Rogue Trader Causes $2 Billion Loss For UBS
- Posted on September 16, 2011 at 2:01am by
Becket Adams
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This could not have come at a worse time. The Union Bank of Switzerland (UBS) has reported today that it has suffered a $2 billion dollar loss because of unauthorized trades made by trader Kweku Adoboli.
According to Reuters, Adoboli‘s profile on Linkedin shows that he spent the last five years working at UBS’s European Equity Trading division and had previously spent three years as a trade support analyst at the bank.
“According to Adoboli’s landlord, Philip Octave, the trader lived in an expensive loft on Brune Street near London’s Brick Lane. His rent amounted to $6,320 a month, suggesting that Adoboli was well payed in his role with UBS,” report Reuters.
The Blaze has been watching the financial health of the Swiss banking giant very closely and, lately, they have been having a rough go of it. While this most recent loss may not be the final death knell for UBS, it will nevertheless cost the bank dearly especially considering the fact that they have been struggling to get back onto their feet ever since the start of the European sovereign debt crisis.
The San Francisco Chronicle reports:
UBS warned that it could report a loss for the entire third quarter because of the rogue trade, which may cost them as much as they were hoping to save ($2.28 billion) by cutting 3,500 jobs over the next two years. Today’s news brings up many questions, with the foremost being “how the hell did this happen?”
It was not that long ago that Jerome Kerviel racked up some epic losses at Societe Generale through alleged rogue trades that involved bets worth around $68 billion. Those trades resulted in around $6.7 billion in losses at the French bank.
It is hard to fathom how UBS could have allowed a similar debacle to occur within its investment bank after seeing the fallout at Societe Generale in the wake of the Kerviel episode, which was heavily publicized across the world. However, it appears that UBS management has allowed it to happen to them.
The consequences are going to be painful—UBS shares have already lost 11.50 percent in Thursday’s trading session. The culprit behind the losses is 31-year-old UBS trader Kweku Adoboli according to London police. This morning, UBS has been tight-lipped about the incident, saying that that no client money was lost and that the trades are still under investigation.
Trying to soften the blow, the financial giant sent out a statement before the U.S. markets opened that read, “UBS has discovered a loss due to unauthorized trading by a trader in its investment bank. UBS’s current estimate of the loss on the trades is in the range of $2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011.”
After that, a letter was sent out to employees that–whether they intended to or not–underscored the unfortunate timing of the news: “While the news is distressing, it will not change the fundamental strength of our firm,” the note said. “We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times.”
According to Reuters, “the weak performance of the investment bank and tough capital rules in Switzerland had already attracted intense scrutiny over how UBS will cope. Analysts have called for a retrenchment, while Swiss politicians are debating how to make sure big banks can weather future crises without having to be bailed out by the state.”
UBS shares have been under significant pressure prior to this incident. Their stock has now lost around 32 percent in 2011 and better than 38 percent over the last year as investors are worrying about the bank‘s exposure to Europe’s sovereign debt crisis.
Kweku Adoboli
According to the Associated Press, Swiss banking regulator Finma said today that they have been in contact with the Swiss bank regarding the incident. A spokesman added, “From the scale of this case you can be sure that it‘s the biggest we’ve ever seen for a Swiss bank.”
The incident, which will prove to be quite costly for shareholders, is raising serious questions about UBS’s risk management. “The real issue … over and above the financial impact is the reflection on risk management at UBS,” said Fionna Swaffield, a banking analyst at RBC Capital Markets in an Associated Press release.
She added, “UBS was seen to have recovered significantly from the credit crisis and to have improved its risk management in the investment bank in spite of its struggle to improve returns. This obviously brings this very much into question.”
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Comments (48)
HD Veteran
Posted on September 17, 2011 at 7:28pmLet’s try the new spirit of savings and reeling in debt, let UBS FAIL.
Report Post »avenger
Posted on September 24, 2011 at 5:55pmWhoa ! is this guy related to obama ?
Report Post »HD Veteran
Posted on September 17, 2011 at 7:26pmYou know, we might want to give him a second chance, he no doubt was abused as a child, or maybe someone yelled at him, or maybe he didn’t get ice cream every time he asked, or maybe he has a criminal back ground and needs a chance to show he is “OK”…
Oh alright, he is likely a criminal loser, but don’t tell the progressives, they don’t want to discuss this.
Report Post »Bonnieblue2A
Posted on September 17, 2011 at 5:46pmOf course the US taxpayers will be on the hook when we are stuck with the tab in US dollars for bailing out the Eurobanks. Thanks tax cheat Timmy Geither! Central planner’s rock!
Ron Paul 2012!
Report Post »jw4joyce
Posted on September 17, 2011 at 5:00pmAnyone else out there besides me getting tired of the phrase “how in the hell did this happen?” This and tons and tons of other things are happening to bring an end to our financial system. The question should be “what in the hell are we going to do about it and is it too late?”
Report Post »MaxineH20Sux
Posted on September 17, 2011 at 7:38pmAmen! I am so sick of this garbage!
Report Post »StargazerInSavannah
Posted on September 17, 2011 at 1:54pmSounds like this clown must have worked as an intern under our own Messiah. Perfected his dishonesty and corruption, Obama style. Compared to the way Obama has destroyed the wealth of the U.S., this loose trader wouldn’t have made even half hour blip on the destruction wrought by O.
Report Post »MUDFLAPS
Posted on September 17, 2011 at 11:58amsee, this is what affirmative action will get ya.
Report Post »hi
Posted on September 17, 2011 at 12:17pm….along with Michael Jackson’s death from his doc and the near death of America because of Obama.
I love blacks and am not a racist. Affirmative Action takes away from the blacks who ARE awesome and true achievers.
Report Post »MainMan
Posted on September 17, 2011 at 6:45amlets all vote for Obama, I want to see if he can destroy the country. Im just curious. I would like to see if he can. The rogue trader is probably Spooky Dudes HO turnin tricks for him. Come on Obama bring him on over and hook him up with the Fed…. that would be impresive to see.
Report Post »motherof18
Posted on September 16, 2011 at 9:14pmIsn’t this the same guy in the video smoking a cigarette at the zoo?
Report Post »LiveNation
Posted on September 16, 2011 at 8:29pmFinancial terrorist/community organizer… what’s the difference?
Report Post »ThoughtfulConservative
Posted on September 16, 2011 at 5:55pmOnly $2 Billion lost? Chump Change…our Guy loses that in like an hour!
Report Post »tower7femacamp
Posted on September 16, 2011 at 6:43pmRumsfeld said the pentagon lost 2.3 TRILLION dollars on sept 10th 2001.
Report Post »dgktowntx
Posted on September 16, 2011 at 4:45pmeveryone go to occupywallst.org the to the forum..you can leave messages without sign up…lets bomb bard the web site..
Report Post »VintageAmerican
Posted on September 16, 2011 at 11:59pmthe occupywallst.org site has removed all posts of persons not signed up. Now you have to sign up to comment. That left a whopping 2 posts from signed up users…. ah, let me rephrase… loosers.
Report Post »imreddog
Posted on September 16, 2011 at 3:20pmPut a tight control on our borders. This looks like another Obama to me. The black voters will support this guy JUST BECAUSE HE IS BLACK and the Demoncraps are sure to support him too. After all, with evidence piled high that Obama has the brains of a slug, the Demoncraps are still supporting him. I know that he is really stupid, but we’ve got a “dumb as a rock” black guy now so there is no reason to think that we couldn’t have another one.
Report Post »portisallen
Posted on September 16, 2011 at 5:52pmonce again some dumbass country bumkin thinks he’s smarter than an harvard law grad.you have got to be the dumbest fkers the devil ever made.
Report Post »motherof18
Posted on September 16, 2011 at 9:16pmHarvard grads=morans
Report Post »VintageAmerican
Posted on September 17, 2011 at 12:03amPORTISALLEN Your so smart and highly literate! WOW, your Harvard grammer is stunning! How much did you pay to be taught to cuss so well? just wonderin
Report Post »packsack54
Posted on September 16, 2011 at 2:47pmRogue traders, do you recall 2008 and the legal trades with the large bailouts. Big Ben and federal reserve is bailing out Greece by promising the Big Banks on the loans. Suckers
Report Post »dabbo
Posted on September 16, 2011 at 11:45amI think Billy Ray Valentine here is innocent….. he was probably set up by the Duke Brothers.
Get Winthorpe on the phone….ASAP!
Report Post »Chuck Stein
Posted on September 16, 2011 at 5:41pmGood one. But, seriously, this kind of thing has been going of for like a decade — it destroyed Barings bank. Like they can‘t put controls on the trading so it doesn’t happen? Very odd.
Report Post »chipmunk
Posted on September 17, 2011 at 3:25am@chuck, yeah you’d think, right?
Report Post »HUGGINGMYBABIES
Posted on September 16, 2011 at 10:33amMy husband used to work for UBS (now a Wells Fargo). Guess we should have given up our shares when they were $60…..now its just toilet paper.
Report Post »chipmunk
Posted on September 17, 2011 at 3:28amif your shares converted to Wells Fargo, don’t worry & hold. Wells is solid & well run.
Report Post »JRook
Posted on September 16, 2011 at 10:13amRead the posts here and use them to refute the observation by Michael Moore in the other report.
Report Post »chipmunk
Posted on September 17, 2011 at 3:36am@JRookie
You again peach? Some posters are just having a good old laugh. No one here has to impress you. I notice you didn’t post a bit of financial analysis or wisdom but just a dig at the other posters. Pray tell, is that YOUR version of humor? I already know that you are a numskull in the economics & finance department.
By the way, this loss @ UBS, as said, poor internal risk management.
Report Post »roadhog
Posted on September 16, 2011 at 9:08amLooks Like UBS got An Afrimitive Action Baby . Could be Obamas trading plan
Report Post »sdeakins
Posted on September 16, 2011 at 8:29amHire that man for the Obama Financial Team.
Report Post »Servant Of YHVH
Posted on September 16, 2011 at 8:48amMaybe he already has been working for the obama team.
Report Post »ComingUnglued
Posted on September 16, 2011 at 8:12amPart way through the article all I thought was financial terrorist. Level the playing field.
Report Post »Harold B
Posted on September 16, 2011 at 7:54amDid they mention that Kweku Adoboli was a Muslim?
Report Post »Who made the profit on his trades ?
Intentional trades that lose money are not mistakes
Two Billion dollars to Jihad friendly countries?
Where will Kweku Adoboli retire? Do you think it will be a Muslim country?
BrerRabbit
Posted on September 16, 2011 at 7:59amPoint well taken. Financial Jihad at its best!
Report Post »vigilante
Posted on September 16, 2011 at 8:53amAllahu-akbar on infidel investors!
Report Post »bigfatslob
Posted on September 16, 2011 at 7:40amThey use afirmative action in Switzerland also.
Report Post »kenboo1
Posted on September 16, 2011 at 7:39amOppps… Look what happens when your not watching whats going on… Kinda like the American public… More Americans know who won American Idol and Dancing with the Stars than who is vice president or better yet why their taxes are so high… They probably don’t realize they are paying so many taxes…. Well that’s what you get for being entertained…
Report Post »TxMadMac
Posted on September 16, 2011 at 7:28amMabe he’s been sleeping with soros. I’ll bet obama is jealous.
Report Post »chipmunk
Posted on September 16, 2011 at 5:01amPoor risk management.
Report Post »altar-ego
Posted on September 16, 2011 at 4:04amyou mean european bankers AREN’T ALL GOOD GUYS wanting to end global whining-i mean warming, stop the famine in somali, the suffering in sudan etc….even if they HAPPEN to be the same skin tone, CANT YA’LL HELP A BRUVA OUT?!? This story shouldnt suprise anyone, not anyone w/a brain any how. HA–bankers, cant live w/em….
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