UBS’s 2 Billion Lost – In Defence of Ringfence Investment Banking

Banks still haven’t learnt. They think they can regulate themselves. That’s just not so.

– Hildegard Fässler, Swiss MP and Finance Specialist

The latest UBS derivatives trading scandal backdated to 2008 has renewed the call to impose strong  regulation on financial institutions. Despite UBS CEO, Oswald Grübel’s efforts to improve UBS risk management , the latest scandal reflects a lack of progress from the supposed move towards a “low-risk client driven model“.

One would asked, what happened to the bank’s “reformed” internal risk management and external audit function?

Some of the measures promoted by international regulatory bodies and leading economists include imposing higher capital standards, ringfencing investment banking from the wider banking organisation and in some cases separating of investment banking operations from their parent organisation.

Related link: Of course it’s right to ringfence rogue universals (Financial Times)

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