BRITAIN'S National Westminster Bank yesterday suspended a senior trader after it discovered a £50 million sterling hole in the options trading book at NatWest Markets, its investment banking arm.

NatWest said it bad discovered "mispricing errors" in its interest rate options book following the departure of a junior trader and would make a provision in its first half results.

The unnamed trader has been reported to the Securities and Futures Authority (SFA), the financial markets regulator.

The bank has also suspended Mr Neil Dodgson, who joined NatWest in 1991 as manager of European currency trading, for failing to supervise the trader.

The developments are the latest in a series of high profile cases of lax supervision and inadequate internal controls.

At Barings, Nick Leeson ran up £830 million sterling of trading losses in Singapore which eventually sank the parent bank.

Although the case has been reported to the SFA, no indication has been given that any criminality might be involved.

NatWest officials insisted that all losses were incurred on the bank's proprietary trading book and said no clients had been affected.

The trader, who resigned from NatWest before collecting his 1996 bonus, was not one of its top traders.

The errors were discovered after this departure. The gap discovered on his options pricing is thought to have been roughly 10 times the size of the profits he reported last year.

One possible cause of NatWest's difficulties may have been the mispricing of sterling and Swiss franc interest rate caps.

These derivative contracts are used to take advantage of low short-term interest rates, while maintaining protection against a sharp rise.