Citigroup executives wooed him in June 2009 at a swanky bar in Tokyo. As they showered him with praise, say people who were there, Mr. Hayes rarely spoke, instead letting his girlfriend, a lawyer, answer questions.
Shady traders: date lawyers! And let them do all the talking for you.
That detail is from this amazing Wall Street Journal article about Hayes. When we last discussed Hayes and his totally open and casual requests to people he’d just met to manipulate Libor for him, I asked “is this: (1) all of these people did not fully realize that they weren’t supposed to be doing what they were doing, (2) UBS’s culture was one of complete lawlessness and fuck-around-ery, or (3) both of those things are true and reinforce each other?,” and per the Journal the answer is fascinatingly (3).
I’ve occasionally said that Hayes made a career of Libor manipulating but that’s not entirely right. He started at RBS and, per the Journal‘s account,1 spent his time there mainly being smart and dressing “like a college student — with washed out jeans, a polo shirt and sometimes a threadbare sweater” rather than IMing people to ask them to fix Libor. (That, at RBS, seems to have come later.) Then he moved to UBS: Read more »
Swiss bank annual earnings are here so we might as well check in on what they’re up to with comp. You and I may think of comp in pretty straightforward ways – if you did good, and your employer did good, you get paid well, and if not not – but Credit Suisse and UBS take a delightfully arcane wheels-within-wheels approach, constantly changing how they pay employees to send signals, fine-tune incentives, and optimize regulatory capital. I suppose if I worked there I’d be so pleased by the complexity of the edifice that I’d be okay with otherwise disappointing pay. Current employees may disagree.
Anyway we talked about UBS the other day; per the FT they are handing out bonuses in the form of high-trigger CoCo bonds that get written down to zero if UBS’s regulatory capital falls below 7 percent. The bonds “will pay a market-based interest rate” though that’s not saying much; any interest rate is “market-based” in the sense that it can be decomposed into, like, Treasuries plus a number. Presumably the number here is high.
The Swiss bank will reportedly announce today that it’s going to be doing things a little differently around here re: compensation. One, deferrals will start at $250,000 and two, rather than being paid in UBS stock, the non-cash portion of 6,500 senior employees’ bonuses will come in the form of subordinated debt that can and will be wiped out in the event the amount of capital on hand falls below the level required by EU regulators, putting the onus on everyone to make sure no one pulls an Adoboli (and avoids multi-billion dollar fuck-ups in general). Half-Adobolis only moving forward, please. Read more »
Cuts are said to be going down in New York. Read more »
Is it just obviously true that if (1) you had a Libor-based loan or swap or whatever, (2) Libor was intentionally manipulated by a bank or a scheming cabal of banks, and (3) that manipulation moved Libor against you and cost you money, then (4) you should be able to sue those banks to get back that money? Maybe? But then what do you do about this?
The preliminary analysis of individual quotes from panel banks shows that some anomalies can be found in the submissions, despite Thomson Reuters sanity checks. These anomalies can be seen as fat finger errors. For example on 12 June 2004, Bank 30 provided quotes between 44% and 55.5% for all tenors, and on 14 August 2006, the same bank provided quotes of 66% for a range of maturities (1 week to 3 weeks and 2 months to 5 months) as indicated in Chart 2.
That’s from the European Banking Authority – European Securities and Markets Authority report and recommendations on what to do about Euribor, a slightly less corrupt Continental analogue of Libor overseen by the European Banking Federation. Euribor was not, you’ll be pleased to know, 44% for any tenor on any date in 2004, but some of these fat finger errors do seem to have moved Euribor, though by mostly trivial amounts. Read more »
Losing Anything < $2 Billion, Whether Through Trading Or Regulatory Fines, Now Considered A Victory At UBSBy Bess Levin
UBS’s $1.5 billion settlement for manipulating interbank lending rates is the fourth separate regulatory finding against the Swiss group in as many years – underlining the failure of bank executives to reform the corporate culture…Just last month, a London jury convicted one of UBS’s former traders, Kweku Adoboli, of the biggest banking fraud in British history after he lost $2.3 billion in rogue trades. The FSA also fined the bank 29.7 million pounds ($39.2 million) for allowing the unauthorized trades. The trading loss is now seen among UBS staff as the new benchmark of wrongdoing, with reports of relief among employees that the bank’s $1.5 billion global Libor settlement was “only half an Adoboli.” [FT]