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UBS suffers US$2b loss by rogue trader
Source: Agencies |
September 16, 2011, Friday
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SWISS banking giant UBS said yesterday that a rogue trader has caused it an estimated loss of US$2 billion, stunning a beleaguered banking industry that has proven vulnerable to unauthorized trades.
Police in London said they arrested a 31-year-old UBS trader, Kweku Adoboli, in the alleged fraud. UBS declined to confirm his name.
Switzerland's largest bank warned that it could report a loss for the entire third quarter as a result of the rogue trade.
The case immediately evoked memories of Jerome Kerviel, the trader at French bank Societe Generale who secretly gambled away 4.9 billion euros (US$6.7 billion). The scale of that fraud rocked the global financial industry and prompted banks to tighten oversight rules to ensure such large sums couldn't be traded unnoticed.
The Swiss banking regulator Finma said it was in contact with UBS about the incident, which was discovered late Wednesday.
"From the scale of this case you can be sure that it's the biggest we've ever seen for a Swiss bank," Finma spokesman Tobias Lux told The Associated Press.
UBS provided little specific information, saying the incident was still under investigation and no client money was involved. The unauthorized transactions could cost UBS up to the 2 billion Swiss francs (US$2.28 billion) the bank hopes to save by cutting 3,500 jobs over the next two years.
It comes as UBS is struggling to restore its reputation after heavy subprime losses during the financial crisis that resulted in a government bailout, and an embarrassing United States tax evasion case that blew a hole in Switzerland's storied tradition of banking secrecy.
Peter Thorne, a London-based equities analyst at Helvea, said the loss was financially manageable for UBS. But he said it was a blow to the reputation of UBS and its management, and will likely add to calls for the bank to slim down its investment banking unit.
Adoboli's profile on the professional networking site LinkedIn showed he spent the past five years working at UBS's European Equity Trading division after three years as its trade support analyst.
He graduated from the University of Nottingham in 2003 with a degree in E-commerce and digital business, the university said.
Police in London said they arrested a 31-year-old UBS trader, Kweku Adoboli, in the alleged fraud. UBS declined to confirm his name.
Switzerland's largest bank warned that it could report a loss for the entire third quarter as a result of the rogue trade.
The case immediately evoked memories of Jerome Kerviel, the trader at French bank Societe Generale who secretly gambled away 4.9 billion euros (US$6.7 billion). The scale of that fraud rocked the global financial industry and prompted banks to tighten oversight rules to ensure such large sums couldn't be traded unnoticed.
The Swiss banking regulator Finma said it was in contact with UBS about the incident, which was discovered late Wednesday.
"From the scale of this case you can be sure that it's the biggest we've ever seen for a Swiss bank," Finma spokesman Tobias Lux told The Associated Press.
UBS provided little specific information, saying the incident was still under investigation and no client money was involved. The unauthorized transactions could cost UBS up to the 2 billion Swiss francs (US$2.28 billion) the bank hopes to save by cutting 3,500 jobs over the next two years.
It comes as UBS is struggling to restore its reputation after heavy subprime losses during the financial crisis that resulted in a government bailout, and an embarrassing United States tax evasion case that blew a hole in Switzerland's storied tradition of banking secrecy.
Peter Thorne, a London-based equities analyst at Helvea, said the loss was financially manageable for UBS. But he said it was a blow to the reputation of UBS and its management, and will likely add to calls for the bank to slim down its investment banking unit.
Adoboli's profile on the professional networking site LinkedIn showed he spent the past five years working at UBS's European Equity Trading division after three years as its trade support analyst.
He graduated from the University of Nottingham in 2003 with a degree in E-commerce and digital business, the university said.
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