Whale Watching on the Trading Floor: Unravelling Collusive Rogue Trading in Banks

Hagen Rafeld (), Sebastian G. Fritz-Morgenthal () and Peter Posch
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Hagen Rafeld: TU Dortmund University
Sebastian G. Fritz-Morgenthal: Frankfurt Institute for Risk Management and Regulation (FIRM)

Journal of Business Ethics, 2020, vol. 165, issue 4, No 5, 633-657

Abstract: Abstract Recent history reveals a series of rogue traders, jeopardizing their employers’ assets and reputation. There have been instances of unauthorized acting in concert between traders, their supervisors and/or firms’ decision makers and executives, resulting in collusive rogue trading. We explore organizational misbehaviour theory and explain three major collusive rogue trading events at National Australia Bank, JPMorgan with its London Whale and the interest reference rate manipulation/LIBOR scandal through a descriptive model of organizational/structural, individual and group forces. Our model draws conclusions on how banks can set up behavioural risk management and internal control frameworks to mitigate potential collusive rogue trading.

Keywords: Behavioural risk; Collusion; Corporate culture; Misconduct; Organizational misbehaviour theory; Rogue trading (search for similar items in EconPapers)
JEL-codes: K42 M14 P37 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10551-018-4096-7

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