BankThink

To better hide card-skimming devices, fraudsters are using 3D printers to craft them to exact specifications.

Create a national charter for nonbanks so they don't have to go through banks to offer products to underserved consumers.

Receiving Wide Coverage ...The Mess at UBS: More details are emerging on how alleged rogue trader Kweku Adoboli may have run up more than $2 billion in losses for UBS without the Swiss bank's knowing. Press reports suggest he took advantage of a loophole in European reporting requirements for exchange-traded fund trading. Adoboli, the speculation goes, could have made up bogus hedges purportedly offsetting the unauthorized positions he took, because the fictitious trades wouldn't have required confirmations. As a former back-office employee, he was well qualified to perpetrate such a ruse. "Some banks do not confirm trades until settlement and Mr Adoboli is likely to have known which ones those were," the FT says, citing an anonymous insider. The paper points out that this is yet another part of the story echoing that of Jerome Kerviel, who worked in Societe Generale's middle office (PDF) before he made rogue trading history. We might add that Nick Leeson got his start as a clerk, too. (If you're wondering how we even remember that piece of trivia, click here and scroll to about 2:45.) And speaking of the bloke who brought down Barings Bank in 1995, Leeson was recently interviewed by The Sun (one British paper we don't expect to cite very often in the Morning Scan) about the Adoboli affair. He told the tabloid he blames the bank and that Adoboli could become a "fall guy." Banks, Leeson says, have "preposterously" failed to learn any lessons about "their dogged pursuit of money": "Putting controls in place, and employing people to ensure the controls are working, costs money so they won't do it. It's last on their list of priorities." This may well be a correct assessment, but as they say, consider the source. OK, let's zoom back out to the bigger picture: several articles observe that the UBS mess has strengthened the hand of those seeking to tighten regulation of financial institutions worldwide. "In the U.S., those on Wall Street and in Congress who wanted to repeal or roll back the Dodd-Frank law will have a hard time making inroads now," Franceso Guerrera asserts in the Journal's "Current Account" column. "The fact that UBS lost more than $2 billion on unauthorized trades leaves the impression that, once again, a member of the global banking elite has been unable to police itself.… Proponents of stricter regulation could hardly have asked for a better assist." A story in the Times' Dealbook makes a similar argument, and suggests that Adoboli's alleged speculative trades — apparently made with UBS' own money — could bolster the case for a stronger version of the Volcker rule in Dodd-Frank.

Since its inception, banking in America has been subject to regulation and supervision. For the most part, this relationship is symbiotic. At its best, regulation and supervision help prevent bad actors from undermining the reputation of the industry and hurting consumers; elevate good practices; and instill public confidence in the system.

The Federal Reserve is holding public hearings in three cities across the country to review Capital One's proposed purchase of ING Direct. The hearings to be held in San Francisco are half a continent away from the nearest branches of what may become America's fifth largest bank. Without branches, the bank's responsibility to California cities and counties is not clear under regulators' current interpretation of the federal Community Reinvestment Act.

Microsoft inadvertently unblocked some of the compromised digital certificates last week for Windows XP users, leaving those users open to potential fraud attacks. The latest Windows update fixes this.

Receiving Wide Coverage ...Rogue Trader Redux: UBS raised its estimate of its losses from allegedly unauthorized trades by a London employee to $2.3 billion from the initial figure of $2 billion. The U.K. authorities formally charged Kweku Adoboli with fraud on Friday and said his shenanigans had gone on undetected for three years. Meanwhile, according to the Journal, the scandal has caused some Swiss politicians to call for UBS' CEO, Oswald Grubel, to step down, and intensified pressure on the company to shrink or spin off its investment bank. Grubel refuses to step down, though. Another Journal story says Societe Generale is still haunted by a similar scheme perpetrated by the now-infamous Jerome Kerviel that was uncovered three years ago. The Financial Times delves into the similarities between the two — both traders allegedly disguised losses with fictitious countertrades. Both Kerviel and Adoboli worked on "Delta One" trading desks, which traffic in, among other things, exchange-traded funds. ETFs had already been a source of worry for regulators this year — see this report from the Financial Stability Board, and this one from the U.K. Financial Services Authority. The Adoboli affair has moved the issue higher on their agenda, the Journal's "Heard on the Street" column notes approvingly. The FT columnist Tony Jackson says the UBS debacle has been used as an argument to support the U.K. Vickers report's plan for reforming banks — which he says is all well and good, but there are plenty of other reasons to do so, as that report said, which he then goes on to enumerate. (Interestingly, Jackson, though wholeheartedly in favor of the Vickers recommendations, argues the proposed ring-fencing of investment banks won't work — a point of disagreement with his colleague Martin Wolf. The problem, according to Jackson: "The underlying premise is that the board can set the culture. But that is not how big corporations work" — see BP. But we digress….) British and Swiss regulators have hired Deloitte to investigate the events at UBS, which will pay for the audit firm's gig, the FT says. David Sidwell, a former chief financial officer at JPMorgan and the senior independent director on UBS' board, will head an internal probe. Finally, an article the Times' "Dealbook" provides a concise summary of this multifaceted drama so far, and in the process answers a question that's been on our minds since we saw that photo of a handcuffed Adoboli surrounded by British police: why is he smiling?

Last week, a group of credit unions found themselves face to face with a bunch of good people, stoic as they were, who are greatly uncertain of what lies ahead for them or where they might turn. And this is the tough part: there wasn't and isn't a whole lot that credit unions could or can do for them.

A brief review of the so-called "intermediate sanctions" rules and a refresher on the simple process that tax-exempt employers should follow.

Lifting the member business lending cap does not just benefit credit unions and their millions of members. It represents a positive, productive step that would go a long way to paving the way for small businesses to flourish and put many Americans back to work while not costing taxpayers one cent.