Regulators are still trying to figure out how 31-year-old trader Kweku Adoboli caused $2 billion in bad bets over three tears. But as the probe continues analysts and politicians say UBS trading losses has strengthened the case for separating retail banks from their investment arm, according to The Associated Press.
According to The AP, in Britain plans to split up the everyday from complex and potentially dangerous investment trading have been on the cards for months. Days ago, those plans were approved by a government-appointed commission and its supporters say that, in a way, Kweku Adoboli's arrest on charges of fraud and false accounting couldn't have come at a better time, The AP reported.
Britain's Sky News television reported that British Treasury chief George Osborne said the shocking case uncovered at the Swiss bank was as strong argument for following the recommendations of the commission, chaired by John Vickers, a former chief economist of the Bank of England.
If you ever wanted a better example of why the kinds of ideas that John Vickers was putting forward were right for Britain, look at what happened at UBS just a few days later, Osborne said.
Vickers' report states that Britain's retail banks should be cut off by 2019 to decrease the risks of taxpayers having to bear the burden of any future bailouts. It also noted that the risks inevitably associated with banking have to sit somewhere, and it should not be with taxpayers.
The commission therefore, recommended that retail banks should be legally, economically and operationally separate from the parent companies, and should have distinct governance arrangements, and should have different cultures, The AP reported.
Kweku Adoboli went before magistrates this week and was charged with false accounting and fraud dating back back to October 2008.
The Telegraph reported that police were still uncertain whether they had uncovered the full extent of the alleged $2 billion fraud, and that authorities are also investigating whether other people at the Swiss investment bank UBS may have been involved.
It has been reported that UBS's internal controls were unaware of the massive loss Kweku Adoboli allegedly caused.
Kweku Adoboli's father John Adoboli, 63, told The Wall Street Journal that his son lived a frugal life, noting that his osn refused a suggestion at one time to buy a car because he didn't want to pay for parking.
We are not flamboyant, John Adoboli said. That is not how we are. We are simple people.