UBS rogue trade – Kengeter memo

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.

If you want to see a savage deconstruction of that argument (albeit aimed at Kengeter’s boss) , John Hempton at Bronte Capital is on sparkling form today.

Your statement that “you can’t do anything” is a statement that you are abdicating your duty. I hope that statement is misquoted because if I were on your board and you took that stance I would be seeking your resignation. To lose money to a determined rogue trader is an error – and all systems have holes. To deny you can do anything about it is to give up being a banker.

Well said.

And now to the memo, which does go on a bit.

(Emphasis throughout ours)

Dear colleagues,

I wanted to update you as soon as I could on the events of last week and assure you that we are already making progress on dealing with the consequences.

First, let me thank everyone across UBS for remaining fully engaged in serving clients, supporting colleagues and executing effectively, despite the emotion we have felt in recent days. We all share a sense of anger and frustration. This is understandable, but I am determined not to let this incident undermine our hard won achievements since the crisis. We now need to unite in our determination to move forward forcefully and decisively. I am proud of how constructive and focused everyone in the Investment Bank has been since Wednesday and I am confident that we will turn adversity into strength as we move forward.

You will have seen the press release sent out today which states the facts as they are currently known. Due to the swift and effective actions of the relevant teams we are no longer at financial risk from the wrongdoing, we know the extent of the financial damage and we are fully engaged in the process of resolving all outstanding issues in a careful and considered way. We are working closely with the police and our regulators to assist them in their investigations.

I want to assure you that we are doing everything in our power to address the frameworks, practices and procedures that should have worked better and strengthen their enforcement, where appropriate. It is very difficult to build and maintain a system which protects us effectively against every possible likelihood of attack, but we will not rest until we have controls that are as watertight as possible. Continued vigilance will be key to ensuring we avoid future failures. Do not hesitate to escalate if you have even the slightest concern at any time.

We are undertaking this work diligently and professionally, without conjecture or finger-pointing. We will deal appropriately with those individuals who were responsible for significant operational and management supervision lapses, and then we must move on.

Now is the time for everyone across the Investment Bank to demonstrate to clients, shareholders, regulators and other stakeholders that we are not going to let a single calculated act of deception deflect us from achieving our long-term strategic goals. UBS is financially strong and one of the best-capitalised banks in the world. The Investment Bank has outstanding people and a large number of profitable and successful businesses. Our fundamental strategy remains in place. Clients are inundating us with messages of support, and placing new business with us, showing how much they want us to succeed. Over the weekend our partners in other divisions have confirmed that they cannot achieve their ambitious goals without a healthy and vibrant investment bank alongside, co-operating at every level.

The key to repairing the financial damage to the firm, as well as to our shareholders, is to deliver excellent ongoing performance from each desk and each team, starting today. A very strong fourth quarter is the best way to demonstrate to all that we are bigger than the acts of one misguided individual. We must reach out to clients, be determined in asking for business, this year and into 2012. We must channel the emotion and disappointment felt by everyone across the firm into re-energised interaction with clients, counter-parties and each other.

Do not be distracted by the often ill-informed media commentary around this event. It will fade quickly as the facts become known. Focus on the job at hand, delivering for our clients thoughtfully and proactively. You can all make a difference by acting with resolve, creativity and energy, executing to the highest standards and working hard to restore our momentum.

I am fully committed to working closely with you, as are all senior managers. We will meet with any client you ask us to and we will be relentless in repairing the damage to our reputation. Together, let’s show the world that we are united as a firm, determined to overcome this setback and emerge even stronger.

Thank you for all your hard work, vigilance and continuing commitment to our future success.


Related link:
Kengeter seeks to reassure UBS staff – FT
UBS rogue trader (Grübel memo) – FT Alphaville
I spy $5.8bn of SPY settlement fails – FT Alphaville
UBS rogue trade – details of the fictitious trades – FT Alphaville

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