One of Kweku Adoboli's bosses said he reacted with disbelief when he heard that the alleged UBS rogue trader, a close colleague, had confessed to unauthorised deals which cost the Swiss bank $2.3 billion (1.4 billion pounds), a British court heard on Wednesday.
Ronald Greenidge, head of European cash trading at UBS in London, also said Adoboli had revealed he had an opportunity to close down his fraudulent deals at no cost to the bank weeks before the losses came to light, but had failed to do so.
Adoboli, 32, was arrested at UBS's London offices on September 15, 2011. He is on trial at Southwark Crown Court accused of fraud and false accounting, charges he denies.
The day before his arrest he sent an email to figures at the bank in which he admitted making unauthorised deals and concealing the bank's exposure to losses by entering fake deals into the books.
"I could not believe someone I worked with for that length of time would do something like this," said Greenidge, who was Adoboli's direct supervisor until April 2011.
"From this email ... I thought it would be a number that would be manageable, the bank, if it were due, could absorb," he told the court.
Adoboli left the office at lunchtime on September 14 before later sending what prosecutors call the "bombshell" email, and Greenidge was asked to call him back in for a meeting.
When the trader returned in mid-afternoon, Greenidge said he told them the bank had exposure of $5 billion on the U.S. S&P 500 stock index and $3.75 billion on the German DAX.
"The question was how could you amass a position of that size without alarm bells going off," Greenidge said. "He said he had booked fictitious trades to hide the exposure."
At a second meeting later that night, Adoboli, who now had his lawyer present, said he had been dealing in breach of his maximum trading limit and booking fictitious trades since October 2008, Greenidge said.
All those deals had been settled by June 2011 when Adoboli decided to "escalate the size of his positions" on the assumption the market would fall.
However, the market rose on the back of the Greek parliament's approval of austerity measures and other U.S. data. In July, he reversed his position, thinking the market would rise, which for a time it did.
Greenidge said he had told them he had a "brief window" to close his position to zero but failed to take it. The market fell, prompting Adoboli to reverse course yet again, only for it to go up again.
Asked in the meeting whether other members of his team on the Exchange Traded Funds (ETFs) desk, or other figures at the bank knew what he had been doing, Adoboli did not give an answer, Greenidge said.
Earlier, William Steward, one of UBS's accountants who was trying to make his desk's books balance, told the court Adoboli kept altering his explanation for a hole in the figures.
He said by the evening of September 13, there was a "great deal of anxiety" about the level of the bank's exposure and after speaking to Adoboli, he approached the bank's Credit Risk Department, something he said he would have expected the trader himself to have done.
"They were very surprised about it," Steward said. As concern mounted, Steward spoke to Adoboli on the following morning to try to find out who the counter-parties to the outstanding deals were.
"It wasn't a very good result," he said of their call. "There was a changing story. The explanations started to make no sense."
Adoboli was asked to provide exact details quickly as more senior figures at the bank began to get involved.
"Something clearly strange was happening. We still thought there was an innocent explanation," Steward said.
At 2.30 p.m., a few hours later and after failing to reach him by phone, Steward said he received what the prosecution described as the bombshell email in which Adoboli admitted to unauthorised trading.
(Editing by Mike Nesbit)