Fishburn Hedges

16.09.2011

Now the dust is settling on the UBS rogue trader’s $2bn loss, a few thoughts on the communications issues:

1: The trader, Kweku Adoboli, was part of a team doing “Delta One” trading. This sounds like “Delta Force” - or maybe it should be renamed “testosterone trading”. Investment banks really need to think about their nomenclature.

2: UBS took about 18 hours to tell anyone, and then tried to fudge the issue about where the trader was. While the initial delay might have been for compliance or regulatory reasons, the decision not to say at least where the trader was, misunderstood the power of both the internet and the ability of journalists to find things out. Mr Adoboli’s name was widely known within an hour.

3: A lot of commentators have asked why traders only become rogue when they lose money. That’s because when they make money, they are “outperformers”

4: The losses at UBS have given proponent of the Vickers’ committee’s central recommendation, a ringfence between retail and investment banks, a big fillip, not least committee member Martin Wolf.

5: The likes of Vince Cable who call investment banks “casino banks” must be feeling justified as well.

The City has a difficult job when these sorts of things happen. Few people understand what goes on in the investment banks, some even suggested the boards of these banks don’t understand, and it is very difficult to explain the processes without falling into jargon. The investment banks have to realise they have a job to do to show the “social good” of what they do, making money isn’t enough, especially when they lose it.

This article was also featured on the Holmes Report website.