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U.K. police arrest rogue trader
Suspected fraud sends UBS shares skidding, threatens Swiss bank's future
By Victoria Howley And Emma Thomasson, Reuters September 16, 2011 3:03 AM
Story
Photos ( 1 )
A security guard gestures as he stands on guard with a colleague infront of a UBS bank in the City of London on Thursday.
A security guard gestures as he stands on guard with a colleague infront of a UBS bank in the City of London on Thursday.
Photograph by: Reuters, Reuters
UBS said a trader who lost the Swiss bank around $2 billion US in unauthorized deals had been arrested, with sources close to the situation naming the man as 31-year-old Kweku Adoboli.
Adoboli - working as a director of exchange-traded funds and Delta 1 trading, according to his profile on LinkedIn - was arrested during the night at UBS's London office on suspicion of fraud, the sources said Thursday.
UBS said it discovered the problem on Wednesday afternoon, but gave no details of the trades involved.
"The man was taken to a City of London police station for questioning and he remains in custody while officers are continuing to investigate this matter," London police Commander Ian Dyson told reporters.
Adoboli, a University of Nottingham computer-science and management graduate, was described by a former landlord as a good tenant of a $1,600-per-week apartment close to UBS in London's East End.
UBS shares dropped to their lowest close since March 2009, ending the day down 10.8 per cent after it said it might post a third-quarter loss, a huge blow as it struggles to rebuild its credibility after years of crises.
The loss effectively cancels out the $2-billion-Swiss-franc ($2.3 billion US) savings it had hoped to make in a cost-cutting program announced last month that would axe 3,500 jobs.
It threatens the future of UBS's investment bank, which is being reviewed by CEO Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.
It also undermines claims by the Swiss bank and the industry that such events are a thing of the past. UBS, which said no client positions were affected, is scheduled to hold an investor day on Nov. 17 at which it was expected to announce a major overhaul 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 U.S.
"[This] is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting around them if they want to," said Chris Roebuck, visiting professor at Cass Business School in London.
UBS had started to see client confidence return this year after its rescue by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank. It has had a history of major risk-management glitches followed by repeated pledges to fix risk systems.
"This loss has the scope to have a material impact on the perception of UBS's private bank, impacting its future operating trends," Goldman Sachs analysts Jernei Omahen and Peter Skoog said in a note.
The last similar case was when Jerome Kerviel, then a trader at Societe Generale, racked up a $6.7-billion loss in unauthorized deals revealed in 2008. Kerviel was sentenced to three years in prison in October 2010.
Both Kerviel and Adoboli were the same age when the scandal broke and both worked with so-called Delta 1 products, derivatives that closely track the underlying securities and give the holder an easy way to gain exposure to several asset classes.
Examples include equity swaps, forwards, futures and exchangetraded funds.
© Copyright (c) The Province
http://www.theprovince.com/business/police+arrest+rogue+trader/5412372/story.html
Suspected fraud sends UBS shares skidding, threatens Swiss bank's future
By Victoria Howley And Emma Thomasson, Reuters September 16, 2011 3:03 AM
Story
Photos ( 1 )
A security guard gestures as he stands on guard with a colleague infront of a UBS bank in the City of London on Thursday.
A security guard gestures as he stands on guard with a colleague infront of a UBS bank in the City of London on Thursday.
Photograph by: Reuters, Reuters
UBS said a trader who lost the Swiss bank around $2 billion US in unauthorized deals had been arrested, with sources close to the situation naming the man as 31-year-old Kweku Adoboli.
Adoboli - working as a director of exchange-traded funds and Delta 1 trading, according to his profile on LinkedIn - was arrested during the night at UBS's London office on suspicion of fraud, the sources said Thursday.
UBS said it discovered the problem on Wednesday afternoon, but gave no details of the trades involved.
"The man was taken to a City of London police station for questioning and he remains in custody while officers are continuing to investigate this matter," London police Commander Ian Dyson told reporters.
Adoboli, a University of Nottingham computer-science and management graduate, was described by a former landlord as a good tenant of a $1,600-per-week apartment close to UBS in London's East End.
UBS shares dropped to their lowest close since March 2009, ending the day down 10.8 per cent after it said it might post a third-quarter loss, a huge blow as it struggles to rebuild its credibility after years of crises.
The loss effectively cancels out the $2-billion-Swiss-franc ($2.3 billion US) savings it had hoped to make in a cost-cutting program announced last month that would axe 3,500 jobs.
It threatens the future of UBS's investment bank, which is being reviewed by CEO Oswald Gruebel as part of a wide-ranging restructuring following heavy losses in the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.
It also undermines claims by the Swiss bank and the industry that such events are a thing of the past. UBS, which said no client positions were affected, is scheduled to hold an investor day on Nov. 17 at which it was expected to announce a major overhaul 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 U.S.
"[This] is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting around them if they want to," said Chris Roebuck, visiting professor at Cass Business School in London.
UBS had started to see client confidence return this year after its rescue by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank. It has had a history of major risk-management glitches followed by repeated pledges to fix risk systems.
"This loss has the scope to have a material impact on the perception of UBS's private bank, impacting its future operating trends," Goldman Sachs analysts Jernei Omahen and Peter Skoog said in a note.
The last similar case was when Jerome Kerviel, then a trader at Societe Generale, racked up a $6.7-billion loss in unauthorized deals revealed in 2008. Kerviel was sentenced to three years in prison in October 2010.
Both Kerviel and Adoboli were the same age when the scandal broke and both worked with so-called Delta 1 products, derivatives that closely track the underlying securities and give the holder an easy way to gain exposure to several asset classes.
Examples include equity swaps, forwards, futures and exchangetraded funds.
© Copyright (c) The Province
http://www.theprovince.com/business/police+arrest+rogue+trader/5412372/story.html
