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  • Dec 21, 2014
  • Updated: 5:35am
BusinessBanking & Finance
GOVERNANCE

Britain's Financial Services Authority fines UBS £30m over rogue trader Adoboli

PUBLISHED : Tuesday, 27 November, 2012, 12:00am
UPDATED : Tuesday, 27 November, 2012, 4:15am

UBS was fined £29.7 million (HK$368.87 million) by the British authorities and told by the Swiss regulator that it might have to increase capital levels for operational risks as regulators levied penalties in response to Kweku Adoboli's US$2.3 billion trading loss.

The Financial Services Authority issued the fine yesterday, saying there were serious weaknesses in the bank's management systems and controls.

Swiss regulator Finma said UBS's investment bank was not allowed to make acquisitions.

Adoboli, a former trader in UBS's London office, was sentenced to seven years in jail last week for fraud in relation to the US$2.3 billion loss, the largest from unauthorised trading in British history. A UBS investment-bank executive testified during Adoboli's trial that losses from his trades could have reached US$12 billion.

"UBS failed to question the increasing revenue of the desk and failed to ensure that there was a corresponding increase in the controls in place over the desk," Tracey McDermott, the authority's director of enforcement and financial crime, said.

"As a result Adoboli, a relatively junior trader, was allowed to take vast and risky market positions, and UBS failed to manage the risks around that properly.

"We know from past experience that failures to manage risk properly can cause firms to fail and cause systemic harm," McDermott said.

Finma is also examining whether UBS must increase capital backing for its operational risks, the Swiss regulator said.

UBS said it was "pleased" that the investigation had been concluded and that regulators acknowledged the steps the bank had taken since the incident.

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