Moody's said its review will focus on "ongoing weaknesses in the (UBS) group's risk management and controls that have become evident again by the events leading to UBS announcing a loss due to unauthorised trading by a trader in its Investment Bank."
The ratings agency's move came after UBS said Thursday it had lost $2.0 billion through unauthorised trading, after London police arrested a man suspected of committing the massive fraud.
"Moody's believes that a loss of that magnitude would be manageable for the Group given its sound liquidity and capital position," the company said in a statement.
"However the losses call into question the Group's ability to successfully complete the rebuilding of its Investment banking operations."
Moody's said it had put the bank's financial strength rating and Aa3 long-term debt and deposit ratings "on review for possible downgrade."
The rating agency noted that UBS had made progress in improving its troubled risk management function.
"However, we have continued to express concerns with regards to the ability of management to develop a robust risk culture and effective control framework while at the same time trying to re-establish its position in certain market segments.
"The events of today suggest that this remains a key downside risk for the Group."