Adoboli trial: ‘risk-seeking’ culture at London UBS

UBS is “less risk-averse” in London than in the US, says Adoboli's former manager

Kweku Adoboli's former manager told a court there was a culture in London that was "risk-seeking" and "less risk-averse" than in the US.

John DiBacco, who was based in New York, managed the UBS exchange-traded fund (ETF) desk from April 2011. He said more proprietary risk was taken in London compared with the US and was "surprised" at the size of some of the positions across the dealing room.

When DiBacco took on his new role, a senior manager is reported to have told him "you have to be careful not to stifle these guys, they like to trade".

Risk limits were doubled by DiBacco, increasing from $50 million to $100 million a day, and to $50 million overnight. When he asked the ETF desk what the risk limits were previously, he "never got a definitive answer", he said.

DiBacco emphasised how "quite often those limits were zero", telling the desk he wanted "no risk" and to "shut everything down" in August 2011. However, he acknowledged flexibility was "certainly possible" for practical reasons.

In an email sent in June 2011, Adoboli told DiBacco he had been "running around $200 million of deltas", double his risk limit, but had made a profit of $6 million. DiBacco's initial response was "well done", later replying "when over $100 million, and certainly $200 million, I need to know before, not after".

On September 14, when DiBacco received what has been described as the "bombshell" email from Adoboli, he said he "didn't believe it" and had to read it twice. He ran to the UBS office where he carried out his "own personal forensics" and saw "thousands" of what looked like fictitious bookings.

During a meeting that day, Adoboli told DiBacco his trading losses had been reduced from $100 million to $2 million in July. However, by the end of August this loss had jumped to $2 billion.

DiBacco was formally dismissed in January 2012. One of the grounds upon which he was fired was a failure to investigate the P&L performance of the ETF desk. He also apparently failed to take appropriate action when it was brought to his attention that Adoboli had neither booked trades nor adhered to trading limits.

He said he "very much disagreed" with these grounds.

The case continues.