Beleaguered Swiss banking giant UBS AG (UBS) is most likely to face enforcement proceedings from the British and Swiss regulatory authorities in the rogue trader case that has cost the bank about $2.3 billion, according to the Wall Street Journal on Sunday.
UBS discovered the loss due to unauthorized trading by a trader in its Investment Bank in September 2011. The loss on the trades was initially estimated to be about $2 billion, but was later raised to $2.3 billion.
The rogue trading scandal hit the banks investment banking arm and the alleged trader was quickly identified as Kweku Adoboli, a director on the "Delta One" derivatives desk. The trader was arrested on false accounting charges and fraud.
The unauthorized trading incident also cost UBS' then CEO Oswald Grübel his job, and on September 24 he resigned. The company then confirmed its EMEA region head Sergio Ermotti as the permanent CEO in mid-November. The incident also saw a number of UBS employees, including the heads of its equities business, resigning.
Following the completion of the bank's internal investigations, and the continuing joint probe by the U.K.'s Financial Services Authority and the Swiss Financial Market Supervisory Authority, or Finma, UBS is reportedly expected to be penalized by the regulators for gaps in oversight that allegedly allowed the rogue trader to make unauthorized trades. The regulators' investigation is expected to be completed by mid-February.
UBS is said to have also found shortcomings during its internal probe on the process of the traders' ability to book and then cancel transactions. The bank confirmed earlier that it has already taken measures to address the shortcomings.
The significant trading loss of $2.3 billion pushed UBS to report a 650 million Swiss francs, or $700 million, decline in its profit for the third quarter to $1.02 billion Swiss francs or $1.16 billion.
UBS closed Friday's regular trading session at $14.05, up $0.07 or 0.50% on a volume of 3.11 million shares, lower than the three-month average volume of 4.46 million shares.
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