Black Clouds Over UBS?

From the BBC:

Police in London have arrested a 31-year-old man in connection with allegations of unauthorised trading which has cost Swiss banking group UBS an estimated $2bn (£1.3bn).

Kweku Adoboli, believed to work in the European equities division, was detained in the early hours of Thursday and remains in custody.

UBS shares fell 8% after it announced it was investigating rogue trades.

The Swiss bank said no customer accounts were affected.

One question is what ramifications such a write-down might have on the bank’s liquidity. In this cloudy and dark financial atmosphere, fire-sales of assets to pay down such a loss might spark panic.

Another question is how — after the Jerome Kerviel and Nick Leeson debacles — does a large financial fail to effectively monitor its staff’s trading activities? Hasn’t investment banking experienced enough of these rogue trading shocks to put a system in place to prevent these kinds of activities?

After all, if a too-big-to-fail bank suddenly implodes, the state is perfectly willing to stand-by to inject in the earnings of future generations to “save the system”

4 thoughts on “Black Clouds Over UBS?

  1. Now it will be interesting to see were those losses made, the ECB and SNB have set up dollar-swap lines lately, and there was rumor of a swiss bank needing the liquidity in the dollar area, ofcourse all major players in Switzerland immidiatly denying.

  2. Aziz,

    Lets treat the Haircut on Bonds, like a rogue trader. Loans to Governments must be transparent and not unnecessarily burdensome on the population.

    Take a look at this link, in particular the approach by Equador. A Bond holder must take a hair cut when they loaned funds in dubious circumstances.

  3. Pingback: Europe to Geithner: “Go Away” « azizonomics

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