by Beth Connolly on June 1, 2012
It’s not surprising, but it is troubling: a source revealed to Bloomberg that Bruno Iksil, aka the London Whale, had a value-at-risk (VaR) equivalent to the size of the entire bank’s since at least 2010 or perhaps even earlier. Iksil’s VaR had veered close to $60 million, according to the anonymous source.
Read on for more about this fishy business, from Bloomberg:
Investigators are examining how long senior executives knew about Iksil’s swelling bets at the chief investment office before losses approached $2 billion. One focal point is why the formula used to calculate Iksil’s VaR was altered early this year, cutting the reported risk by half. The change followed an internal analysis in late 2011 and was approved by top risk executives, said a person close to the bank. About the same time, half a dozen managers typically involved in such decisions moved to new jobs.
“If it was something that had that large an impact, it would have to be agreed to at the very-most-senior level within risk management,” probably including the bank’s chief risk officer, said Steve Allen, a former head of risk methodology for JPMorgan who retired in 2004. “You’re not going to make a change of that magnitude on the basis of one risk manager.
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