Peter Norris, Nick Leeson's boss when the rogue trader brought down Barings, has called for industry-wide reform of risk systems in the wake of the UBS trading scandal.
Kweku Adoboli, a 31-year-old London-based banker, allegedly ran up losses of £1.3 billion ($2.48 billion) after making huge numbers of ill-judged, unauthorised trades. He has been charged with fraud and false accounting, which carries a maximum 10-year sentence.
The extraordinary cover-up is all too familiar to Norris, head of Barings' investment division in 1995 when Leeson's derivatives trading resulted in £827 million of losses and killed the bank. Norris has since re-established himself as chairman of Richard Branson's Virgin empire.
Norris said value-at-risk systems, a widely used measure of the risk of loss, were fundamentally flawed as they allowed rogue traders to act undetected. "There should be a long, hard rethink of these value-at-risk systems across all the banks."
While he conceded that UBS is big enough to withstand the losses, he said Adoboli should still be condemned for his actions if proved guilty. On a radio programme last month, Norris told Leeson he had "wanted to punch [his] lights out" when his losses were discovered. "They [the bank and his colleagues] should have a visceral reaction against him," he said. "The fallout within the organisation will be huge."
