The rogue trading scandal may not inflict intolerable financial damage on the Swiss bank ? but the blow to its battered reputation is severe indeed
Oswald Gr�bel, the chief executive of UBS, was on flimsy ground when he said the $2bn (�1.3bn) loss from the rogue trading scandal would not affect "the fundamental strength of our firm".
It is true that the hit from the Kweku Adoboli affair will not inflict unbearable financial damage on the bank's finances ? after the last disasters, Swiss regulators and politicians ensured that big Swiss banks are among the best capitalised in the world ? but a bank's fundamental strength is about much more than its capital base. Reputation matters just as much, and UBS's is about as low as it is possible to go in the field of investment banking.
To give a flavour of the scale of reputational damage, imagine a British parallel. What if Royal Bank of Scotland (RBS) were to suffer such a blow in its investment bank? RBS's management might try to maintain the idea that one incident, and one employee, should not jeopardise a whole division, but everybody would know the game was up. It would be a disaster too far. The cries to give up on trading, and get back to basic banking, would be overwhelming.
So it will be with UBS, which was taken to the cleaners in the US sub-prime mortgage disaster and was only allowed to attempt to rehabilitate its investment bank on the understanding that it was drinking in the last-chance saloon. Any failure to control risk would not be tolerated. The danger of contaminating the wealth management business ? a far more important activity, both for UBS and for Switzerland ? would be too great.
Swiss regulators could take matters into their own hands by ordering Gr�bel to get rid of the investment bank, or at least the part that engages in trading, as opposed to advising corporate clients on mergers and acquisitions. Even if they don't, simple market forces should do the job. If UBS's more successful traders are to be hit in the pocket by the $2bn loss when bonus season arrives, as they should be (them's the rules these days), they are prime targets for poaching by rivals.
Source: http://www.guardian.co.uk/business/2011/sep/18/imagine-if-ubs-had-been-rbs
The Archers Wigan Athletic International criminal court Republicans Rape Foreign currency
No comments:
Post a Comment