The trial of two former foreign exchange options traders of National
Australia Bank over losses exposed in January 2004 is throwing up some
additional insights into practices at the bank earlier this decade.

AAP’s
report on yesterday’s hearing says that the former head of the currency options
desk, Luke Duffy, told the court that “there was a hidden pool of money the
National Australia Bank’s foreign exchange options desk could call on to smooth
the profit and loss accounts.”

AAP reported that Duffy said this was referred to as “the reservoir”. And
that the flow of funds could be turned on or off, depending on the desired
result on the profit and loss line.

The two former traders on trial are Vince Ficarra and David Bullen, who both
used to report to Duffy.

AAP reported that Duffy said he sometimes spoke to his peers in the interest
rate division of the bank about the reservoir.

“It was talked about in hushed tones, obviously because people don’t like to
make a big deal of the fact that P/L is being manipulated like this,” Duffy
said.