UBS fined US$48m by UK regulator over rogue trader

Swiss regulator beefs up control measures at UBS

PUBLISHED : Monday, 26 November, 2012, 3:47pm
UPDATED : Monday, 26 November, 2012, 5:59pm

Britain’s financial regulator fined Swiss investment bank UBS 29.7 million pounds (US$47.6 million) for system and control failings that allowed Kweku Adoboli to cause over US$2 billion losses through unauthorised trading in London.

“UBS failed to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems, and failed to conduct its business from the London Branch with due skill, care and diligence,” the Financial Services Authority said in a statement on Monday.

Adoboli was jailed for seven years last week after admitting trading far in excess of authorised limits.

Switzerland’s financial regulator  on Monday said it was examining whether UBS should raise capital as part of measures to mend major control failures that led to a US$2.3 billion trading loss at the bank.

In a summary report published on Monday, Finma said it had identified “serious deficiencies in risk management controls” at UBS’s investment bank and would appoint a third party to ensure that corrective measures were implemented.

Finma, which carried out a joint investigation with Britain’s financial regulator, said the FSA would impose a 29.7 million pound (US$47.6 million) fine on UBS.

The two regulators launched an investigation to review the control mechanisms at the bank that led to Kweku Adoboli, a trader on UBS’s “Delta One” desk, losing US$2.3 billion for the bank. Adoboli was convicted of fraud and jailed for seven years last week.

“In FINMA’s view, the fraudulent transactions executed by the rogue trader would have been detected sooner if these deficiencies had not existed,” it said in a statement.

Finma said it had decided to take additional steps to beef up controls at the bank, including engaging an audit firm at a later date to review whether the steps taken by UBS were effective.

The regulator is also examining whether UBS must increase its capital backing for its operational risks.

The steps come on top of corrective measures taken as soon as the trading loss was discovered, which included a ban on new acquisitions at UBS’s investment bank and a prior approval from Finma for any new business initiatives.

UBS said it would publish a statement later in the day.