http://www.todayonline.com/Business/EDC110916-0000332/Rogue-trader-at-UBS-racks-up-S$2,48b-loss
Rogue trader at UBS racks up S$2.48b loss
04:47 AM Sep 16, 2011
LONDON - UBS, Switzerland's biggest bank in which the Government of Singapore Investment Corp (GIC) is the largest shareholder, said yesterday it might be unprofitable in the third quarter after a rogue trader lost US$2 billion (S$2.48 billion) at its investment bank.
Police in London yesterday arrested 31-year old Kweku Adoboli on suspicion of fraud in connection with the case. UBS declined to name the suspect.
Adoboli, of Ghanaian descent, joined UBS as a trainee in March 2006, according to the Financial Services Authority's register. He had been a member of UBS' Delta One team that worked on synthetic assets and derivatives for providers of exchange-traded funds.
Several traders said Adoboli might have mis-hedged his exposure to the Swiss franc and attempted to hide it from his team when the market moved against him by overcompensating with a hedge in the opposite direction. UBS claims the third-largest share in global foreign exchange trading and is the biggest in the euro/franc pairing.
Outside Adoboli's former home in Aldgate - a large loft space that he had rented for £1,000 a week - Mr Philip Otabe, Adoboli's former landlord, said he was "very, very polite - a salesman sort of chap".
In a statement issued from its Zurich headquarters, UBS said it might post a third-quarter loss after the rogue trades, a huge blow as it struggles to rebuild its credibility after years of crises. The loss effectively cancels out the US$2 billion that the bank had hoped to save in a cost-cutting programme announced last month in which it will axe 3,500 jobs.
It also threatens the future of UBS' investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich US clients dodge taxes.
UBS, which said no client positions were affected by the rogue trades, is scheduled to hold an investor day on Nov 17 at which it was expected to announce major restructuring of the investment bank. UBS employed almost 18,000 people in its investment bank at the end of June, most of them outside Switzerland, particularly in London and the United States.
UBS shares plummeted by 8 per cent to 10.07 Swiss francs late yesterday in Zurich, even as the European banking sector surged on news that central banks would provide additional liquidity to prevent the money markets from seizing up.
The share price plunge is bad news for GIC, which holds a 6.4 per cent stake in UBS. Based on the last traded price, GIC is sitting on about 7 billion francs, or S$10 billion, in unrealized losses, even after taking into account the 2 billion francs it received on the coupon before its 2008 investment was converted to shares last year.
A GIC spokesperson yesterday declined to comment when contacted by Today.
UBS' news caused disbelief among market operators.The last similar case was when Jerome Kerviel, a trader at France's Societe Generale, racked up a US$6.7 billion loss in unauthorised deals revealed in 2008. Kerviel was sentenced to three years in prison in Oct 2010.
ZKB trading analyst Claude Zehnder said: "It is amazing that this is still possible. They obviously have a problem with risk management … It's once more a loss of confidence that casts UBS in a poor light."
By coincidence, the Swiss parliament was slated yesterday to debate the future of the country's banking industry. Lawmakers are being asked to consider proposals to ensure that Switzerland's two biggest banks - UBS and Credit Suisse - are brought under tighter control as they are considered "too big to fail." - AGENCIES
Rogue trader at UBS racks up S$2.48b loss
04:47 AM Sep 16, 2011
LONDON - UBS, Switzerland's biggest bank in which the Government of Singapore Investment Corp (GIC) is the largest shareholder, said yesterday it might be unprofitable in the third quarter after a rogue trader lost US$2 billion (S$2.48 billion) at its investment bank.
Police in London yesterday arrested 31-year old Kweku Adoboli on suspicion of fraud in connection with the case. UBS declined to name the suspect.
Adoboli, of Ghanaian descent, joined UBS as a trainee in March 2006, according to the Financial Services Authority's register. He had been a member of UBS' Delta One team that worked on synthetic assets and derivatives for providers of exchange-traded funds.
Several traders said Adoboli might have mis-hedged his exposure to the Swiss franc and attempted to hide it from his team when the market moved against him by overcompensating with a hedge in the opposite direction. UBS claims the third-largest share in global foreign exchange trading and is the biggest in the euro/franc pairing.
Outside Adoboli's former home in Aldgate - a large loft space that he had rented for £1,000 a week - Mr Philip Otabe, Adoboli's former landlord, said he was "very, very polite - a salesman sort of chap".
In a statement issued from its Zurich headquarters, UBS said it might post a third-quarter loss after the rogue trades, a huge blow as it struggles to rebuild its credibility after years of crises. The loss effectively cancels out the US$2 billion that the bank had hoped to save in a cost-cutting programme announced last month in which it will axe 3,500 jobs.
It also threatens the future of UBS' investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich US clients dodge taxes.
UBS, which said no client positions were affected by the rogue trades, is scheduled to hold an investor day on Nov 17 at which it was expected to announce major restructuring of the investment bank. UBS employed almost 18,000 people in its investment bank at the end of June, most of them outside Switzerland, particularly in London and the United States.
UBS shares plummeted by 8 per cent to 10.07 Swiss francs late yesterday in Zurich, even as the European banking sector surged on news that central banks would provide additional liquidity to prevent the money markets from seizing up.
The share price plunge is bad news for GIC, which holds a 6.4 per cent stake in UBS. Based on the last traded price, GIC is sitting on about 7 billion francs, or S$10 billion, in unrealized losses, even after taking into account the 2 billion francs it received on the coupon before its 2008 investment was converted to shares last year.
A GIC spokesperson yesterday declined to comment when contacted by Today.
UBS' news caused disbelief among market operators.The last similar case was when Jerome Kerviel, a trader at France's Societe Generale, racked up a US$6.7 billion loss in unauthorised deals revealed in 2008. Kerviel was sentenced to three years in prison in Oct 2010.
ZKB trading analyst Claude Zehnder said: "It is amazing that this is still possible. They obviously have a problem with risk management … It's once more a loss of confidence that casts UBS in a poor light."
By coincidence, the Swiss parliament was slated yesterday to debate the future of the country's banking industry. Lawmakers are being asked to consider proposals to ensure that Switzerland's two biggest banks - UBS and Credit Suisse - are brought under tighter control as they are considered "too big to fail." - AGENCIES
