Due Diligence
Rogue UBS Trader Loses Bank $2 bln, May Dip Bank Into Red

Rogue UBS Trader Loses Bank $2 bln, May Dip Bank Into Red

UBSA single UBS trader lost the bank $2 billion and was arrested on Thursday. The Swiss bank said it may have to report a loss in the third quarter as a result of the "unauthorized" trading by a London trader named Kweku Adoboli. The bank issued the briefest of press releases Thursday morning on the incident.

The Wall Street Journal writes that Adoboli has been authorized to work in the business since 2006, and that his discovery raises serious questions about the bank's risk management process.

"According to the U.K.'s Financial Services Authority, Mr. Adoboli has been authorized to work in the securities business since March 2006. According to Mr. Adoboli's LinkedIn profile, he is a director at UBS's ETF desk within a unit called Delta1 Trading. He previously worked as a trade-support analyst at the bank. It is unclear whether Mr. Adoboli is still employed by the bank, according to a person familiar with the situation.

UBS discovered the huge loss late Wednesday and the bank is still working to ensure that all positions are closed, according to a person familiar with the situation. While UBS said publicly the losses totaled $2 billion, a person familiar with the matter said the total is between $1.5 billion and $2 billion.

Regardless, the new shock will raise serious questions about the bank's risk-management systems just three years after its investment bank had to write down $50 billion in securities trades."

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