According to this Bloomberg report, Government of Singapore Investment Corp (GIC) faces a potential loss of 6.7 billion Swiss franc (US$7.4 billion) by virtue of being the biggest investor in UBS, making it one of the most unprofitable banking investment since 2007. In 2Q 2009, the Bank of America "divestment" by Temasek Holdings lost US$1 billion in just one deal (188.8 million BOA shares valued at US$13.7 each sold at an average US$8.67 per share). When these guys make a boo boo, they make sure it generates more publicity than the F1 night race.
UBS chief executive Oswald Gruebel was earlier reported to be under pressure to step down after a rogue trader trashed US$2.3 billion (S$3 billion), less than half of what GIC stands to lose. When Gruebel finally quit on Saturday, 10 days after the trading scandal was exposed, he stressed it was a personal decision and that he was personally accountable for the loss. “I am convinced that it is in the best interests of UBS to approach the future with a new leader at the top.”
Nobody at GIC seems to feel personally accountable for their losses. As a matter of fact, the former chairman has just been rewarded with a $4 payola.
When Nick Leeson broke the Barings Bank, the international community was aghast that it happened under the supposedly strict supervision of the Monetary Authority of Singapore. Like the former derivatives broker whose fraudulent, unauthorized speculative trading caused the collapse of the United Kingdom's oldest investment bank, Kweku Adoboli also engaged in unauthorised trades in his role as part of UBS's so-called Delta One trading team, which deals in Exchange Traded Funds. Both Leeson and Adoboli placed big bets on future movements in stock-market indices. Leeson used one of Barings' error accounts to cover up bad trades, Adoboli hid the size of his bets by the manufacture of fictitious offsetting investments. The similarities are uncanny.
The Financial Services Authority, the equivalent of our MAS, is investigating why UBS failed to identify the unauthorised transactions that the bank says will generate the humongous US$2.3 billion loss. GIC, which has a 6.41 per cent stake in UBS, had repeatedly expressed its support for outgoing chief executive Oswald Gruebel, according to a Reuters report. The worrying aspect of this sorry saga is that while Leeson left only a black-eye on MAS, the UBS debacle is hurting us where it counts - our hard earned sovereign funds. And the guy in charge of protecting our reserves won't be telling us much about other potential disasters because he claims to be bound by the Official Secrets Act. "GIC believed he had good plans," said one source, a remark that is hardly assuring, since Thaksin was also considered be a good bet by the same people playing with the nation's savings.