When pressed by extreme stress, do you, as a leader, stay and fight or fly the coop?
UBS CEO Oswald Grübel reacted to the bank's "
Defiantly.
Grübel told Der Sonntag,"If someone acts with criminal intent, you can't do anything. That will always exist in our job. If you ask me whether I feel guilty, then I say no."
Oswald Grübel previously led Credit Suisse and has a reputation as a tough guy. After retiring, Grübel was asked to take the top job at UBS and help the bank recover from the devastating blows sustained during the 2007-2008 financial crisis.
Grübel has now backpedaled and grudgingly accepted responsibility for the scandal but vows he will not resign.
The UBS scandal is consistently compared in the media to the Société Générale "rogue" trader scandal uncovered in January 2008. Grübel's ongoing travails may end up mimicing those experienced by Société Générale’s Daniel Bouton.
Bouton, who had been chairman since 1997, renounced his CEO title in 2008 and left the bank in 2009. Resigning was necessary because,
Bouton's initial position — that "rogue" trader Kerviel had acted alone and the bank's controls were adequate — eventually unraveled.
There were reports that Eurex, the German derivatives exchange, had raised an alarm about Kerviel's positions to Société Générale in November 2007. Kerviel himself told
SPIEGEL: "Supervisory bodies issued 70 risk alerts to Société Générale."
KERVIEL: "In reality, there were many more warnings. But the higher-ups had gotten deeply involved in the speculation themselves. There were limits in terms of how much exposure each individual trader could take on, but no one paid any attention to them. Like I already told you, my supervisors had deactivated the system of alerts on my computer."
The
Similar reports on the UBS losses will be produced by a Big Four auditing firm on behalf of Swiss and British regulators, though it's not clear which one. The Financial Times said
Deloitte's investigation will start at the top with an assessment of controls, as an auditor would when checking support for the CEO and CFO certification of the financial statements each quarter. Investigators look at the example set by bank leadership and the board. Is the "tone at the top" supportive of risk management and internal controls or are controls portrayed by executives as obstacles to success and roadblocks to efficiency? Are the controls and risk management practices adequate to prevent, or at least detect, such significant trading losses early?
Don't be surprised if Deloitte finds the "tone at the top" hasn't changed much since the Société Générale scandal. Corporations, especially global banks, are obviously not learning from past mistakes and failures. There's no money in that. Competition, and desire for windfall profits and rewards, pushes banks to constantly place shareholder capital — and their employees, communities, vendors, and customers — at risk. Some bankers believe failures will never happen at their bank.
UBS CEO Oswald Grübel may soon have to admit he can fail, too.
(UPDATE: Since this post was published, Oswald Grubel
Francine McKenna writes the blog re: The Auditors, about the Big Four accounting firms. She worked in consulting, professional services, accounting and financial management for more than 25 years.