The bank revealed on Thursday that a trader had carried out unauthorised trades, and that it may be forced to report a loss in the third quarter due to the damages incurred by these fraudulent trade.
A reduction in size of the investment bank is to be announced on November 17th during UBS' investors' day, said newspaper Tages-Anzeiger, quoting sources within the bank.
This could lead to "thousands" of job cuts in the division, it added.
The newspaper also expected chief executive Oswald Gruebel and investment banking chief Carsten Kengeter to resign.
Police have arrested a man in central London on "suspicion of fraud by abuse of position."
British media named him as Kweku Adoboli, a trader in UBS' exchange traded funds division, although neither the bank nor the police have identified the suspect.