LONDON (Reuters) - A former senior trader at Merrill Lynch in London has been banned for at least five years for deliberately overvaluing his trading positions to hide his losses, forcing the US bank to make a $456 million writedown.

The Financial Services Authority said Alexis Stenfors, who worked at Merrill Lynch International Bank (MLIB) - now part of Bank of America Corp. - had shown a lack of integrity and was not fit or proper to perform any regulated activity.

Stenfors, who worked on the short-term interest rate trading desk of the bank's London branch, "mismarked" his positions by around $100 million in the month between mid-January 2009 and mid-February 2009, the FSA said.

Stenfors was first alerted to his managers asking questions about the value of his trading positions while he was on holiday in February 2009. He contacted his managers, admitted he had been mismarking his positions and was suspended, the FSA said.

A spokesman for the bank said MLIB contacted the Irish regulator, which was the "appropriate regulator". After an internal investigation, Stenfors was dismissed last June and MLIB was fined 2.75 million euros ($3.8 million) in October for failing to supervise activities that included Stenfors's.

"This is between the FSA and the individual," the spokesman said: "We're not party to it in any way."

The FSA assesses which employees meet the requirements for its so-called "fit and proper test for approved persons."

"Market confidence is likely to be damaged by sudden and unexpected writedowns and revaluations of securities," said Margaret Cole, the FSA's head of enforcement and financial crime.

"Financial instruments must be priced correctly by traders, particularly in more challenging conditions and when it comes to illiquid products. (Stenfors)... betrayed the trust placed in him by the firm..."

The FSA dismissed Stenfors's claim that he was mentally exhausted because of his enormous workload and a prolonged lack of any holiday, because he had not alerted his managers to any difficulties he was having.

He also argued that exceptional market conditions made it difficult for him to obtain marks for his positions.

But the FSA said Stenfors' cooperation, his remorse and his agreement to settle at an early stage meant it might revoke his prohibition order after five years.

The Irish Financial Regulator said in October that MLIB, which also suffered a second loss of $5.3 million between May and August 2009 when a second trader inappropriately valued positions, had taken complete remedial action to rectify the breaches of regulatory requirements.