London police have arrested a man in connection with allegations of unauthorized trading which has cost Swiss banking group UBS an estimated $2 billion.

The 31 year-old man was detained in the early hours of Thursday and remains in London Police custody.

UBS shares fell today 8% after it announced it was investigating rogue trades which would mean the bank making a loss for the third quarter of 2011.

UBS, the Swiss bank said no customer accounts were affected.

London police have arrested a man in connection with allegations of unauthorized trading which has cost Swiss banking group UBS an estimated $2 billion

City of London Police said:

“We can confirm we arrested a 31-year-old man at 3:30am on suspicion of fraud by abuse of position.”

In a letter to its 65,000 staff, UBS said:

“The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of $2bn.

“It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.

“While the news is distressing, it will not change the fundamental strength of our firm.

“We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times,” the bank said.

“All the clever systems that the banks now have still cannot stop a determined individual .”

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.

UBS declined to say in which department, or country, the rogue trader operated. However, there is already speculation that the losses may have occurred in foreign exchange trades.

At the beginning of September, the Swiss Central Bank shocked the markets by capping the franc against the euro at 1.20 francs. The move sent the franc-euro pairing up 10%, and it is rumored that some traders lost money.