26 Sep 2012
The court in south London has heard that Adoboli was twice caught flouting financial trading limits set by managers to protect against big losses in the year before his arrest. In both occasions he was “told off”, according to a witness and former colleague, but left to return to his ways.
According to UBS employee John Hughes, he failed to report that Adoboli was breaking his daily trading limit the second time, after warnings, because of the negative strain the first report had put on their working relationship. Adoboli was arrested in September that same year.
The case highlights some of the institutional failings of large organisations such as UBS. Hughes claimed Adoboli resented his colleague for “grassing on him”, even though it has since emerged that further action by Hughes could have prevented Adoboli “fraudulently gambling” away the ten-figure sum. It seems that an appropriate response was not mounted by the bank upon the discovery of the first occasion of fraudulent trades, thus discouraging further denunciation.
It has also emerged that other members of Adoboli’s team were aware of “fictitious trades” being made by the former trader, but they claimed not to be aware of the extent of the practice. They also failed to raise the alarm.
Former colleagues were unanimous in describing Adoboli as a “very, very good trader”, with a “braver” attitude towards risk. In an email sent by Adoboli on September 14, 2011, in which he confessed to the ‘fake trades’, he claimed to have acted in the interest of reviving “risk appetite” in the bank. Other UBS employees have told the court that in 2009, Oswald Grübel, then chief executive, had told the staff he was seeking a “change in ethos” and that the bank should be looking to “take more risk”.
It seems that in his eagerness to revive the heady days of huge trades and even bigger payoffs, Adoboli lost sight of regulations and overstepped his duties. But passing the 32-year-old off as a ‘rogue trader’ acting with no regard to the institutions best interests and without its consent downplays the role that the banking culture and environment has played in this case. Adoboli was encouraged to take more risk. He was pressured into recreating payoffs that were no longer possible in the current financial climate.