Definitely a turn-around for the books in the Kweku Adoboli case.
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The following is a transcript of Kweku Adoboli’s last recorded phone call at UBS with members of the bank’s back office accounting team.
Not only does it reveal that Adoboli may have used Blackrock and SocGen as faux counterparties for hiding losses but that the “back-office genius” seemingly had difficulty grasping the difference between an asset and a liability (at least in public). Scrutiny of the bank’s unsettled trades, meanwhile, seems to be what prompted his eventual confession. Read more
Former SocGen trader, Jerome Kerviel, has been handed a five year prison sentence (with two suspended) at the end of the final appeal for his conviction for covering up billions of euros in losses at the bank.
There’s also the small matter having to repay the €4.9bn it took to unwind his positions. Read more
No clouds in my storms
Let it rain, I hydroplane into fame
Comin’ down like the Dow Jones
When the clouds come, we gone
We fly higher than weather
Kweku Adoboli, the former UBS trader accused of causing the largest unauthorised trading loss in British history, has denied charges of fraud and false accounting, reports the FT. Mr Adoboli, 31, entered pleas of not guilty as he appeared for a third time at Southwark Crown Court in London after being accused of unauthorised trading following revelations of a $2.25bn loss at the Swiss bank last year. Mr Adoboli worked for UBS’s global synthetic equities division, buying and selling exchange traded funds. The not guilty plea will probably slow an investigation by the UK’s Financial Services Authority of alleged regulatory and compliance failings at UBS. The watchdog and Finma, the Swiss regulator, have jointly commissioned PwC to examine the losses and will probably receive a report next month. But any move to bring an enforcement action will be complicated by the need to protect Mr Adoboli’s right to a fair trial.
British and Swiss regulators are likely to begin enforcement proceedings against UBS for shortcomings that allowed a London trader to make unauthorised trades last year, the WSJ says, citing people familiar with the situation. In September, UBS disclosed that an employee on its London-based equity desk allegedly made unauthorised trades, and police subsequently arrested Kweku Adoboli in connection with the case. The scandal led to the resignation of chief executive Oswald Grübel shortly thereafter. A joint probe by the FSA and Switzerland’s Finma, that until now had been seen largely as a fact-finding mission to determine what went wrong, is now expected to result in regulators penalising the bank for gaps in oversight that allegedly allowed Mr Adoboli to make the trades without authorisation. Unlike the FSA, Finma does not have power to fine banks, but can force a bank to make changes such as to personnel.
One thing we’ve learnt about Delta One is that it’s head-scratchingly, mind-bogglingly tricky to explain.
And exactly how the division makes money, outside of the fees it charges investors is even harder to work out. Read more
UBS expects to report a modest net profit for the Group and positive net new money in its wealth management businesses for the third quarter of 2011
What a relief. In spite of that “unauthorised” trading loss UBS is still going to make a profit. However, dig a little deeper into Tuesday’s update and it becomes apparent that all is not what it seems. Read more
I have handed in my resignation as CEO to the Board of Directors today. That it was possible for one of our traders in London to inflict a multi-billion loss on our bank through unauthorized trading shocked me, as it did everyone else, deeply. This incident has worldwide repercussions, including political ones. I did not take the step of resigning lightly. I am convinced that it is in the best interests of UBS to approach the future with a new leader at the top. Read more
Carsten Kengeter, head of UBS’s investment bank, plans to accelerate changes to the business’s size and structure following the Swiss group’s discovery of $2.3bn in unauthorised trading losses. Mr Kengeter, who senior executives say retains the board’s backing in spite of the losses, believes his division needs to move more quickly to reduce risk and to exit non-core businesses, the FT reports, citing people familiar with his thinking. The prime area for cuts is in UBS’s fixed-income business, which lacks the scale and the risk appetite to compete with global rivals. However, the trading scandal may force the bank to take an axe to higher-risk activities in its equities business, historically one of the bank’s strengths. Meanwhile the Swiss parliament piled pressure on the bank on Monday in the wake of the loss, reports Reuters, with a proposal to reopen debate debate on tough new capital measures for UBS and Credit Suisse so that a ban on investment banking could be added only narrowly failing to gain enough support. A plan to raise capital requirements passed the lower house.
In which the CEO of UBS’s embattled investment banking arm urges his staff to move “forward forcefully and decisively” and vows to “deal appropriately with those individuals who were responsible for significant operational and management supervision lapses.”
Sadly he goes on to take a pot shot at the media — ill informed commentary around the event apparently — and then repeats the line that rogue traders are are very difficult to stop. Read more
The FT reports Kweku Adoboli, the trader charged with blowing a $2.3bn hole in the books of UBS, allegedly disguised huge lossmaking positions with fictitious counter-trades, the bank has stated, the same tactic used by Jérôme Kerviel who caused €4.9bn of losses at Société Générale in 2008. As one senior UBS executive likened the trading scandal to “a terrorist attack” that was impossible to prevent, the group revised upwards its estimate of the loss caused by Mr Adoboli from an earlier estimate of $2bn and attempted to shore up the position of chief executive Oswald Grübel. In a statement on Sunday aimed at reassuring staff and investors, which can be read on FT Alphaville, UBS said the extent of the risk exposure escaped detection because fake hedging positions had been placed into the bank’s systems allegedly by Mr Adoboli. The Swiss bank is trying to get on top of a scandal that has spurred calls for Mr Grübel to step down and for it to scale back dramatically its investment banking activities. Separately, the FT reports Mr Grubel struck struck an uncharacteristically humble note on Sunday night, telling Swiss German television he bore ultimate responsibility for the trading scandal at UBS.
Sunday’s statement from UBS, in which the bank reveals the loss from ‘unauthorized’ trading in various index futures (over the last three months) was in fact $2.3bn.
On September 15, 2011 UBS announced that it had discovered unauthorized trading in its Investment Bank. This trading was conducted by a trader in its Global Synthetic Equity business in London. The trader in question has been charged by UK authorities with fraud by abuse of position. Read more
A 31-year-old trader, Kweku Adoboli, has been arrested in London on suspicion of blowing a $2bn hole in its books, the FT reports. UBS warned that the discovery could push the group into a loss for the third quarter. People close to the matter told the FT UBS did not discover the suspected rogue trading activity until midday on Wednesday, about 12 hours before they asked police for Mr Adoboli to be arrested. Separately, the FT explains Delta One and the ETF connection. NYT’s DealBook reports that Moody’s may downgrade UBS over the trading loss.