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An article relating to this blog post on Finextra:

UBS trading scandal investigation finds risk systems ignored

Risk systems did pick up suspect activity at UBS related to the recent loss of $2.3 billion through unauthorised trading but the information was not properly acted on, according to an internal investi...


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Risks at UBS: Is it a honour story?

It's a fact that risk systems are only as good as the people that monitor them. This has to be a board level down responsibility and it's good that UBS has received the resignations of two top managers. However, the breakdown has to be far deeper and it's hoped UBS will not only punish those caught up in the fraud but come clean on how they managed to get away with it. Publish the internal report and be dammed I say!

But what I am most interested in is the culture within Banks that breeds these fraudulent activities and what the banks are doing to change this culture and environment to discourage people from engaging in criminal activities in the first place.

It's all well and good to spend huge sums on systems and that are simply ignored by people who are so scared of the consequences that they cover up and then cover up some more before the fraudulent balloon gets so big, it bursts.

Going back to Nick Leeson and his case there is a common theme of the fraudster covering up (quite often to protect a colleague) and senior managers turning a blind eye to problems because the trader is a major earner for the bank or they are ignorant of the transaction risks.

More focus needs to be made on how and why people carry out these rogue trades that are often not for personal monetary gain but for the protection of reputation, ego and strangely honour.    

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Gary Wright

Gary Wright

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BISS Research

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19 Sep 2007

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London

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The Post Trade Forum's aim is to propagate debate and discussion between senior practitioners in Post Trade Operations in the global securities market; to bring about increased awareness and knowledge across both buy-side and sell-side financial institutions in financial products and be a focal point for firms and practitioners to air views.


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