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How much was Kweku Adoboli actually earning at UBS? And will persons from the middle office ever move into the front office again?

As details emerge of Kweku Adoboli’s ‘bling’ accomodation with “limestone floors and whitewashed walls,”, that was “big enough to make a 10-bedroom flat” and comparable to an, “art gallery,” costing an alleged 1k a week, the question is very clearly: how much he was earning at UBS? And then, are all Delta One professionals doing as well as he was?

The answer to the first question appears to be that: Kweku Adoboli was probably earning several hundred k sterling. And the answer to the second appears to be that: other Delta One professionals probably earn more than him because they haven’t spent their entire career at one firm and worked their way out of the middle office.

“If he joined in 2006 and moved into the front office around 2007-8 and was a director, he was probably on a base salary of around 120k and would have been generating revenues of around 5m, which should have given him a bonus of up to 250k,” speculates one Delta One headhunter. “However, he may have made less than that as he moved internally and would have been happy to get out of the middle office,” he adds.

Big Delta one hiring this year

There’s been a lot of movement in Delta One this year, including the exit of CJ Donley, the former head of Delta One sales in Europe at UBS who apparently left the bank in August and has yet to resurface (There is no suggestion that Donley’s exit was in any way related to Adoboli’s alleged loss at UBS).

Delta One headhunters also point to recent departure of Dan Katz and Ronnie Feiereisen, the former co-heads of Delta 1 sales at Nomura, to BAML and JPMorgan respectively. James Palmer, head of Delta One sales at Credit Suisse, is also thought to have resigned several weeks ago, but his whereabouts is currently unknown.

“There are some very senior guys in Delta One who’ve migrated across from flow derivative sales desks,” says a search consultant focused on the business. “In the first half of this year, people were moving on very big numbers.”

Lots of migration from the middle office

Much has been made of the fact that like Jerome Kerviel, Kweku Adoboli migrated out of the middle office. Another Delta One headhunter says this isn’t at all unusual in this space.

“A lot of Delta one people went in as graduates in the middle office and in the Delta one explosion over the past couple of years they’ve risen with the bullet,” he says. “As a middle office professional in the space since 2006, Adoboli would have had intimate knowledge of the risk management systems for the Delta One desk,” he adds.

Robert Peston is reporting today that Adoboli informed UBS himself of his alleged mishap himself, suggesting the bank was completely oblivious of it until that time.

There is much speculation as to how on earth Adoboli could have lost so much money, of which some of the most plausible is to be found here.

Either way, it’s suggested that Adobili knew his way around UBS’s risk systems. “I can’t see a way to lose that much money in the last 30 days without having a position over $10B, which was (before today) about 20% of the banks market cap,” says one commentator. “I can’t see how the treasury wouldn’t have freaked out on settlement day.”

Conclusion: moves out of the middle office have always been hard. It looks like they’re about to get harder still.

Comments (12)

  1. I don’t pretend to be a finance whizz, but this trading game can’t be much bag if a guy earns his firm 5m but his salary is 350k. Either delta 1 people are poor negotiators, or working in the hallowed ‘front office’ is just a bad deal. Decent plumbers earn that dough, and presumably since they are self-employed don’t get nobbled by the 50% rate either.
    Conclusion: get a proper job

  2. Complete Rubbish,

    having worked in middle office before, (albeit in credit) there is NO WAY you can rack up 2yards of losses without MULTIPLE flags being raised to Market Risk, Finance, Collateral, Treasury, Credit Risk, Settlements, Middle Office, Confirmations and the rest of the bank. Even if you knew the entire back office, middle office like the back of your hand it would be impossible. There are different access privileges across multiple systems. you will never have access to all the risk, settlement systems used. If you can get round the internal controls, then there is a serious problem with technical and strategic architecture of the bank, How was this not picked up in the annual external audit? they should whack the head of risk, ops, audit and and the entire risk management committee,
    Either their entire bank was incompetent or this was a case of kitchen sinking losses. after all, UBS like everyone else were long and very wrong

    Middle Office to Trading Reply
  3. If a decent plumber earns 350k, there can be only one conclusion: there are no decent plumbers.

    no decentplumbers Reply
  4. I can only agree with above based on years of experience in both front and middle office roles: any decent bank would have the big warning signs going all red at the first hint of a trading loss. A bank needs to keep a correct audit trail and it is very straightforward to design and prevent tempering.
    UBS clearly does not have any proper risk-controls in place which is absolutely shocking, particularly given the history of this bank. I am appalled and horrified that this can happen nowadays and that they only figured out after the guy gave himself up!!

    experiencedbanker Reply
  5. i so glad i moved to DELTA 2. we have written 2 million lines of code to program a system that can game the euro settlements. although turnover of euro2.5 trillion per quarter at .00000005 margin it will make our bonuses the best in any bank anywhere.

  6. Plumbers’ going rate in london is 80/hour without call-out charge.
    Assuming an average of 6 working days a week for 52 weeks billing 8 hours a day he would make: 6*52*8*80 = 200k
    Assuming he manages to sell 2000 pound of plumbing materials every week at a 50% margin for himself: 1000*52 =52k
    That’s a rather unrealistic 250k and that’s before you deduct at least one basic salary for a helper, the shiny van, etc, etc
    I believe a decent plumber would still be a happy plumber as he’d probably be well in the six figures, but definitely not 350k

    financialplumber Reply
  7. I know the systems at UBS very well. I implement them on another area of their business. If I was went onto a FO role I know the weaknesses of their systems and where you can exploit them from execution to Trade Reporting, Risk Manangement etc.

    I have to admit, UBS’s system are quiet efficient compared to other banks I have worked with. Its shocking that this happened at UBS, there technology expenditure is vast…its just a matter of time till we hear a story like this coming out of another bank after the turmoil we have seen in the financial market in the last few weeks.

    FinancialElectrician Reply
  8. @financialplumber, you forgot the nonlinearity, the plumber will charge a higher rate on weekends.

  9. Another weakness of the article is that Palmer was let go and worked swaps, not delta1

  10. @financialplumber

    But how much of that plumbers salary is paid cash (less or no taxes paid)? What is relevant is the net comp after tax, not the gross comp…

  11. It seems highly implausible that a single person acting alone could have done it. What happened to all the checks stated above. ( Market Risk, Finance, Collateral, Treasury, Credit Risk, Settlements, Middle Office, Confirmations and the rest of the bank.) Its doubtful that alleged trader had know how as well as access to temper with all the systems in the various departments.

    Maybe, unhappy place that UBS is due to its history of miserable bonuses its only left with monkeys, or maybe everyone is conspiring to get rid of Kengeter and Gruebel .LOLZ

  12. Technically it possible a person to have access priviledge of differrent account/ module within multiple financial system but it can not be done without some one to realize and ring the bell, because each employee has subjected to less than two modules unless for technicsl and support personnel, so is the settlement module has vandalised for a couple of weeks with unresponsible personel and no one know there is a problem to he who asdigne the module or the system has bugs, and normally each account should be reviewed monthly when culculation of turnover, debtors and creditors and finally each account should have only one person who create it into the system after get all support documents and be signed by senior figures within banks oops, what i mean kweku adoboli is not alone but a chail of people, perhaps he is has been taken tothe law to fish the chain.

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