Swiss banking giant UBS shocked investors and staff in September when it made public an unauthorized trading incident that forced it to take a write-down of Sf1.9 billion ($2.17 billion). UBS had revamped the risk controls in its fixed-income division following subprime losses of $50 billion during 2008 and 2009. The loss on its Delta One trading desk, part of the equities unit, came as a shock to investors, but risk consultants and rival traders were less surprised.
“Banks put young people under huge pressure to perform, and when it goes wrong, their instinct is to hide their losses — from peers and from management,” says a former UBS trader, who declined to be named.
Kweku Adoboli, a 31-year-old director at the bank, was arrested in connection with the loss and is currently out on bail. Meanwhile, UBS has launched an internal investigation into the rogue trading, which sparked the resignation of the bank’s embattled chief executive officer, Oswald Grübel, 67. Separately, the venerable bank has accepted the resignations of its co-heads of global equities, Yassine Bouhara and François Gouws, who stepped down because the losses happened on their watch. UBS said at its October 25 third-quarter-results presentation that it is considering further disciplinary action against other, unnamed individuals. ....