A UBS Disclosure
UBS disclosed that one of its London-based employees lost $2 billion in unauthorized trades. Kweku Adoboli, the 31-year-old UBS equities derivatives trader, was arrested by City of London police early this morning on suspicions of fraud.
The loss was discovered late Wednesday night and UBS is still investigating the matter to ensure all positions are closed. The startling news that Adoboli was able to execute $2 billion in unauthorized trades challenges the effectiveness of the bank’s risk management system.
The announcement comes at a bad time for the bank. UBS is currently in the process of laying off about 5% of its staff following poor second-quarter results. An internal memo stated the unauthorized trading might result in another loss for third-quarter earnings.
Switzerland’s financial markets regulator FINMA is currently looking into the case. This is the largest trading incident in Europe since 2008.
