Thursday, September 22, 2011

Reasons why UBS must be given large bonus despite of blown up

In the midst of US$2.3 billion blown up, Reuters reported that UBS bosses are meeting now in Singapore, the home country of its biggest shareholder GIC. GIC has since lost 77% of its 11 billion Swiss Franc investment. 

Now its chance for GIC to push for bonus claw back
So will GIC push for bonus claw back? Given that many in UBS already have claw back clauses in their contract, this is the time to test whether GIC wants to do the right thing.

In addition, this is also a good opportunity to introduce further claw back clauses, risk control and to sack the whole lot of crazy gamblers in UBS.

Or will GIC connive so that UBS "talent" got their bonus
The excepts of an article in Bloomberg titled Swiss Must Save UBS’s Bonus Pool or Die Trying is as below, telling us paying talent good salary is everything.

  • If the bankers don’t get their bonuses, the best and brightest UBS employees will leave for competitors.
  • Is it really fair that hundreds of high-net-worth UBS professionals should pay for the alleged sins of a lone 31-year-old Ghanaian trader, just because they failed collectively to oversee him?
  • The failure of the UBS bonus pool at a time of major global and economic instability would exacerbate the challenge of reigniting consumer confidence...... the effects of disrupting the industry are wide-ranging and significant


Anonymous said...

Bloomberg's Jon Weil misses the point: Adoboli is a scapegoat. The front page of FT last Saturday clearly pointed out that some of the "charges" against the man dated back to 2008. The whole bunch at UBS are crooks trying to hide losses all the way back to 3 years ago, the whole truth never really came out. Only when the time is right (like now when everyone is owning up to losses) that the "BOD" and the Swiss government agree to spill all the dirty beans all at once. Basically your favourite sovereign wealth fund got conned the way "innocent money" regularly lose their shirt. And of copurse GIC will not ask for claw back. No way, they won't want the public to turn around and ask to claw back GIC's hundreds of millions (Temasek billions) of bonuses from 1998 dot-com bust, 2007 subprime bust, Real estate busts in Stuyvesant, Wamu etc and now 2011 total bust.

Anonymous said...

The term "rogue trader" is misleading.
The kind of environment which these traders work in involved significant risk-taking. And the adrenaline of winning need to be fed.

The smart people will just find loopholes.

That is why there is a need to separate banks to 2 types: investment and deposit-taking.

We know that bank's senior management will never own up their mistakes.

Veritas said...

Anyone who have done trading knows that there is this thing call "trading limit".

The software will not allow anyone to trade over his limit unless that trader is cleared by some higher authority.

To blow up 2.3 billion, it is only likely that the head of the trading department has already cleared Adoboli.

This is just a cover up for even greater fraud within the management. Politician and law enforcer simply collude by not pursuing any further.

Else, the IT department can easily find out the person who authorized for Adoboli's trading account.