UBS Trader, Kweku Adoboli, Loses $2 Billion
UBS trader in London, Kweku Adoboli, has been charged with fraud after allegedly losing $2 billion.
The astronomical sum is thought to have been lost over the past year in large numbers of small trades. The case brings back memories of Jerome Kerviel who lost 4.9 billion euros, Yasuo Hamanaka who lost $2.6 billion and Nick Leeson who lost $1.4 billion.
How or why bosses were not aware of the losses has yet to be investigated but it is thought that Kweku Adoboli had previously worked in UBS’s back office before becoming a trader.
This knowledge and insight into the inner workings of their systems could have enabled him to cover the trail. Jerome Kerviel managed to hide his losses because of his knowledge of both front and back offices.
It seems that UBS only knew of the problem once Kweku Adoboli had confessed to colleagues, not through any internal detection systems.
The financial watchdog and police are investigating the case and Kweku Adoboli is expected to appear before a hearing on 22nd September.
In 2008 UBS lost around $50 billion and had to be bailed out by Swiss taxpayers. The $2 billion loss will not mean further bailouts as the bank has enough resource to cover the losses, it made $6.4 billion in the last 12 months, but it is likely to face a downgrade in it’s credit rating.
UBS has recently made 3,500 people redundant and in all likely hood the savings from that exercise will be wiped out by the $2 billion loss. Now, further job losses are likely, probably starting with those supposed to be monitoring the traders.
The revelations will also lead to even louder calls for investment arms of banks to be split off from their retail operations in order to safeguard normal business operations for millions of customers.
The move is being fought, most recently in the UK, by the banks who are pushing for any changes to be implemented in decades rather than months or years. No doubt they hope subsequent changes to Governments and the economic environment will erode the proposed changes over time.
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