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Swiss banking giant UBS has admitted that the losses allegedly racked up by “rogue trader” Kweku Adoboli has risen from $2 billion to $2.3 billion.

UBS said the huge loss was caused by unauthorized trades on stock index futures made over the past three months.

It said the transactions Kweku Adoboli made were within normal limits and slipped through risk controls due to “fictitious trades” in complex financial instruments called exchange traded funds (ETFs), which were used to cover up losses.

Kweku Adoboli is charged with $2.3 billion fraud at Swiss banking giant UBS

Kweku Adoboli is charged with $2.3 billion fraud at Swiss banking giant UBS

According to UBS, “the true magnitude of the risk exposure was distorted” because the hedges that traders are required to put in place had been fabricated.

The bank also suggested that the trades involved “unauthorized speculative” bets on various S&P 500, Dax and Eurostoxx index futures, rather than on the Swiss franc, as some had thought.

Swiss banking giant also claims that the non-existent hedges entered into its records were “fictitious, forward-settling, cash ETF positions”, trades that had never actually been executed.

UBS also countered suggestions that it did not notice the trades until Kweku Adoboli came forward.

UBS said that Kweku Adoboli, who was charged on Friday with fraud and false accounting, had been responding to the bank’s inquiries.

It appears that the fraud came to light last Wednesday during a review of Kweku Adoboli’s trading book, which it has now unwound.

UBS has now launched an internal investigation regarding the failure of its risk systems.

UBS board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank’s control systems.

UBS stunned markets on Thursday when it announced unauthorized trades had lost it about $2 billion.

The figure was raised by a further $300 million on Sunday, and chief executive Oswald Gruebel said the alleged fraud would have consequences for strategy and possibly also for himself.

The huge loss is a heavy blow to the reputation of Switzerland’s biggest bank, which had just started to recover after its near collapse during the financial crisis and a damaging U.S. investigation into its aiding wealthy Americans to dodge taxes.

By 7:45 a.m. UBS shares were down 1.6% at 10.10 francs, outperforming a 2.6% slide on the European banking stocks index.

UBS CEO Oswald Gruebel said he would not be resigning, and said calls for his resignation were “purely political” and that he was “not thinking about stepping down”.

Gruebel added that while he bore ultimate responsibility, he did not feel “guilty” for failing to prevent the costly and embarrassing incident.

Gruebel defiant stance comes amid suggestions that Swiss regulators could tell the bank to hive off or close down its investment banking division, which houses the “Delta One” desk where Kweku Adoboli worked.

The Financial Services Authority and Swiss regulators have drafted in accountancy firm Deloitte to investigate the affair.

Meanwhile, UBS senior independent director David Sidwell, a former finance chief at JP Morgan Chase, is leading the bank’s own probe into the matter.

UBS rogue trader arrested in London for $2 bn losses.


Kweku Adoboli is the suspected rogue trader who was arrested in London at early hours today on suspicion of losing $2 billion of UBS, the major investment Swiss bank group.

Ghanaian Kweku Adoboli, 31, was detained on suspicion of committing fraud while working at Swiss bank UBS, after police raided his home at 3.30am.

After the raid UBS shares fell by 8%, as the bank warned that the unauthorized trading could tip the firm into a third-quarter loss.

Kweku Adoboli, the rogue trader arrested in London for $2 bn UBS losses (Facebook image)

Kweku Adoboli, the rogue trader arrested in London for $2 bn UBS losses (Facebook image)


UBS CEO, Oswald Gruebel sent a memo to UBS staff yesterday that the rogue deals had been discovered within the past 24 hours.

Gruebel told staff:

“We regret to inform you that yesterday we uncovered a case of unauthorised trading by a trader in the Investment Bank. We have reported it to the markets in line with regulatory disclosure obligations.

“The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars.”

Oswald Gruebel vowed to “establish exactly what has happened” and underscored that “no client positions were affected”.

The UBS CEO urged staff to remain focused on their clients as the investigation continues.

“We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened. We will keep you updated on the progress of our investigation.”

Trader Kweku Adoboli worked at the UBS’ headquarters in the very heart of London’s finance district.

UBS has around 65,000 employees worldwide, but it said the bank has recently reduced its staff by 3,500 as part of a bid to save $2.3 billion by the end of 2013.

The cuts came as it said pre-tax profits dropped 23% on the previous quarter to $2 billion at the end of June.

As well as the economic downturn, UBS said regulatory changes such as the Basel rules, which require the bank to hold more capital, were behind the need for the cost reductions.

Despite being one of the biggest wealth managers in the world, UBS has a chequered recent history.

In 2008, UBS was rescued by the Swiss state following huge losses on toxic assets held by its investment bank.

The bank then became embroiled in a serious tax evasion dispute with US authorities and was forced to hand over 300 client names and pay a $780 million fine. There was then a second case in which bank agreed to hand over data on 4,450 American clients.

A restructuring then saw UBS launch a multi-million dollars advertising campaign which used the slogan ‘we will not rest’.

UBS Investment Bank’s offices in Stamford, Connecticut boasts the largest trading floor in the world – it is the size of two American football pitches, and sees more than $1 trillion in assets traded every day.