Another rogue trader struck the investment banking world last week. This time the firm is UBS; the loss is more than $2 billion; and the trader is Kweku Adoboli. This is the biggest loss since Societe Generale lost $7 billion in 2008 with Jerome Kerviel. The accused trader worked as a director trading ETFs on a desk named Delta One. The details are not clear but the trades seem to be in index futures on the Standard & Poor's 500, the DAX in Germany and the Euro Stoxx 50. As in the Kerviel case, false trades were entered into the system to evade the bank's risk management levels.
UBS has had a history of one-off losses. There was their $1 billion investment in Long Term Capital Management in 1998. Dillon Read Capital Management, one of their hedge funds, lost 150 million francs in 2007 before it was shuttered. In 2008, $50 billion in losses on subprime mortgage securities caused the resignations of CEO Marcel Ospel, Finance chief Clive Standish and Investment Banking Head Huw Jenkins. There are people pressing for the resignation of the current CEO Oswald Grubel. He had become CEO in 2009 and was reforming the bank's risk management.
The sources for this article can be accessed at Bloomberg.com, the Telegraph, Reuters, the New York Times Dealbook and Business sections.
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