Dr. Alex Cowie Morning Money Australia 26 November 2012
2012 has seen an impressive list of global banking scandals.The problem is that even as they get more outrageous, the market becomes more desensitised.
The real bombshell this year was the LIBOR scandal.
Some of the world’s biggest banks got caught with their pants down, manipulating the LIBOR rate. If you think that sounds boring, then know that it underpins derivatives worth over $300 TRILLION. Tweaking LIBOR a few basis points here and there can pay for more than lunch.
This was a scandal so huge that it involved some of the biggest names in the banking game: Barclays, HSBC, Deutsche Bank, UBS, Credit Suisse, Soc Gen, Citibank, JP Morgan, and Bank of America, amongst many others.
So global banking titans formed a cartel to deceive the world?
This is the kind of thing that should spark a revolution!
But sadly, no one seems that surprised or that fussed. Maybe investors are just too battle weary after four long hard years down in the trenches.
It seems the forgotten headlines about LIBOR are already today’s fish and chips wrapper.
Now the current ‘scandal-du-jour’ served up by the media is the ‘The London Whale’ which is now going through the courts.
Somehow, within six years of leaving Uni, this Ghana-born lad was in charge of multi-billion dollar bets in UBS’ London office.
Didn’t anyone ever question the wisdom of this?
Or just perhaps…keep a bit of an eye on him?
But no! The trading culture and poor oversight let ‘The Whale’ singlehandedly rack up a loss of nearly $12 billion.
It’s not too hard to draw the dots from this loss, to the recent announcement that UBS is cutting 10,000 jobs (16% of its workforce) over the next few years.
Obviously HQ in Switzerland isn’t too chuffed at what’s been going on at the London branch, as the job cuts kicked off with a swift axing of 100 traders in London.
But this is happening everywhere.