Computer error forces NAB billion dollar write-off

Computer error forces NAB billion dollar write-off

National Australia Bank has appointed a former head of Hogan Systems as the new president and chief operating officer of HomeSide Lending. The bank last week sacked the top staff at its Florida-based mortgage unit after writing off A$3.05 billion as the result of a computer error that went undetected for two years.

The Australian bank bought HomeSide Lending in 1998 for about US$1.2bn, praising its proprietary technology and indicating that it would be used throughout its global network. The write-down resulted from the fact that HomeSide had been feeding the wrong interest rates into a critical valuation model since 1999.

The bank discovered the fault after engaging Cohane Rafferty Securities to complete a detailed review of the estimated market sale value of the HomeSide business. The incorrect interest rate assumption was uncovered during the investigation.

HomeSide chief executive officer, Hugh Harris, president and chief operating officer, Kevin Race, and chief financial officer, Blake Wilson, left with immediate effect. HomeSide chairman, Joseph Whiteside, took on the role of CEO, while Gordon Lefevre, formerly general manager finance and strategy for the National in Europe, was named as executive vice president and CFO. Lefevre had been working with the National team managing the HomeSide situation in Jacksonville since early July.

On Friday, the National announced that Gary Fiedler has joined HomeSide as president and chief operating officer. A former chairman and chief executive at Hogan Systems, Fielder also served in the same role at Pittsburgh-based Equimark. Most recently, he served in various executive roles completing business turnaround assignments at several private companies.

Frank Cicutto, NAB chief executive and managing director, says the investigation will continue into the issues that led to the HomeSide writedown.

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