Posts tagged "UBS"

Knight Vinke: UBS would be better off without investment bank

Eric Knight and his crew own less than 1% of UBS, but do they make a good point about the Swiss Bank Corporation merger?

Knight Vinke, the activist investor, is not everybody’s cup of tea and the directors of UBS may believe that the grumbles of a shareholder that owns less than 1% of the bank can be ignored.

That would be foolish. Eric Knight and his crew have a good record in pointing out uncomfortable truths and some of their ideas (but certainly not all) eventually become adopted. Remember HSBC, where Knight Vinke was lobbying for years for the bank to cut costs and remember its Asian roots, two pillars of today’s strategy.

Knight is not the first person to argue that UBS would be better off without its investment bank but he is armed with an excellent statistic. Since the merger between UBS and Swiss Bank Corporation in 1998, he calculates, the investment bank has paid Sfr 115bn in salaries and bonuses to its employees but contributed a negative Sfr 25bn to its parent and shareholders. That’s how painful were the colossal write-offs during the crisis, plus the fine for Libor-rigging and the loss on the Kweku Adoboli fraud.

Worse, the calamities in investment banking “weakened the reputation of its prized wealth management division and the all-important trust of its clients”, argues Knight. That’s almost undeniable given the outflows of funds in 2009 and 2010.

It’s all in the past, UBS might respond, the investment bank has just had a sparkling quarter and the private-client business is back on form. Okay, but Knight’s point is that the risks have not been removed. He is perfectly right to say that the time to consider a split is when the sun is shining.

He is, however, gloriously vague about how divorce would be achieved in practice, given the capital complications.

Forcing the employees to buy ownership over time sounds like wishful thinking. But at least the branding part would be easy.

If they dig around in the cellars, UBS will find one of the best names in the game – SG Warburg.

UBS should give Knight a proper response. He is probably not the only shareholder who thinks the investment bankers have grown fat at their expense, and may do so again.

UBS should be broken up says Knight Vinke

Group says Swiss bank should sell off its investment arm and sell it to staff

Activist investor Knight Vinke has reopened the debate about investment banking by calling on the Swiss bank UBS to sell off its casino investment banking arm to its employees.

On the day of the bank’s annual meeting, the fund management group said: “We question the merits of keeping the investment bank under the same roof as the wealth management and Swiss banking businesses”.

The investment bank, a major employer in the City and fined £940m for rigging Libor last year, is already being scaled back by a new management team, led by Sergio Ermotti who was installed in the fall out from the unauthorised £1.3bn trading losses caused by Kweku Adoboli, who has since been jailed for seven years.

The division has just posted strong results for the first quarter of 2013 and Knight Vinke, which sent a representative to the annual meeting on Thursday, said this was now the moment to debate the structure of the group.

The investment bank had “nearly destroyed UBS” between 2007 and 2009 when the bank was bailed out by the Swiss authorities, said Knight Vinke, which has in the past criticised HSBC.

Knight Vinke said: “Investment banking is a very risky business and these risks pose a serious threat to UBS’s wealth management and swiss banking franchises.

“They may also be preventing them from achieving their true potential. This is a discussion that is best had when all the businesses are doing well – as is the case today – and the board needs to be encouraged to act quickly and decisively so as not to lose the opportunity.”

The fund manager, led by Eric Knight, suggested that the “best owners” for the investment could be its employees. Since 1998, the investment bank has paid Sfr115bn (£80bn) in salaries and bonuses to its employees but knocked a Sfr25bn hole in the entire group. “Transferring full or partial ownership of the investment bank to insiders would almost certainly lead to more prudent behaviour,” Knight Vinke said.

The group voted against the remuneration report at the annual meeting at which 18% of shareholders failed to back the pay policies which included a potential £17m signing on fee for the new investment banking head Andrea Orcel.

However, this was an improvement on the 40% who had failed to support the pay awards the previous year. In response to the criticism by Knight Vinke, UBS said its shareholders had the opportunity to speak out at the annual meeting.

At the meeting “UBS confirmed that the firm is on track and comfortable with its new strategy”.

“The results of the first quarter 2013 confirm that the company made significant progress and is reaping the benefits from its focus on wealth management and the Swiss bank supported by focused and de-risked investment banking activities and asset management,” UBS said.

UBS has attempted to show restraint over pay since pharmaceutical company Novartis was forced to scrap a payoff of Sfr72m for its former head Daniel Vasella. There was also a national referendum which voted to ban big payouts for new and departing managers.UBS is said to have warned half its 16,000 investment bankers than they would not get bonuses and cut its total bonus pool by 7% to Sfr2.5bn.

The FSA is being ridiculous in the Pru case

After bank scandals, UBS, Libor rigging and money laundering, the FSA should itself be censured over its Pru regulation

The Financial Services Authority deserves to be censured for making UK financial regulation look ridiculous. The £30m fine dished out to the Prudential is wildly over the top when you remember that UBS copped only a similar sum for failing to detect Kweku Adeboli’s fraudulent trading. Which offence is more serious? Failing to give the regulator a heads-up on a possible deal, even a big one, or allowing a trader to run riot and clock up a £1.2bn loss? Come on, UBS’s sins were many times greater.

And the censure for chief executive Tidjane Thiam is beyond parody. Think about what has been going on in our big banks in recent years. Libor has been rigged. US sanctions against Iran have been breached. Rules against money laundering have been flouted. Small businesses have been fleeced via interest rate swaps. Punters have been stuffed with inappropriate and overpriced PPI policies. Yet no chief executive of a big bank has been censured for anything. Thiam, by contrast, has been put in the stocks – he is the only FTSE 100 chief executive to receive a censure from the FSA.

At a push, one might agree that the Pru kept quiet for too long. The $35bn (£23.2bn) purchase of AIA would have been a very big transaction. It would have involved a £14.5bn rights issue and, conceivably, there were implications for UK financial stability. Yet the FSA’s rule on disclosure is vague – principle 11 imposes an obligation to “disclose appropriately information of which the FSA would reasonably expect notice”.

That phrasing introduces an element of judgment. The detail that seems to have annoyed the FSA was Thiam’s failure to mention the Pru’s ambition to buy AIA at a regular supervisory meeting on 12 February; a non-binding proposal had been dispatched to AIG, AIA’s owner, by that stage. But Thiam’s reticence at the meeting is easy to understand. Loose talk costs deals and a leak could have been a killer.

Yes, on balance, Thiam waited too long to tell the FSA – and, indeed, it was a newspaper report of the talks that came first. But a modest fine for the Pru plus criticism of the entire board, not just the chief executive, would surely have made the FSA’s point about the importance of prompt disclosure. Better still, the regulator could have offered clearer guidance on when firms are supposed to report possible deals.

The big fine and censure make it look as if the FSA, in its final hours, is trying to make up for lost time. It is a classic case of UK regulation at its worst: miss the big stuff and then stamp on minor infringements.

Top 10 FSA fines

Following Prudential’s £30m acquisition fine, we run down the FSA’s top 10 fiscal grabs

Insurance group Prudential has been fined £30m for failing to tell the Financial Services Authority (FSA) about its attempted takeover of the Asian arm of US insurer AIG. The regulator has also censured the company’s chief executive, Tidjane Thiam. This is the fifth largest fine imposed by the FSA to date.

Here’s where it fits in the FSA’s 10 largest fines to date:

1. £160m, UBS, December 2012, Libor rigging

2. £87.5m, Royal Bank of Scotland, February 2013, Libor rigging

3. £59.5m, Barclays, June 2012, Libor rigging

4. £33.32m, JP Morgan, June 2010, failing to protect client money

5. £30m, Prudential, March 2013, failing to inform FSA of acquisition plans

6. £29.7m, UBS, November 2012, failing to prevent unauthorised trading

7. £17.5m, Goldman Sachs, September 2010, weaknesses in controls

8. £17m, Shell, August 2004, market abuse

9. £13.96m, Citigroup, June 2005, failing to conduct its business properly

10. £10.5m, Card Protection Plan, November 2012, mis-selling insurance

Three arrested in Libor manipulation investigation

Former UBS and Citigroup banker and two others questioned as part of Serious Fraud Office investigation into Libor manipulation

A former UBS and Citigroup banker and two others had their homes raided early on Tuesday morning and were taken in for questioning as part of the Serious Fraud Office investigation into the manipulation of Libor interest rates.

The intervention came amid mounting speculation that the Financial Services Authority is preparing to take action against a number of banks in relation to Libor setting.

The SFO and City of London police arrested three men aged 33, 41 and 47 after searching a house in Surrey and two properties in Essex. The three were taken to a London police station to be interviewed “in connection with the investigation into the manipulation of Libor”.

The three are understood to be Tom Hayes, who has worked for a number of banks including UBS and Citigroup, and two men who worked for City-based inter-dealer broker RP Martin – Terry Farr and Jim Gilmour. They are either on leave or have left the company. Citi and UBS declined to comment. RP Martin stressed it was co-operating with the authorities but not under investigation.

A lawyer for Farr declined to comment, while Gilmour and Hayes could not be contacted. It was anticipated the three would be release on police bail after questioning without being charged.

The SFO’s investigation into Libor rigging was sparked by the £290m fine for Barclays in June, which led to the departures of chairman Marcus Agius, chief executive Bob Diamond and newly promoted chief operating officer Jerry del Missier.

Investigators working in collaboration with multiple parallel inquiries around the world are racing to establish the international reach of alleged Libor manipulation rings.

Hayes, who had been based in Tokyo during his 10 months with Citi, was let go by the bank. This was about the same time as the Japanese regulator sanctioned the firm following a probe into alleged manipulation of the yen-based interest rates.

The director of the SFO, David Green, has told MPs that he knows the agency will be largely judged on the success of the Libor investigation and had deployed 40 staff on the cases which involve more than one firm.

The SFO announced a formal investigation into the complex rate-rigging affair on 6 July and by the end of that month had already concluded it had the powers to conduct a criminal investigation.

While the Financial Services Authority and regulators in the US have fined Barclays, individuals involved have not been formally named or reprimanded. Barclays’ head of investment banking, Rich Ricci, told the banking standards committee that it had “terminated the employment” of five people and that 13 staff had been disciplined in total.

Barclays is so far the only bank the regulators have penalised, but speculation is rife that other banks will face penalties before the end of the year. The FSA said that eight financial firms in total, and not just banks, were the subject of investigations by the City regulator. UBS and Royal Bank of Scotland are among those in settlement talks with the FSA that could reach a conclusion shortly.

Terry Smith, chief executive of City broker Tullett Prebon, said: “At the time I was astonished that no one thought those involved in Libor manipulation could be prosecuted without new and specific legislation. It is a modern illusion that an act cannot be prosecuted as a crime just because there is not a specific piece of legislation which proscribes it. We have some perfectly good laws, they just need to be applied.”

UBS fined £30m over rogue trader

FSA fines Swiss bank for ‘serious weaknesses’ in systems and controls which allowed Kweku Adoboli to rack up £1.5bn losses

UBS has been fined £30m by the City watchdog and could see its investment banking activities crimped by the Swiss regulator in the wake of the jailing of its former trader Kweku Adoboli.

Adoboli, a relatively junior City trader who almost destroyed UBS through increasingly reckless illicit deals, was jailed last week for seven years after being convicted of what police describe as the biggest fraud in UK history.

Both regulators criticised the Swiss bank for serious weaknesses in controls, which allowed the 32 year-old to rack up eventual losses of over £1.5bn during three years of secretive, off-the-book trades. Tracey McDermott, director of enforcement and financial crime at the Financial Services Authority, said: “UBS’s systems and controls were seriously defective. Failures of this type in firms of the size and standing of UBS not only damage the firms concerned but also wider confidence in the integrity of the markets and the financial system.”

The case has been hugely damaging for UBS, prompting the departure of its chief executive Oswald Grübel. During Adoboli’s trial, all three of his desk colleagues admitted they knew about the secret account, to varying extents, and his two bosses over the period showed an apparently relaxed attitude to daily trading maximums being exceeded. All five have either left UBS or been sacked. The bank has also clawed back bonuses and withheld compensation from individuals involved, totalling more than £34m.

On Monday, the regulators issued damning reports on the bank’s control measures, saying compliance at UBS was based too much on trust. Swiss financial market supervisory authority Finma noted that the staff in charge of controlling risk “had too little understanding of the trading activities in question” and were therefore unable to challenge actions taken by Adoboli’s desk. It said UBS had sent out misleading signals by awarding pay increases and bonuses to Adoboli, even though he had clearly and repeatedly breached compliance rules.

In a statement, UBS said: “Since the outset of this matter we have fully co-operated with the regulators’ investigations and we now accept their findings and the penalties incurred. We are pleased that this chapter has been concluded and that the regulators have acknowledged the steps UBS has taken since this incident.”

The bank said it had made progress over the year “reinforcing our position as one of the most financially sound global banks”. UBS last month announced a global cull of up to 10,000 jobs as it dramatically shrinks its investment bank, which has been rocked by a series of scandals. Earlier this year, the bank suspended some of its most senior traders in connection with an international investigation into the manipulation of Libor. It also took a £227m hit from the botched stock market listing of Facebook, which it blamed on Nasdaq’s “gross mishandling” of the flotation.

Some City analysts argued that the FSA fine – which was reduced by 30% because the bank agreed to settle early – was too low considering the extent of failings discovered at UBS. Michael Hewson, senior market analyst at CMC Markets, said: “Our regulator is a bit toothless when it comes to levying fines. If they want to set a deterrent factor with respect to these fines they really need to make them higher – £29.7m is nothing really, it’s a slap on the wrist. If you want banks to be more serious about oversight you need to hit them where it hurts and that’s in the pocket.”

Finma, which does not have the power to fine UBS, imposed capital restrictions and an acquisition ban on its investment bank. It will appoint an independent third party to “ensure that corrective measures are successfully implemented”. The regulator hinted at further sanctions, saying it continued to investigate whether the bank should increase the level of capital it holds. But analysts said the impact of these measures would be minimal.

UBS faces large fine from Swiss and UK regulators after trial

Swiss bank braced for reprimand over jailing of Kweku Adoboli for fraud

The Swiss bank UBS is braced for a fine and reprimand from regulators after its former trader Kweku Adoboli was jailed for fraud.

The UK’s Financial Services Authority and the Swiss financial market supervisory authority (Finma) are also investigating the trading activities of Adoboli, who was jailed on Tuesday after a jury at Southwark crown court found him guilty of two counts of fraud, although he was cleared on four other charges.

Finma is expected to announce its findings within days but while it can make public statements and demand changes to operations it does not have the power to impose fines. The FSA is expected to fine UBS and can also has the powers to penalise individuals who were authorised to worked in the London arm of Adoboli’s bank.

The FSA announced in February that its investigation had been passed to its enforcement arm, signalling that some form of reprimand was likely. Adoboli, who lost UBS £1.5bn, had used a secret account, known as his “umbrella”,for some of his trading activities. Three colleagues told the court that they knew of the secret account.

The largest fine ever imposed by the FSA was the £59.5m slapped on Barclays for attempting to manipulate the Libor benchmark interest rates.

Hero or pariah? A whistleblower’s dilemma

Some are rewarded under US laws, others get nothing and are vilified for speaking out

Whistleblowing is not for the faint-hearted. Careers can be ruined, marriages strained, and pariah status is almost guaranteed. Nevertheless, a whistleblower from software company Autonomy decided to step forward and tell their new bosses at Hewlett Packard about alleged financial irregularities in the business.

HP has since written off $8.8bn (£5.5bn) from the value of Autonomy which it bought for $10bn less than a year earlier, and informed the FBI and Securities and Exchange Commission.

As for the whistleblower, rather than facing the sack, he or she could be entitled to a multimillion-dollar payout thanks to new US laws.

New rules introduced by the Wall Street regulator mean a whistleblower can get up to a 30% cut of any fine handed out for wrongdoing.

Launched a year ago, the scheme made its first award in August, paying nearly $50,000 to a whistleblower who alerted the Securities and Exchange Commission to a multimillion-dollar investment fraud.

However, former whistleblowers are less convinced such incentives are necessary and say they acted on their conscience rather than the thought of any financial reward.

Paul Moore, the former head of group risk for HBOS who was sacked after warning the board it was taking excessive risks, turned whistleblower in 2009 having taken a payoff and signing a confidentiality agreement.

He said: “Money was never a consideration and I don’t think it would have been. I was earning hundreds of thousands a year as one of the biggest compliance officers in the country. By comparison, last year I earned £15,000.”

Talking about his own experience, he said:

“I took the decision to speak out on the night Lehman Brothers went down. I was breaching a confidentiality agreement but I thought the greatest good for the greatest number of people was to speak up because it would feed into the policy debate.”

But the fallout left him unable to work in banking again, turning to drink and putting a strain on his family life.

“Even though society wants people to speak up, they can’t get another job and get treated like a leper in your profession.”

The US tax authorities have similar reward schemes. Earlier this year a former UBS banker, Bradley Birkenfeld, was given $104m for assisting the US tax authorities with its investigation into Swiss bank accounts. He was paid the money out of a $780m fine for the bank.

Two years earlier, former GlaxoSmithKline employee Cheryl Eckard exposed a series of contamination problems at a drugs factory in Puerto Rico and a subsequent cover-up by company bosses. She received $96m under the false claims act – her share of the $750m criminal and civil settlement between US regulators and the firm.

However, former Olympus chief executive Michael Woodford, who exposed a £1bn fraud at the company before he was sacked, warned against such large payouts. “I agree with the principles of having some financial protection for people going forward,” he said, “but there should be a limit of around $2m.

“Look at the UBS whistleblower who got $100m. That’s like winning the Euromillions and it’s not morally justified to pay such a huge amount. That money should have gone to the state imposing the fines.”

There are no state-sanctioned financial incentives for whistleblowers in the UK, and the City regulator is unlikely to follow America’s lead.

Despite this, a new survey by risk advisers Kroll found UK employees were responsible for nearly one in four tip-offs the SEC gets from foreign employees, suggesting financial incentives could increase the number of whistleblowers coming forward to the UK’s Financial Services Authority.

Benedict Hamilton, managing director at Kroll, said: “We have already seen a sharp rise in whistleblowing tipoffs to the regulator in the last few years and the offer of rewards would almost certainly accelerate this trend.”

But while the UBS whistleblower, Birkenfeld, is counting his millions, sometimes going public can have a different outcome. Former Enron vice-president Sherron Watkins was sacked from the company for raising issues around fraud to chief executive Kenneth Lay. She turned whistleblower, but never worked in the sector again and now gives talks on corporate governance, having written books on her experience with Enron. Another famous whistleblower, Karen Silkwood, was immortalised by Meryl Streep in the 1983 film Silkwood. She died in mysterious circumstances after she turned whistleblower on the Kerr-McGee plutonium plant where she worked. She suffered radiation poisoning, leading to her investigating wrongdoing at the company, but on her way to meet a journalist, she died in an unexplained car crash.

Most whistleblowers agree the impact of blowing the lid is immeasurable and far greater than they ever expected, whether exposing wrongdoing in the business world or beyond.

Dr Rita Pal, an NHS whistleblower who exposed patient neglect in a North Staffordshire hospital, said: “The main consequence of whistleblowing is that the pariah effect makes you essentially unemployable due to the perceptions people have. I do have regrets on occasion when I look at the personal consequences. I am a human being after all and the devastation to my life has been incredible. The hardship for a whistleblower is hard to cope with. The worst aspect is that few people understand that vulnerability and there is little by way of support.”

But Woodford, formerly of Olympus, believes the situation is changin. “Since I became a whistleblower, I’ve been offered the presidency of a Japanese firm and chairmanship of a British company, so I hope that encourages others to speak out. A few years ago it was more closeted with the establishment looking at whistleblowers as troublemakers, but as the world sees scandal after scandal, people shouldn’t fear standing up.”

Moore agreed: “Whistleblowers are raising issues because they care about their company deeply and this is misunderstood as disloyal subversion.”

UBS and Goldman Sachs had access to negative Autonomy research

Leading City analyst says both banks had access to research about alleged banking irregularities at UK software firm

UBS and Goldman Sachs, two of the banks that advised Autonomy on its disastrous sale to Hewlett-Packard, had access to research about the alleged accounting irregularities at Britain’s largest software company before the deal was negotiated – a transaction that has wiped $8.8bn (£5.5m) from the US company’s balance sheet over the last couple of days.

Paul Morland, a leading City analyst who started raising red flags about exaggerated performance claims at Autonomy as early as 2009 and has been one of the company’s most vocal critics, said both banks had access to his research which was widely circulated at the time.

It is understood that both banks requested meetings with Morland, with Goldman Sachs seeking advice prior to winning a role as Autonomy’s broker in June, a role which it held jointly with UBS and Citigroup.

“The banks must have concluded that my research findings were not negative enough not to take on the mandate,” said Morland. “You can understand why they came to that conclusion when they had Mike Lynch [co-founder of Autonomy] telling them one thing and me telling them another.”

None of the 15 different financial, legal and accounting firms involved on both sides of the transaction publicly raised concerns about Autonomy’s books. The company’s lead adviser was US firm Qatalyst Partners, while UBS and Goldman Sachs were brought in as second tier advisers days before HP’s $10.3bn offer for Autonomy last year. Both UBS and Goldmans declined to comment.

Speaking out about Autonomy was a difficult stance to take. Analysts have described how Lynch and his senior managers were quick to hit back at those who questioned the numbers. They were barred from attending quarterly results meetings, blacklisted so that company staff were forbidden to talk to them and pressure was put on managers to silence their criticism.

But while Morland was one of a hard core asking awkward questions, many analysts at the large banks had buy recommendations on Autonomy.

A look back at the notes published in the 12 months leading up to the sale, compiled by brokerforecasts.com, shows Bank of America Merrill Lynch and Goldman Sachs, both of which advised Autonomy, were consistently positive.

UBS turned from neutral to positive in February 2011. Barclays Capital, who advised HP, Credit Suisse and RBC Capital Markets were also recommending their clients buy the stock.

“Our job, if we’ve got any moral good in us, is to ensure the efficient allocation of capital,” said Morland.

“If the quality of analysis is worse you will get more misallocation of capital. That is a bad consequence and that might be what happened here.”

Autonomy’s chief operating officer, Andrew Kanter, wrote to Morland’s bosses at Astaire Securities, where he worked at the time, insisting on corrections and retractions to his published research. One letter said: “Autonomy likes to encourage robust debate among analysts,” but it went on to accuse Morland of “knowing dissemination of false information into the marketplace”.

Morland described how he was one of three analysts – Daud Khan at JP Morgan Cazenove and Roger Phillips at Merchant Equity Partners were the others – who were not allowed to ask questions at a particularly fraught results presentation.

At one point Khan was banned from attending results announcements for a year. Pressure was also put on technology specialists. Khan did not respond to requests to comment.

Alan Pelz-Sharpe, of IT experts 451 Research, was banned from speaking to company staff. He said: “I was essentially blacklisted by them, so in theory nobody there could talk to me. If I wrote anything critical I would have a threatening note come back saying my report was riddled with inaccuracies and there was no way it could go to press.”

Lynch said on Wednesday there was no sense in the claim by HP that more than $200m of improperly recorded revenue led to a writedown worth billions. “After being ambushed by all this yesterday, I’ve had a chance to look at some of the things that they’re saying – it just doesn’t add up,” Lynch said in an interview with technology site All Things D. “HP is looking for scapegoats, and I’m afraid I’m not going to be one of those.”

The 47-year-old, who left the combined company in May, said that he has no plans to hire a lawyer and has not been in contact with HP.

Deloitte’s deal

Deloitte, the top four accountancy firm thatthat signed off Autonomy’s annual reports, earned £4.44m in non-audit fees from the technology firm during the last four years it was charged with scrutinising the accounts. The sum, paid for advice on tax, acquisitions and other services “pursuant to legislation”, is close to the £5.422m Deloitte collected for auditing work.

Investor advisory service PIRC has in the past recommended Autonomy shareholders vote against the reappointment of Deloitte on the grounds that it was conflicted by taking extra commissions.

Definitions of auditing tasks vary, and PIRC rules put the fees earned by Deloitte that had nothing to do with auditing at 40% over the four year period.

Nigel Mercer, the Cambridge-based Deloitte partner who scrutinised Autonomy in 2010, was also Tottenham Hotspur’s auditor. Autonomy signed a £20m sponsorship deal with the football club in 2010. A spokesman for Deloitte said there was no link between Mercer’s involvement with both clients. The proportion of non-audit work Deloitte did for Autonomy had reduced over the years.

£1.5bn UBS fraud case witness sets up football betting website

John Hughes, brains behind the Bets of Mates, told court he knew of unauthorised trades by jailed City trader Kweku Adoboli

A former colleague of Kweku Adoboli, the City trader jailed for seven years for gambling away £1.5bn of Swiss bank UBS’s money, has set up an online betting company.

John Hughes, who was dismissed by UBS after the firm found strong evidence of collusion at local desk level according to evidence at Adoboli’s trial, has now co-founded a football betting company called Bets of Mates, in which groups of friends gamble against each other in a league.

Hughes, who appeared as a prosecution witness at Adoboli’s trial and told Southwark crown court he “cried all the way home” on the night his colleague was arrested, said he began work creating the website shortly after leaving UBS.

“Obviously, I’ve been without a job,” he said. “I thought it [the website] was a good idea. My best mate is a professional footballer and he’s invested in it.”

Hughes, who is described as the brains of the operation on the Bets of Mates website, said he could not “pass comment on whether it’s appropriate” for a man so closely linked to Britain’s biggest ever fraud loss to be running a betting site.

“It’s not as though it’s the first gambling website,” he said. “It’s an appropriate use of my skills, hopefully.

“I appreciate there’s a story here, but I don’t want to be the one to tell it. Obviously the judge has made his comments on that [the role of gambling in Aboboli's fraud].”

Sentencing Adoboli earlier this week, Mr Justice Brian Keith told him there is “a strong streak of the gambler in you. You were arrogant to think the bank’s rules for traders did not apply to you.”

Hughes told the trial he was aware Aboboli was hiding his unauthorised trades in an “umbrella” account more than six months before the bank discovered the losses, but failed to report it.

The court heard that after Adoboli told him how much money was in the account, Hughes sent a chat message to Adoboli saying: “Nice. It can piss down with rain after this. You’re a legend. I don’t know how you sleep at night.”

He told the court he was “stupid not to have reported Adoboli as soon as he became aware of the unauthorised trades.

Hughes said he had to receive six weeks of counselling iafter Adoboli’s arrest in September 2011. “This was a huge trauma,” he told the court. “I nearly drove my car into the middle of the motorway. I wasn’t a rational human being. I cried all the way home from London to Middlesbrough.”

On his profile page on the website, Hughes is described as “a Middlesbrough fan by trade, but seven years in the City removed all sense of optimism from his character, and made him absurdly superstitious”.

“Having worked in the City since 2005 John is all numbers and spreadsheets, numbers and spreadsheets, numbers and spreadsheets,” it adds.

The website, which uses the slogan “there is always a winner”, was set up by Hughes and two friends who had a “drunken idea [to set up the gambling site while] watching the Champions League semi-final in 2012″.

Hughes’ partners are Adam Haywood, a business development manager, and Dave “TY” McGurk, a centre half for York City.

“I know a lot of professional footballers,” Hughes said. “The idea was they were going to promote it for me … but it doesn’t look like I need them to now.”