Oct 2009 Financial News

First Global fills five posts after trading breach

Oct 07, 2009

First Global Bank (FGB) moved quickly to fill five slots made vacant after the bank took a US$20-million ($1.78 billion) hit from irregular bond trading activities, but GraceKennedy executive chairman, Douglas Orane has set no timeline to replace former FGB head, Wayne Wray.

After the head of treasury was dismissed for his part in the trading irregularities, four persons at various levels of the management structure left the bankm, the last being Wray.

Courtney Campbell, who is CEO of the GK Investments, under which FGB and its sister company First Global Financial Services fall, assumed the position since Wray resigned last Thursday and will hold the position until a replacement is found.

The bank brought in seasoned retired banker Kerry O'Sullivan to head up back office operations while the firm promoted Dino Hinds to act as the head of treasury - the position vacated after a senior employee was dismissed for allegedly being found to be involved in the irregularities that led to the loss towards the end of August.

Two other positions in settlement were also vacated but have apparently since been filled by internal staff.

FGB is said to be sound now, having benefitted from a $900-million capital injection from its parent GraceKennedy, which allows it to comfortably exceed the capital base to total assets ratio required by regulations.

Orane told the Business Observer that the internal audit team did not detect irregularities in an audit conducted earlier this year because of surreptitious trading.

It was only in August that further investigations confirmed bond trading losses of approximately US$19.93 million resulting from breaches of procedure and the irregular conduct and reporting of transactions. It was done using US treasuries with overseas counterparties.

"The irregularities involved hiding transactions, so they were not known of and not seen because of the fact that they were hidden. The organisation discovered these irregularities in August and acted on them immediately," stated Orane. "The report is in the hands of the police. It is now for them to determine what direction to take the matter."

The trading losses will be reflected in GraceKennedy's third quarter consolidated financial statements but have already wiped out the group's first half-year net profit of $1.73 billion and is almost three times the $647 million pre-tax profit earned by the group's banking and investment division.

O'Sullivan, who recently retired from National Commercial Bank (NCB), joins FGB as senior vice-president of operations. Her mandate, along with that of acting president Courtney Campbell, will entail stemming future irregularities at the bank.

"She is responsible for all the back office operations, reconciliation, keeping the records at the bank," said Orane yesterday in an interview from his Harbour Street head office.

O'Sullivan is a career banker with strong background in banking administration. She joined NCB in 1969 and served in various positions up to 2003, when she was promoted to the post of senior assistant general manager, centralised operations.

GraceKennedy is currently advertising the positions of president and treasury manager but consideration is already being given to personnel internally, even though Orane is not set on the idea that the new head of the bank will come from within.

"No decision has been made as to who will be the president of First Global Bank on a permanent basis," said Orane. "The process is just beginning to determine who will be the best candidate based on the succession planning process that GraceKennedy has for every single management position including that at First Global bank."


Source:
Jamaica Observer
Wednesday, October 07, 2009

http://www.jamaicaobserver.com/magazines/Business/html/20091006T200000-0500_161290_OBS_FIRST_GLOBAL_FILLS_FIVE_POSTS_AFTER_TRADING_BREACH.asp