The real lesson of rogue trading

The real message of the UBS rogue trading affair isn't that investment banks have useless risk controls. It is that banks no longer have any business left that doesn't involve taking massive and irresponsible risks, says Matthew Lynn.

Massive bets on the markets; testosterone-fuelled trading floors; 30-year-old traders raking in a million a year through trading instruments so complex you needed a couple of PhDs in physics to understand what they were, never mind what price they were likely to hit the following week. The UBS rogue trading scandal was like something out of the mid-noughties.

But hold on. We thought finance houses were meant to have given all that up. In the wake of the credit crunch, investment-banking giants were meant to have put in new risk controls, beefed up their credit ratios, and gone back to making money the old-fashioned way by servicing their clients with products they actually want. Unfortunately, it turns out they haven't given up frenetic trading at all.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.