If we thought by now that we pretty much knew how bankers behave, the trial of Kweku Adoboli opened another shocking window onto a crazy world. There are many disturbing features of this glimpse into life inside UBS at the turn of the decade, but it’s the sheer scale of the numbers that astonishes.

Traders deal in sums which ordinary mortals may not see in a lifetime; Adoboli, we’re told, “started small” with a concealed loss of a mere $400,000. Perhaps such trivial amounts are regarded as little more than rounding errors, easily hidden in his “umbrella” of unauthorised trades, since as the FT report went on: “By 2009 and 2010, Adoboli’s scheme was going well and the umbrella’s $40m profit gave him confidence to do bigger trades.”

And how. On 8 August 2011, his losses peaked at $11.8bn. As he testified, he become so desensitised that he’d lost any grasp of how big the trades were. It’s clear he wasn’t the only one who was desensitised, but the common theme through this and other “rogue traders” is the casual betting of huge sums – and as long as there are paper profits, fat bonuses all round, while those sad losers in compliance and audit can be ignored.

It’s possible that systems are better in other banks (although clearly not at JP Morgan or Societe Generale) or that others have discovered their rogue trading while it was showing a profit, allowing the miscreants to be rewarded and the breaches covered up. It’s unlikely that the dealing desk at UBS was unique. The casino culture was pervasive, and as the Adoboli case shows, the near-collapse of the banking system in 2008 made little difference to behaviour or rewards. These people genuinely believe that they are worth the grotesque sums they are paid.

Now it looks as though the game is up for investment banking, not because of any remorse on the bankers’ part (that time is past, as we know) but because the capital which fuels the trading machine is getting too expensive. Just as bakers are always well fed, bankers will always be well rewarded, but the glory days are over. More of the best brains will be forced into doing something socially useful. Bankers might be forced to concentrate on matching lenders and borrowers. Less fun for them, less risky for us.

A fine board

Whatever the failure of the systems at HBOS, its board was absolutely splendid. We’re told this by a chap who knows. Sir Ronald Garrick, deputy chairman, senior independent director and chairman of the corporate risk committee was before the Parliamentary Commission on Banking Standards last week, and with the benefit of 20 years of pump-making experience running Weir Group, told them: “I have no doubt that the HBOS board was by far and away the best  board I ever sat on.”

A director since 2001, he saw HBOS first pump itself up and then go bang. Nevertheless, he averred that were he to be asked to sit on the board again, he would happily do so. Perhaps happily for the taxpayer, it’s unlikely that an invitation will come his way.

Pensions madness

One of the enduring mysteries of policy-making is the unstated assumption that the better-paid need better pensions, and thus need bigger tax breaks. Common sense suggests that the better-paid should be able to save more, yet higher rate taxpayers get twice the relief on every pound they put aside.

The leaks suggest that the Chancellor is planning to cut the maximum contribution eligible for tax relief from £50,000 a year to £30,000. This would bring in £1.8bn (almost enough to pay for one day’s state spending) a calculation which betrays how much of the relief goes to the few at the top. Since the cap would also apply to the value of accruing benefits for final-salary scheme members, it would serve to highlight these schemes’ real worth to, say, senior civil servants.

A better change would be to scrap higher rate tax relief on contributions, which would pay for two days’ state spending, and demonstrate rather painfully that we’re all in this together (although some are deeper in it than others).

This is an updated vesion of my column in Saturday’s Financial Times

http://www.ft.com/cms/s/0/c291951a-356a-11e2-bd77-00144feabdc0.html#axzz2DJimMCI7

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