Will the 29.

7m fine imposed on UBS by the

FSA reduce the risk of future rogue
trading?
Tuesday 27th November 2012, 12:36am
YES
David McCluskey
The extra capital requirements proposed by the Financial Stability Board reflect the global
effort to make banks safer post 2008. But to really change the way banks deal with risk, we
need a culture where risk management is prioritised and adequately resourced in all financial
institutions. The FSAs enforcement agenda increasingly focuses on governance and risk
management. The fine levied against UBS for the defective controls that failed to spot Kweku
Adobolis off book trades follows similar action taken against the bank in 2009 and Socit
Gnrale in 2008. By setting UBSs fine at 15 per cent of the revenue of the relevant trading
division, the FSA is sending the message that it expects high standards in these areas. The
FSA also tries to hold senior individuals to account for any failings. In our view, FSA action
of this nature will be more effective than increased capital requirements in changing banks
attitude to risk management.
David McCluskey is a partner at Peters and Peters.
NO
Douglas McWilliams
Post 2008, we have had two trends in City regulation. The first is increased reserve
requirements in various different ways oddly ministers persist in trying to persuade banks to
lend more while at the same time increasing the restrictions that stop them lending more. The
second is constraints on pay in the direction of making the pay more dependent on long term
results. The only real way of making banks careful about risk is not by getting civil servants
to second guess them but by making the boards take personal responsibility if necessary
reinforced with fairly draconian sanctions. If boards take personal responsibility, then
dangerous lending will be curbed. And pay will move into line with the objectives of the
shareholders. Put the responsibility where it belongs on the banks boards.
Professor Douglas McWilliams is chief executive of the Centre for Economics and Business
Research.
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