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• What’s $2 billion between friends?

  September 16, 2011 @ 12:51 pm | by John Collins

  So UBS “Delta One” trader Kweku Adoboli (left)  joins the rogues gallery of traders who have lost their employers millions or billions with dodgy trades which their superiors claim to have had no knowledge of. At $2 billion, he has some ground to make up on Jerome Kerviel, who lost $7.2 billion at Societe Generale in 2008. But he easily beats Nick Leeson, the Galway-resident who brought down Barings Bank with losses of $1.4 billion in 1995, and John Rusnak, the US foreign exchange trader, who lost $691 million at AIB’s US subsidiary in 2002.

  The truly shocking revelation has come this morning from the BBC’s business editor, Robert Peston, who says UBS’s internal controls did not pick up Adoboli’s massive bets. In fact they only found out about it on Wednesday morning when the 31-year-old came clean. This is hugely concerning for a bank that lost €50 billion during the subprime crisis in 2008 and had to be bailed out by the Swiss taxpayer. It also gives the lie to the statement by UBS chief executive Oswlad Grubel that the rogue trading does “not change the fundamental strength of our firm”.

  Adoboli was a trader on UBS’s Delta One desk, a shadowy area of banking that allows banks trade with their own money largely out of the sight of regulators. As one commentator has noted, most bank chief executives don’t understand what actually happens in these units. Delta One is a rapidly growing area of derivative trading and one you are likely to hear a lot more about after this.

  And on a slightly lighter note, if Adoboli posted on his Facebook page (now converted to a UBS community page by Facebook) that he needed a “miracle”, surely someone at UBS should have got concerned??

• Would Alan Dukes make a good Central Bank governor?

  August 31, 2009 @ 5:00 pm | by Laura Slattery

  With the present incumbent John Hurley due to clear out his desk at the end of September, Paddy Power is quoting evens on Alan Dukes becoming the next governor of the Central Bank, making him the bookies’ favourite. (Read Simon Carswell’s news story on the runners and riders.) But would the former Fine Gael leader, economist and erstwhile reality TV judge (on TG4′s Feirm Factor) be a smart choice for the job?

  Judging from recent history, the criteria for the position seem to largely revolve around an ability to make dire but completely unheeded warnings about investment bubbles, a willingness to travel to Frankfurt once a fortnight and a capacity to cope with regular deckchair-rearranging within your organisation. Not being a senior civil servant in the Department of Finance has dropped off the list of necessary qualifications, it seems, given Minister for Finance Brian Lenihan’s remarks in February that “the traditional practice whereby it is axiomatic that a senior public servant should be appointed governor of the Central Bank will not be followed by me”.

  Dukes already has form when it comes to unpopular pragmatism, political expediency and a willingness to get stuck into the mess (he has been a non-executive director of Anglo Irish Bank since December 2008). But the post of Central Bank governor is supposed to be politically independent. Would Dukes be too close to the next government, or is it about time that the governor of the Central Bank was someone who the political class might actually bother to take advice from?

  If he does get, or indeed want, the job, he’ll have to work with some of the same people who he criticised on the double in July, when he attributed delays in the appointment of a new Anglo Irish Bank chief executive to regulators who he said had “proved for so long to not be very good at their job” and were “now being too perfectly careful and asking every question 10 times before they’ll give you a ‘yes’.”

  If this statement is anything to go by, Dukes as Central Bank governor would aspire to be a feather-ruffling decision-maker rather than a overly cautious elder statesman with one eye on the pension.

  The other shortlisted candidates are thought to include civil servants Kevin Cardiff (an attractive 25/1) and David Doyle (33/1), Central Bank insider Tony Grimes (11/4), Professor Patrick Honohan (Trinity College banking expert and second favourite at 7/4) and Willie Slattery (of State Street fame, no relation, at 7/1). Rounding off the Paddy Power list, somewhat inevitably, is Sean Fitzpatrick – at a generous 1000/1. Any takers?

• Mortgage memos

  February 11, 2009 @ 12:13 pm | by Laura Slattery

  The phone rings. It’s not “private number calling”, so it can’t be NTL. But I recognise it as the same number that I’ve missed calls from twice over the last few days. It’s the mortgage broker I took a loan out with three years ago, Simply Mortgages.

  I usually wouldn’t bother answering – if it was something important they would write – but I’m working from home this week and have an irrational urge to talk to another human being for a few minutes, so I press the green button. “It’s X from Simply Mortgages, can you talk?” she says. “Hang on a minute,” I say, hoping to convey the impression I’m just excusing myself from an important business meeting when really I’m in my pyjamas, reluctantly turning down the volume on a fascinating BBC News segment with Michelle Mone, founder of Ultimo lingerie, about how to use the recession to start your own business and then get Julia Roberts to endorse your product.

  Simply girl wants to offer me a financial review – the chance to sit down with my original mortgage “consultant” for half an hour to discuss my outgoings. That would take more than half an hour, I think. Specifically, they want to talk about how I could save money on my mortgage, my life assurance and my home insurance. “Is that something you would be interested in?”

  “No,” I say. “Sorry, no.” I remember my original mortgage consultant: she was very professional, not at all like those Simply Mortgages employees who had a starring role on Prime Time Investigates in 2006. More importantly, she had the same monochrome Topshop skirt as me, so I felt I could trust her with my finances. Perhaps it would be fun to sit down and indulge in some nostalgia for the peak-era property market. But this phone call is raising my personal finance writer hackles. (more…)

• Getting confidence back – Davos told it’s a question of coconuts

  January 31, 2009 @ 12:03 pm | by Simon Carswell

  Montek Alhluwalia, deputy chairman of India’s planning commission, told delegates at the Davos economic forum in Switzerland this morning that the world needed to have confidence again. He said that confidence grows like a coconut tree but falls like a coconut. He said that India was still expecting 7 per cent economic growth this year. This isn’t far off what Chinese premier Wen Jiabao predicted for his country during his speech in Davos on Wednesday night – he said that even though he believed China’s forecast of 8 per cent growth this year was “a tall order” he still believed it was attainable.

  This morning Japanese prime minister Taro Aso  said he had decided on an economic stimulus package of about 75 trillion yen or US$840 billion with fiscal measures amounting to 12 trillion yen or $135 billion, which corresponds to about 2 per cent of Japan’s GDP. Mr Aso said that he would pledge not less than $17 billion in development assistance to Asian countries. The Japanese PM ended his speech with a quote from French philosopher Alain: “Pessimism comes our passions, optimism from the will.” Certainly, the Russian and Asian participants are far more sanguine than their Western counterparts at Davos this year.

  It’s worth noting that Japan treated delegates to a fine sushi lunch in Davos headquarters, the Congress Centre – a sign that at least there is no culinary slump at the Swiss think-in this year.

• McCreevy warns that fixing banking supervision will not solve crisis

  January 29, 2009 @ 2:02 pm | by Simon Carswell

  Despite the flak being taken by banking regulators over the global financial mess – 51 per cent of delegates in a survey yesterday at the World Economic Forum in Davos blamed poor supervision of the financial sector – Ireland’s EU Commissioner Charlie McCreevy has said in interviews in the Swiss resort this morning that fixing regulation alone won’t solve the crisis. He said that the banking meltdown has shown the need for a pan-European monitoring of banks with cross-border businesses, but said that member states were still opposing this and that it was a “very vexed” issue. (more…)

• How George Soros would save the financial world…

  January 28, 2009 @ 2:49 pm | by Simon Carswell

  Financier George Soros, the man best known for breaking the Bank of England by betting against the pound in 1992, told reporters at the World Economic Forum in Davos this lunchtime that there was “very serious trouble brewing in the peripheral countries” and particularly the new members in the European Union where more than half their household debt is in foreign currencies, mainly Swiss francs. “That is a problem that urgently needs atttention,” said Soros. (more…)

• Swiss think-in starts on a predictably pessimistic note

  @ 9:00 am | by Simon Carswell

  The World Economic Forum’s 2009 annual meeting in Davos began on a typically bearish note this morning as the first sessions kicked off.

  Stephen Roach, chairman of Asian operations at US investment bank Morgan Stanley, said that 2009 would be the first year since the end of the Second World War when the world’s economy (GDP) would contract. (more…)

• Creating one bad bank and adding the bad debts of the others

  January 14, 2009 @ 10:01 am | by Simon Carswell

  The London-based Daily Telegraph reported this morning that the UK Treasury has asked Credit Suisse to assess the possibility of setting up a “bad bank” as a means of restoring a better flow of credit into the economy. This happened following the collapse of the banking system in Sweden in the early 1990s where bad property loans were purchased from some of the country’s more troubled banks. The UK government could ring-fence bad debts and underwrite them with a state guarantee.

  Anna Lalor, analyst at Goodbody Stockbrokers, says in a research note this morning that a similar plan by the Irish Government would “depend on its willingness for taxpayers to take on the risk of such loans (on the assumption that they were transferred at fair prices – whatever that may be) and its capacity (to raise sovereign debt) to support any additional equity issuance that may be required as a result of taking credit losses up front.”

  It would certainly be a clever idea corralling all the bad debts, particularly high-risk, speculative loans to the property market, into one bank so the Government could solve one problem instead of six. Bank of Ireland’s former chief executive Mike Soden has suggested this as an idea to this newspaper in recent weeks. Such a plan would deal with a significant blackspot on the balance sheets of the Irish banks. However, the taxpayer should exact a hefty premium for shouldering the not-insubstantial bad debts into a single Irish bank.

• Elan’s trouble with dates

  January 13, 2009 @ 8:12 pm | by Dominic Coyle

  Elan president Carlos Paya entered the JP Morgan Healthcare Conference hoping to put behind him the controversy over statements attributed to him over a possible extension to the duration of Phase III trials for the company’s Alzheimer’s drug bapineuzimab  currently slated to last 18 months.  Unfortunately, as he moved to clarify -referring to recent confusion – he again alluded to 24 months before hastily correcting himself.

• Will Lenihan seek banker resignations in return for capital?

  December 15, 2008 @ 11:04 am | by Simon Carswell

  Minister for Finance Brian Lenihan said in an interview with RTE yesterday evening that there would be some “tough” decisions ahead for the banks in response to a question about management changes at the institutions. He’s clearly hinting that some of the senior management teams at the banks may not be around after the State injects capital through this recapitalisation programme of up to €10 billion announced yesterday evening. It’s no surprise therefore that some of the banks have been resisting private equity investments and even any potential capital raising from their own shareholders over recent months.

  The prospect of shutting down lending in a bid to bolster capital is not finding favour within Government at a time when credit rationing is the last thing that most small and medium-sized businesses are struggling to keep cash flowing.

  There is much at stake at present. The State is setting up a mechanism where €10 billion should get the banks up to capital ratios of the 8.5 per cent which will appease the market as these levels have become the norm since the UK bank capitalisation. However, the State is setting conditions on its investment “in order to safeguard fully the interests of the taxpayer.” (more…)

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