What makes a bank trader go rogue?

Thu Oct 27, 2011 7:54am EDT
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By Kylie MacLellan

LONDON (Reuters) - The traits banks tend to look for when hiring new traders are the very same ones likely to make them go rogue, industry insiders and psychologists say.

Super-competitive, steely calm under pressure, motivated by money and willing to take risks tick all the right boxes for financial institutions.

By hiring such people, banks may be self-selecting those who are more likely to push risk too far.

"If we say to be a trader you have got to be aggressive and prepared to take risks and we have reward systems that are all about rewarding that sort of person, then there are going to be people who will end up rogue trading," occupational psychologist and writer Kim Stephenson told Reuters.

"You are putting people in that position who are more likely than average to do it."

Banks will usually put candidates through multiple rounds of rigorous interviews, as well as several hours of numerical and psychometric tests. A London-based recruiter specializing in traders said it was impossible to screen for rogue potential.

"When someone passes a driving test with flying colors, it doesn't mean they aren't going to crash further down the line," he said.

In the latest example of a trader accused of illegal activities, London-based UBS trader Kweku Adoboli was charged with fraud and false accounting that the Swiss bank says cost it $2.3 billion.   Continued...

<p>UBS trader Kweku Adoboli arrives at City of London magistrates' court in the City of London October 20, 2011. REUTERS/Andrew Winning</p>