Letting a trader lose $2 billion through unauthorised, risky trades is always going to be a black eye for a bank, as it necessarily raises alarm bells about controls and risk management.
But it gets even worse for UBS.
BBC’s Robert Peston reports that the bank never discovered the losses. It had to be told about them from the alleged rogue trader Kweku Adoboli.
The course of events was that on Wednesday Mr Adoboli disclosed to UBS that he had engaged in unauthorised trades, in his role as part of UBS’s so-called Delta One trading team, which deals in exchange traded funds (or tradable investment funds whose proliferation has concerned regulators).
UBS then examined his trading positions and rapidly informed the Financial Services Authority and the police. Mr Adoboli was arrested by the police at 3.30am yesterday.
All this furthering the notion that UBS is easily among the worst banks in the world.
John Gapper rightfully asks whether we’re talking about a rogue trader scandal or a rogue bank given its history of huge losses in both the US mortgage market and even its entanglement with Long-Term Capital Management.
What’s more, after 2008, an internal report confirmed that its risk control was not good.
Meanwhile, things are reportedly very bad with the unit’s decision on hold. A mess all around.
SEE ALSO: The biggest rogue traders in history >
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