Continued
AIB/Allfirst Structure, Treasury and Forex Trading
In this case study we will discuss the losses sustained by Allfirst Financial Inc. and Allfirst Bank in foreign exchange trading. The primary person responsible is john N. Rusnak. In this first part we look at the relationship between AIB/Allfirst, … Continued
How Icelandic Banks Funded their Risky Business Models
Even after the mini-crisis in 2006, the Icelandic banks were able to fund themselves. The banks had three primary funding sources: 1. Issuance of commercial paper and bonds 2. Foreign wholesale and retail deposits 3. Loans, including bilateral and syndicated … Continued
Icelandic Banks: Asset Composition and Quality of Banks’ Balance Sheets
In this article we will take a look the asset composition of the Icelandic banks and the concentration risk in the system. There are several factors that contribute to the deteriorating asset quality of the banks. This includes: Expansion of … Continued
How Icelandic Banks Underplayed their True Riskiness?
Before the financial crisis began, even though all the warning signals were there, the top three Icelandic banks were able to underplay their true riskiness. Moody’s had assigned high credit ratings to all these banks. Moody’s ratings consider both quantitative … Continued
Early Warning Indicators in Icelandic Financial Crisis
Like in every financial crisis, even the Icelandic Financial Crisis provided many early warning indicators and cues, which if acted upon at the right time could have avoided or atleast reduced the extent of the losses. Let’s look at the … Continued
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