Tue, Sep 20, 2011 - Page 10 News List

UBS raises rogue trade losses to US$2.3bn

FALLOUT:The loss will affect strategy and the firm’s board of directors may decide to oust CEO Oswald Gruebel, who told the media he was not considering resigning


Swiss bank UBS increased the amount it said it had lost on rogue equity trades to US$2.3 billion on Sunday.

UBS chief executive Oswald Gruebel said that the alleged fraud would have consequences for strategy and possibly also for himself.

“It is obvious that these incidents will have an influence on the strategy of the investment bank,” a visibly chastened Gruebel told Swiss TV, adding that the firm would present a new strategy for its investment bank soon.

“I will bear all the consequences of the incident. They will be announced as soon as we put them in practice,” he said.

UBS stunned markets on Thursday when it announced unauthorized trades had lost it about US$2 billion. London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008.

UBS said in a statement on Sunday the trader concealed “unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months” by creating fictitious hedging positions in the firm’s internal systems.

“The loss arising from this matter is US$2.3 billion. As previously stated, no client positions were affected,” it said.

The loss is a disaster for the reputation of Switzerland’s biggest bank, which had just started to recover after it almost collapsed during the financial crisis and faced a damaging US investigation into aiding wealthy Americans to dodge taxes.

Gruebel, who was brought out of retirement in 2009 to turn the bank around, was quoted in a newspaper on Sunday as saying he was not considering quitting over the crisis, but said it was up to the board to decide.

“Ultimately, the buck stops with me. I and the rest of senior management are responsible for dealing with wrongdoing,” he said in a memo to staff on Sunday.

Swiss newspapers quoted unnamed insiders as saying the UBS board and important shareholders such as the Singapore sovereign wealth fund still backed Gruebel, with immediate changes the last thing the bank needs and an obvious successor lacking.

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