Traders exploited loopholes in NAB's procedures

National Australia Bank "failed at every level" to implement proper controls on risk management, the regulator said.

The inquiry by Australian Prudential Regulation Authority's report is the second to condemn lax controls at NAB.

NAB has tried to root out the problem by sacking eight managers and traders.

APRA said the bank's board had paid lip service to the importance of internal controls but failed to act on its pledges.

'Profit is king'

"Despite often asserting that risk issues were of such importance that they should be dealt with by the full board, the board paid insufficient attention to risk issues," the APRA found.

Instead, the bank suffered from a profits-first culture which led line managers to neglect internal controls and known risk management concerns.

"'Profit is king' was an expression frequently heard in our interviews with corporate and institutional banking staff," the report said.

The bank itself commissioned a previous report by PricewaterhouseCoopers which found that traders exploited loopholes in the bank's systems to conceal heavy losses, which were only uncovered after junior employees raised concerns.

It argued that NAB had insufficient systems in place to supervise traders and deal with mistakes when they arose.

The bank's chairman and chief executive stood down after the rogue trades came to light.