UBS details rogue trades that lost bank $2.3 billion
Swiss bank UBS on Sunday increased the amount it said it had lost on rogue trades to $2.3 billion and gave details of how a trader concealed his risk exposure by creating fictitious positions in its systems.
UBS stunned markets on Thursday when announcing unauthorized trades had lost it some $2 billion. London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008.
The loss resulted from unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months, UBS said in a statement.
The loss arising from this matter is $2.3 billion. As previously stated, no client positions were affected.
The fraud is a disaster for the reputation of Switzerland's biggest bank.
UBS has only just recovered from the financial crisis when it had to be bailed out by the state, prompting calls for its top managers to step down and for its investment bank to be split off into a separate unit.
UBS also said its board of directors had set up a committee to be chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and their relation to the bank's control systems.
The bank said it had covered the risk resulting from the unauthorized trades, and its equities business was again operating normally within previously defined risk limits.
It said the trader had concealed the fact the index future trades violated UBS risk limits by allegedly executing fictitious cash exchange-traded fund (ETFs) positions in the bank's system.
ETFs are index funds listed on an exchange and can be traded just like regular stocks. They try to replicate index performances and offer lower costs than actively managed funds.
Regulators have warned about risks from some of the more complex forms of ETFs.
(Reporting by Emma Thomasson and Silke Koltrowitz; Editing by David Hulmes)
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