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Europe

UBS Trader Kweku Adoboli Charged Over Bank's $2B Loss

By NewsCore
Published | Updated
7e58bd0d-Britain Switzerland UBS

A logo for Swiss bank UBS is seen outside one of their offices in the City of London, Thursday, Sept. 15, 2011. Swiss banking giant UBS said Thursday that a rogue trader has caused it an estimated loss of $2 billion, stunning a beleaguered banking industry that has proven vulnerable to unauthorized trades. (AP2011)

LONDON -- UBS trader Kweku Adoboli was charged Friday with fraud by abuse of position and false accounting in connection with the Swiss banking giant's $2 billion loss from unauthorized trades, the City of London Police said.

He was due to appear at the City of London Magistrates Court in central London on Friday afternoon and will remain in custody until that time, police added.

UBS discovered the $2 billion loss late Wednesday and notified the City of London Police at 1:00am local time Thursday. Adoboli was arrested two and a half hours later.

The trader worked on a UBS desk in London dealing with exchange-traded funds (ETF) for five years. The desk specializes in so-called "Delta One" products, which allow clients to trade securities that track the performance of broad indexes, a person familiar with the matter told The Wall Street Journal.

A number of people on that desk were suspended by UBS pending further investigations after the loss was discovered, Sky News reported.

Adoboli was being represented by Kingsley Napley, the London-based law firm that also represented British "rogue trader" Nick Leeson during his 1995 trial. Leeson lost the UK's Barings Bank $1.3 billion and subsequently caused its collapse.

After the latest blow for UBS, the bank looks set to make major changes in a bid to reduce costs.

The TagesAnzeiger newspaper reported earlier Friday that UBS plans to announce a "massive reduction" in the size of its investment bank, which would result in the loss of thousands more jobs. Thousands of UBS bankers could also go without bonuses this year following the substantial trading loss, the Financial Times reported.

The Zurich-based bank declined to comment on the reports.

UBS had already been planning huge job cuts. In August, the bank said it planned to reduce costs by around two billion Swiss francs ($2.3 billion) by the end of 2013, which would result in the loss of 3,500 jobs.

Moody's Investors Service had more bad news for UBS Thursday, as the ratings agency announced it had placed the Swiss bank's credit rating on review for a possible downgrade, citing concerns about UBS's reputation and its risk-management abilities.