LONDON/NEW YORK, Nov. 22 (Thomson Reuters Accelus) – When the young UBS trader Kweku Adoboli turned himself in after allegedly having lost $2.3 billion on the Swiss bank’s delta one desk, many asked how such a huge loss could have happened without anyone knowing. The short answer was, in part, that Adoboli’s back-office experience gave him inside knowledge which permitted him to game UBS’ control systems and hide the fraud. The same excuse was trotted out to explain Jérôme Kerviel’s $6.8 billion loss at Société Générale in 2008, but it must surely take more than a stint in the bank office to fool banks’ risk controls systems.
Giorgio Questa, visiting professor in the faculty of finance at Cass Business School in London, said: “Banks have not understood that they will have accidents if they don’t come to terms with risk controls. It’s a question of incompetence. It’s completely clear [in the UBS case] that people weren’t doing their jobs.” (more…)