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UBS faces music over trader
Source: Agencies |
September 17, 2011, Saturday
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Print Edition
Print Edition
UBS was under pressure yesterday to explain how its managers failed to catch a US$2 billion loss due to rogue trading, with experts calling into question the Swiss bank's ability to turn around its scandal-hit image.
As the 31-year-old trader, Kweku Adoboli, was ordered held in prison custody until another court appearance next Thursday in London, charged with fraud and false accounting, the bank's investors and the wider industry wondered about the fallout, both for UBS as a storied Swiss financial institution and for the banking sector.
"Until UBS has explained in detail how such a significant loss due to unauthorized trading could happen, and how the problem will be solved, confidence will remain impaired," said Andreas Venditti, an analyst at Zuercher Kantonalbank.
Some commentators and politicians called for senior managers at UBS to take responsibility for the loss, which the bank said could put its third-quarter results in the red. Ratings agency Moody's placed UBS's credit grade on review for possible downgrade, citing worries over the future of its London-based investment unit.
Manuel Ammann, a professor of finance at the University of St Gallen, said it would be difficult for UBS to sell the investment unit in the current depressed financial climate, though some shareholders might prefer it to be split off.
"From a risk point of view there are good grounds for separating the classic credit and payment business from the investment banking, because there's a danger of cross-infection," Ammann said. "Shareholders would prefer to have two shares of two focused companies than a single share for a conglomerate."
Swiss media questioned how one UBS trader could have managed to cause a US$2 billion loss without others around him noticing sooner. Respected Swiss banking expert Hans Geiger told state-owned SF television he doubted the lone trader account put forward by UBS.
The bank refused to comment on BBC reports that it was Adoboli himself who alerted managers to the loss.
As the 31-year-old trader, Kweku Adoboli, was ordered held in prison custody until another court appearance next Thursday in London, charged with fraud and false accounting, the bank's investors and the wider industry wondered about the fallout, both for UBS as a storied Swiss financial institution and for the banking sector.
"Until UBS has explained in detail how such a significant loss due to unauthorized trading could happen, and how the problem will be solved, confidence will remain impaired," said Andreas Venditti, an analyst at Zuercher Kantonalbank.
Some commentators and politicians called for senior managers at UBS to take responsibility for the loss, which the bank said could put its third-quarter results in the red. Ratings agency Moody's placed UBS's credit grade on review for possible downgrade, citing worries over the future of its London-based investment unit.
Manuel Ammann, a professor of finance at the University of St Gallen, said it would be difficult for UBS to sell the investment unit in the current depressed financial climate, though some shareholders might prefer it to be split off.
"From a risk point of view there are good grounds for separating the classic credit and payment business from the investment banking, because there's a danger of cross-infection," Ammann said. "Shareholders would prefer to have two shares of two focused companies than a single share for a conglomerate."
Swiss media questioned how one UBS trader could have managed to cause a US$2 billion loss without others around him noticing sooner. Respected Swiss banking expert Hans Geiger told state-owned SF television he doubted the lone trader account put forward by UBS.
The bank refused to comment on BBC reports that it was Adoboli himself who alerted managers to the loss.
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