National Australia Bank case study

The discovery of foreign exchange losses at NAB in early 2004 and the way in which the Bank responded provides a good case study of an organisation which had a breakdown in its compliance culture and what it has done to fix it.

This note provides a link to key documents in chronological order.

2 February 2004: National Australia Bank Chief Executive Frank Cicutto resigned following disclosure that the Bank could lose up to $360 million in foreign exchange trading losses. The Board immediately appoints a new CEO.

The forex scandal followed a number of losses at NAB which raised questions about the effectiveness of its risk management systems, controls and internal reporting.

16 February 2004: National Australia Bank Chair Charles Allen resigned and Graham Kraehe apponted as Chairman.

Other than stating "I believe that this action is in the best interests of the Bank and its shareholders", no explanation was given.

24 March: APRA releases its report

26 March: 7 non-executive directors request general meeting.

29 March: Mrs Walter submits request for general meetings

1 April: Blake Dawson Waldron (BDW) advised on probity and governance matters relating to the PricewaterhouseCoopers (PwC) report into foreign exchange options trading losses.

2 April: The Board of Directors of the National Australia Bank announced that it has approved the formation of a committee to manage the proposed Extraordinary General Meeting and consider resolutions submitted by Mrs Catherine Walter.

6 April: Board renewal program announced

7 April: The Board announces it intends to appoint a new external auditor.

19 April: NAB announced that it will hold General Meetings of shareholders on Friday 21 May 2004.

There will be three separate meetings, as required to consider three different sets of resolutions submitted by Directors in three separate Notices served on the Company.

The first meeting will consider a resolution submitted by seven non-executive Directors on 26 March 2004 to remove one Director, Mrs Catherine Walter, as a Director of the National Australia Bank.

The second and third meetings will consider two sets of resolutions submitted by Mrs Walter on 28 March 2004 to remove all the non-executive Directors of National Australia Bank over time, to censure the Board, to request a search for a new Chairman and to express views as to re-election of non-executive directors and retirement benefits.

28 April: NAB announces it has received a request from one of its Directors, Mrs Catherine Walter, to release a copy of working papers by PricewaterhouseCoopers (PwC) that were part of its inquiry into irregular foreign currency options trading earlier this year.

5 May: resignation of 2 NAB directors announced

6 May: Mrs Walter announces resignation

7 May: NAB announces cancellation of SGM's.

21 June: Michael Chaney appointed to Board and will be Chairman from September 2005.

2005: 17 June Jail Term for NAB Trader