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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Risk Management in Banks, Value at Risk (VAR) Model.

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