Adoboli affair rocks London financial hub

The jailing of rogue UBS trader Kweku Adoboli, convicted of Britain’s biggest ever fraud, is the latest damaging scandal to rock London’s financial district and spark fresh concerns over its conduct.

LONDON: The jailing of rogue UBS trader Kweku Adoboli, convicted of Britain’s biggest ever fraud, is the latest damaging scandal to rock London’s financial district and spark fresh concerns over its conduct.

Adoboli was jailed last week for seven years after gambling away US$2.3bil (1.8 billion euros) of the Swiss bank’s money in a spectacular fall from grace that highlighted the City’s risk culture, analysts said.

A jury in London found the Ghanaian-born banker, 32, guilty of twocounts of fraud, though it cleared him of four charges of false accounting.

“Adoboli is very much a symbol” of the City, or London’s financial quarter, independent banking analyst Ralph Silva told AFP. “He is an old school guy.”

Silva noted that London-based traders had been willing to take greater risks than their counterparts across the Atlantic in the run-up to the financial crisis beginning in 2008.

“London was far more risky than anywhere else, they (traders) took bigger risks even than theUSbecause New York took risks only in America, (but) London took risks in the world,” he said.

Adoboli admitted losing the enormous sums but denied any wrongdoing. He claimed that senior UBS managers were fully aware of his activities and encouraged him to take risks and raise profits.

“There is a strong streak of the gambler in you,” judge Brian Keith told Adoboli, as he sentenced him.

“You were arrogant to think the bank’s rules for traders did not apply to you.”

Britain’s coalition government is eager to crack down on so-called “casino” or high-risk banking that was partly blamed for the notorious global financial crisis, as traders pursued vast bonuses and excessive pay.

Finance Minister George Osborne has urged lawmakers to support his plans for costly structural reform of the country’s banks - which include ringfencing investment and retail activities - to avoid a repeat of the devastating crisis.

“I would be very wary of unpicking a consensus that has been arrived at” over reform of the nation’s banks, Osborne told Britain’s Parliamentary Commission on Banking Standards last week. The Commission, a scrutiny panel set up by Osborne, is looking into banking standards and culture in the wake of scandals that include Libor rate-rigging, product mis-selling and money laundering.

Osborne’s warning came as he appeared to back the creation of a potential professional standards body to oversee the behaviour of lenders like Barclays, HSBC and state-rescued pair Lloyds Banking Group and Royal Bank of Scotland.

Bank of England (BoE) governor Mervyn King meanwhile told the Commission that the government’s ringfencing proposals will “certainly help” drive further improvements in the industry’s culture.

Next year, the BoE will take over banking sector oversight from the Financial Services Authority (FSA) watchdog, as part of a major regulatory revamp.

This year the City - also known as the Square Mile - has been plagued by problems, with banks facing huge compensation bills for mis-selling cover on credit products - or payment protection insurance (PPI). — AFP