23 September 2011

Kenneth Jeyaretnam : GIC, UBS and the Death Spiral of your CPF funds

Link to his blog post here.

Of all the banks out there to invest in, we had to choose a rogue bank. UBS seem to have been involved in every single major financial debacle in the last 20+ years, including LTCM, sub-prime, abetting tax evasion. And now Kweku Adoboli. If we wanted to invest in prop trading, we might as well have gone with the best ie Goldman.

It is simply not possible for a rogue trader to do this on his own. If it was just him alone, then it definitely is a failure of management to install proper controls. Top management should be sacked. No 2 ways about it.

I say definitely split UBS into wealth management and investment banking. Our CPF money should only be in the non-speculative, sustainable business bit ie wealth management.

1 comment:

akikana said...

It is quite possible for one person to do this, especially if they have come from the back office and understand the dynamics/interactions (and lack thereof) between the control functions. What is more interesting about this is the fact that people seem to think it was a problem with risk limit - which it isn't. They rogue was trading within limits albeit the hedge being fictitious. The problem is simple: culture. Support areas are not given enough teeth to stop errant traders nor do they seem to have the urgency in escalating problems quicker. Why should they when they are being 'paid' by the people they are expected to monitor. Of even more concern is the fact that cultures are created from up high and they changing of the guard at UBS has shuffled in the European operation CEO as new head honcho. Remind me again in what region of the world did this rogue get to exploit the culture...?