UBS Starts Probe; Raises Loss Estimate to $2.3 Billion

Swiss bank UBS has kicked off an internal investigation into the catastrophic failure of its risk systems after raising the amount it lost on rogue equity trades to $2.3 billion.

UBS said its board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank's control systems.

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

The bank raised the figure by a further $300 million on Sunday, and chief executive Oswald Gruebel said the alleged fraud would have consequences for strategy and possibly also for himself.

UBS said 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 internal systems.

The loss is a heavy blow to the reputation of Switzerland's biggest bank, which had just started to recover after its near collapse during the financial crisis and a damaging U.S. investigation into its aiding wealthy Americans to dodge taxes.

By 0745 GMT UBS shares were down 1.6 percent at 10.10 francs, outperforming a 2.6 percent slide on the European banking stocks index.