A rogue trader for Swiss banking giant UBS has been arrested for allegedly making unauthorized deals that cost the investment firm $2 billion. Hit the jump to read the rest of the story.
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Kweku Adoboli, 31, who as a director of exchange traded funds in the bank’s London office, was arrested on suspicion of fraud.
“I can confirm that an employee of the bank was arrested in London,” a UBS spokesman told Reuters.
UBS said the illegal trades may result in it posting a third-quarter loss – a huge blow to a financial institution that has struggled to rebuild credibility after years of crises.
The loss would effectively cancel out $2 billion the bank had hoped to save from a cost-cutting program announced last month in which 3,500 jobs would be axed.
UBS said none of its clients’ money was affected by the rogue trades.
The alarming episode threatens the future of UBS’s investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.
UBS employed almost 18,000 people in its investment bank at the end of June, most of them in London and the United States.
UBS shares sank 8.2% on Swiss exchanges as the news broke.
Experts said the scandal showed that the banking sector is still vulnerable.
“(This) is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to,” said Chris Roebuck, visiting professor at Cass Business School in London.
The case bears shocking similarities to the scandal that rocked French bank Societe Generale in 2008 when trader Jerome Kerviel racked up a $6.7 billion loss in unauthorized deals.
He was sentenced to three years in prison in October 2010.
UBS had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank.
