• Switzerland's news in English

Rogue trader costs Swiss bank UBS $2 billion

AFP · 15 Sep 2011, 11:15

Published: 15 Sep 2011 09:24 GMT+02:00
Updated: 15 Sep 2011 11:15 GMT+02:00

Facebook Twitter Google+ reddit

Swiss banking giant UBS revealed on Thursday that a rogue trader had lost an estimated $2 billion (€1.46 billion) in unauthorised trades, and that it may plunge into the red as a result.

Shares in the bank nosedived on the announcement which was issued two minutes before trading began, plummeting 7.04 percent to 10.16 francs, before recovering slightly to a loss of about 5 percent.

"UBS has discovered a loss due to unauthorised trading by a trader in its Investment Bank," the bank said in a statement.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion."

The bank added that it may also be forced to report a loss for the third quarter due to the unauthorised trade.

It assured clients however that their positions were not affected.

When contacted, the bank would not give further details.

"It's a sad story for UBS, but also for a bank in Switzerland as a whole. Everyone is wondering how this could happen. What kinds of risk system did UBS have?" noted Claude Zehnder, chief analyst at the Zürcher Kantonalbank.

"UBS has sort of regained credibility, and now this happened," he said.

UBS has been fighting to restore its reputation after losing colossal sums in US subprime loans and the ensuing financial and economic crises of 2007-2008.

The bank had to be bailed out by the state, while clients exited en masse amid fears that it would go under.

In 2008 and 2009, the bank was also embroiled in a serious tax evasion spat with the United States.

It was forced to hand over 300 client names and pay a $780-million fine in a first case, before a second wider case in which it finally agreed to hand over data on 4,450 American clients.

The rogue trading incident could also force UBS to "think seriously about exiting investment bank as a whole or cutting it down substantially in size," noted Zehnder, pointing out that the unit was already one of the worst performers of the bank in recent years.

Story continues below…

Traders say that the losses may have occurred in foreign exchange trades.

After the Swiss National Bank announced earlier this month that it would cap the franc rate against the euro at 1.20 franc, the franc-euro pair jumped 10 percent. Those who had open positions may have had their fingers burnt badly, they said.

In 2008, French bank Societe Generale uncovered rogue trading by one of its former employees Jerome Kerviel, whose unauthorised trades lost the bank €4.9 billion ($7.1 billion at that time).

Kerviel was later sentenced to five years in jail with two years suspended, and ordered to pay back the €4.9 billion, although the French bank said it would spare the trader from reimbursing the full compensation.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
‘Scary clown’ craze hits streets of Zurich
Photo: Pedro Pardo/AFP

Police in Zurich have warned so-called ‘scary clowns’ that they could face charges, following a number of incidents in the city.

VIDEO: driver chases runaway car on Swiss motorway
Image: Neuchâtel police

Shocking footage shows the moment a man dodged lorries to chase after his runaway car on a Swiss motorway.

Saas-Fee crowdfunds low-cost season ski pass
Saas-Fee is hoping to attract 99,999 season pass holders. Photo: Denis Emery/Photo-genic.ch

Skiers could get their hands on a whole season pass for just 222 francs ($223) in the Swiss resort of Saas Fee this winter – if enough people want one.

Swiss billionaire fined for dodging import tax
Urs Schwarzenbach owns the luxury Dolder Grand hotel in Zurich. Photo: Wilhem Rosenkranz

Urs Schwarzenbach faces a $4 million fine for failing to properly declare some 200 artworks imported into Switzerland.

Muslim woman wins headscarf court battle
Photo: Jack Guez / AFP

A Swiss court has ruled against a company that fired a longtime employee after she began wearing the Muslim headscarf.

Montreux throws hat in Olympic rings
Could Montreux host the 2026 Games? Photo: Ivo Scholz/Swiss Tourism

Montreux is to put itself forward as the host city for the 2026 winter Olympics as part of a potential bid by the cantons of Valais and Vaud.

Geneva car share scheme could help reduce city traffic
Catch a Car is aimed at short hops within a city. Photo: Catch a Car

Catch a Car, already in Basel, launches in Geneva next month.

Swiss women will ‘work for free’ for the rest of year
Female employees in Switzerland earn 19.3 percent less than their male colleagues. File photo: Randy Kashka

Switzerland's gender pay gap means from today, Friday October 21st, women in the country will effectively be working for free for the rest of 2016.

Swiss luxury watches stolen in Paris raid
Police outside the Girard-Perregaux watch store on Thursday. Photo: Bertrand Guay/AFP

The 10 Girard-Perregaux watches are worth half a million euros in total.

Brother-in-law arrested over murder of Swiss teacher
The victim worked in a school in Stabio, near the town of Mendrisio. Photo: Oliver Graf

The primary school teacher was found dead in Ticino earlier this week.

Photo: Richard Juilliard/AFP
Man makes Geneva airport bomb threat ‘for a joke’
Sponsored Article
Last chance to vote absentee in the US elections
Photo: AFP
Solar Impulse team reveals plans for unmanned plane
File photo: Martin Abegglen
Swiss to vote on passport rules for 3rd gen foreigners
Photo: AFP
Swiss wingsuit hotspot Lauterbrunnen won’t impose ban
Photo: Swiss Tourism
Six reasons Switzerland isn’t as boring as you might think
Photo: Swiss Tourism
Report: Switzerland one of world’s best places for girls
Photo: The Local
Thief returns Swiss cow bells worth thousands
File photo: Wikimedia Commons
One in three rapists isn’t locked up: statistics
Photo: activistin.ch
Tampon-tax protest turns Zurich fountains red
Photo: AFP
Geneva police to lift ban on bearded officers
Photo: Marcel Gillieron/AFP
Suicide chef’s restaurant keeps Michelin stars
Photo: Lara de Salis
11 things the Swiss get tired of hearing abroad
Photo:  Ivo Scholz/Swiss-image.ch
Survey: expats in Switzerland have money but few friends
Photo: AFP
Swiss press criticize Bern’s 'capitulation' on immigration
Photo: Jura Trois Lacs tourism
German ex-policeman is Swiss city’s new hermit
Photo: Dmitry A. Mottl
Ticino votes to favour local workers over foreigners
Photo: file
Some deodorants could cause breast cancer: Swiss study
Photo: Royal Savoy
In pictures: Inside the latest Swiss luxury hotel
Photo: AFP
Geneva airport bomb hoaxer faces 90,000-franc bill
Photo: Schaffhausen police
Mother leaves toddler son alone in car to go clubbing
Photo: Fabrice Coffrini/AFP
Swiss populist attacked by knife-wielding pensioner
jobs available