Since 2008, investment banks have taken quite a beating. From huge subprime losses to dwindling trust of consumers. And now, they can add another notch to their belt. Today, Swiss bank UBS announced that a rogue trader in its investment bank had lost $2 billion on unauthorized trades.
The incident raises questions about the bank’s management and risk policies at time when it is trying to rebuild its operations and bolster its flagging client base. The case could also bolster the efforts of regulators who have pushing in some countries to separate trading from private banking and other less risky businesses.
The trader, 31-year-old Kweku Adoboli, was arrested by UK officers though exact charges have not yet been announced.
You may remember a similar case involving Jerome Kerviel, a former trader at French bank Societe Generale, who defrauded the company by gambling away $6.7 billion. He single-handedly brought the 145-year-old bank to near bankruptcy when the trades were discovered in January 2008. He was charged and convicted of breach of trust, forgery and unauthorized use of the bank’s computer system.
Will Adoboli be charged with the same? More importantly, why didn’t the largest bank in Switzerland learn from the Societe Generale case, which went down in history as the biggest rogue trading scandal in history?
“All men make mistakes, but only wise men learn from their mistakes.”