What Happens Next At The UBS Investment Bank?

Oswald Grubel
Oswald Gruebel

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Yesterday’s unexpected news of a UBS rogue trader losing $2 billion has added yet another blow to the embattled Swiss bank’s employees and shareholders.Now many are left wondering what will happen to UBS’s investment bank business?

The bank already announced has widespread layoffs, but the remaining bank employees will likely see a major hit to their bonuses thanks to the $2 billion loss.  

Even though the trade loss accounts for less than 5% of the firm’s equity, shares of UBS tumbled more than 10% Thursday on the New York Stock Exchange. 

Then late Thursday ratings agency Moody’s placed UBS’s rating of A+ on review a possible downgrade.

Now questions are being raised the company’s risk management and the bank’s use of internal controls.

What’s embarrassing is neither the bank nor its top executives knew about losses from rogue trade until recently.  The alleged rogue trader Kweku Adoboli had to confess to the bank in an email that he had accumulated the losses.

The could potentially mean top executives’ jobs will be on the line.

As head of the investment banking division, Carsten Kengeter is responsible for risk control.  He has also been viewed as one of the top candidates to take the helm after chief executive Oswald Gruebel steps down. 

The Swiss bank’s chief executive Gruebel is expected to host an investor day on November 17 to discuss a “major restructuring of UBS’s investment bank.”

It’s unclear at this time what that restructuring will be exactly, but some think the investment bank business will be pared back.

From the WSJ:

The trading loss may also renew calls in Switzerland for UBS to drastically scale down its investment bank or even spin it off entirely. Since UBS’s near-collapse three years ago, Swiss regulators have fretted about UBS’s ambitions to rebuild the investment bank.

SEE ALSO: The Most Notorious Rogue Trader In History