In a sign that French banks are becoming extraordinarily risk averse, BNP Paribas is said to have let go of a senior trader after a loss that would barely merit a mention at rival banks.
The Financial Times says that Lionel Crassier, the former head of U.S. equities for BNP Paribas, has left the French bank after his department lost between $10m-$25m last year.
Crassier, who had worked for BNP Paribas for 19 years, latterly in New York, was reportedly summoned back to Paris after the loss and now lives in Switzerland. We were unable to contact Crassier and BNP said that it declined to comment on individuals. However, the French bank said it had transferred a member of staff from New York to Paris in March 2012 after he demonstrated “poor trading judgement.” It is understood that risk limits weren’t exceeded.
However, the scale of Crassier’s loss pales into insignificance alongside recent scandals such as the loss at J.P. Morgan’s chief investment office (CIO), which totalled more than $6bn, or the £1.4bn loss made by Kweku Adoboli at UBS. In a recent regulatory filing, Goldman Sachs said it lost 0-$25m on two days in the first quarter of 2013. In the same quarter, Morgan Stanley lost $0-25m on six days and between $25m and $75m on another two.
Lex Van Dam, former head of the equities proprietary trading desk at Goldman Sachs, said BNP’s seeming decision to drop Crassier for a comparatively inconsequential loss reflects the extreme risk aversion afflicting French banks:”This just shows that their risk tolerance has diminished enormously – to a level at which they can’t take any risk at all.”
Charles Ferguson, founder of Ferguson Solicitors, which specializes in representing traders in cases against banks, said it’s difficult for banks to let go of traders just because they’ve lost money. “Losing money is all part of the risk of trading,” said Ferguson. “It would be very difficult for a bank to prove that a trader has lost money because of negligence,” he added.
When banks do let go of traders on the grounds of losses and poor trading judgement, Ferguson said it’s common for the exiting traders to be offered a lucrative payoff. “In the UK, it’s normal to offer redundant traders £75k,” he said. £75k is the maximum amount a trader can win in an unemployment tribunal for unfair dismissal, so the incentive to sue the bank is removed.