There has been too much talk of the lost/stolen/defrauded (depending on whose version of accounts you believe) $2bn from UBS by 31 year old Kweku Adoboli and what will become both of him and UBS’s upcoming earnings release.
For me, I have two fundamental problems. The first has to do with the banking sector in general. The second has to do with how insignificant a sum like $2bn has suddenly become in today’s world….we no longer talk about millions, but BILLIONS. The world has quickly amended its opinions that the worlds worst people were real estate agents, to that of lawyers. But that opinion has very quickly changed to that of bankers. Bankers are the worlds newest scourge. Why? Well, for starters, the absolutely unjustifiable bonuses. Even during the boom years their annual bonuses were something that no other industry could justify, or even afford to pay their employees.
Then there was the Barings collapse in 1995, brought about by the rogue trader, Nick Leeson, followed by the $7bn fraud of Societe General twelve years later by Frenchman Jerome Kerviel. Leeson got six years in prison (was let out after serving just three) for bringing down Barings, and Kerviel got five years with a symbolic restitution of the $7bn he lost. Of course the press was stupefied on both occasions, asking the “how could this have happened” and “who could be next” type questions, only to calm the markets in the ensuing weeks by printing sound bites and press conference quotes from the banks that they would implement check and balances so that this would never happen again. Thing is…..after the Barings debacle, the rest of the financial sector assured us of “Chinese Walls” and “Internal Controls”, and my personal favourite “Self Regulation” that this could never reoccur. Except that it did….twelve years later, and now again, just THREE YEARS later!!
To my chagrin, this latest scandal is hot on the heels of the banks being bailed after their flagrant disregard for managing a business in accordance with accepted banking rules, accounting and banking laws, and just plain common sense. They voted people inot key positions within the policy making organisations that espoused the benefits of “self regulation”, enabling them to changes the rules from the inside, allowing them to over leverage themselves, ignore regulation and control of derivatives and resulting in the biggest collapse of world markets since the Great Depression in the 1920’s. So the worlds taxpayers come to their rescue, bail them out, and the banks return to profit in record time and go back to giving themselves exorbitant bonuses. Oh….and they don’t bother to “self regulate” because some Ghanaian allegedly managed to slip under the radar and their thick layers of control and pulled another one on the financial sector.
This time it’s $2bn. That’s a lot of money, in anybody’s book. But given the amount, UBS does not seem to be running around like Chicken Little, their sky is not falling….yet! Whist their stock price has dropped….it hasn’t tanked. So, in the financial services sector, $2bn seems to be chomp change these days. Not surprising, given how much, even small countries like Ireland, have spent bailing them out 18 months ago.
In the real world though, $2bn can buy you a lot.
$2bn would cover the entire annual funding requirements to tackle the current famine in the Horn of Africa (source UN OCHA as at 6th September 2011)
$2bn would support Habitat For Humanity’s current annual worldwide program spend (home building, disaster response, training and sanitation projects) for six years.
$2bn would pay for 800,000 Cleft Lip & Palette procedures for a year to help bring a smile on the face of more children like this beautiful little girl from Brazil.