The star of a bank's back office

In almost all operations and back office teams in financial institutions, these departments are considered primarily as cost centers and play a supporting role to the front office traders, the rock stars or money makers for the banks.

Having spent six years in the company supporting clients in the back office domain of processing and financial control, I have seen my share of gross wage and hours worked disparity between the rock stars and the backroom operators. This was the rule of the jungle - the traders rake in the big bucks with an army of support staff at their disposal, to ensure that the trades have been confirmed, the payments settled, their P&L verified.

In a dramatic turn of events, Jerome Kerviel decided that he had enough of the jungle rules and wanted to prove that he was also able to rack in huge profits despite his humble beginnings in the back office. He busted a 3.6bn pd hole in SocGen's balance sheet with his 50bn pd positions on European equity futures.

How he managed to deceive his managers and the risk departments will be thoroughly analysed, I can bet that his fraud will be pored over with just the same intensity as his banks' famous quants poring over their 5-factor pricing models.

In many ways, the back office is the last bastion of control for any banks. Any mismatched confirmations, unfixed trades or unsettled payments should have raised alarm bells. But as the rule of the jungle goes, the back office operators are too insignificant in the whole food chain - traders usually have the right of way and can easily brush off any mismatches with scant excuses or simply just by throwing a fit. It is perhaps the time now that the balance of power starts shifting more towards the back office.