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UBS revises loss up to $2.3 billion in unauthorized trade

By the CNN Wire Staff
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Suspected rogue trader charged with fraud
  • The Swiss banking giant says unauthorized trading cost it more than previously known
  • It says risky behavior was hidden by fictitious trading
  • Trader Kwaku Adobili was charged with fraud Friday
  • The 31-year-old suspect didn't enter a plea

London (CNN) -- Swiss banking giant UBS lost more than previously thought due to unauthorized trading, it announced Sunday, putting losses at $2.3 billion, up from earlier estimates of $2 billion.

The losses resulted from unauthorized speculative trading over a period of three months, UBS said Sunday.

It said a trader had concealed trades violating the bank's risk limits with "fictitious trades.... allegedly executed by the trader."

Police charged a bank trader with fraud Friday, a day after he was arrested in connection with the discovery of unauthorized deals at UBS.

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City of London Police said Kwaku Adoboli appeared in court later Friday, charged with two counts of false accounting and one charge of fraud by abuse of position.

The suspect was not obliged to enter a plea, and did not enter one.

Clad in a V-neck sweater, a crisp white shirt, and gray slacks, the suspect wiped his eyes from time to time but otherwise did not appear visibly upset.

The court ruled that Adoboli will remain in police custody until his next hearing, set for Thursday.

Bellyard Communications, the public relations firm for Kingsley Napley -- the law firm representing Adoboli -- said Monday it had no response to the UBS Sunday statement and did not anticipate making any comment Monday.

Adobili can apply for bail during next week's proceeding. A committal hearing has been set for October 28.

The 31-year-old was arrested in an early-morning operation in London's banking district hours before the loss was announced on Thursday, police said. His first name has been spelled elsewhere as Kweku.

The Financial Services Authority, the Serious Fraud Office and the Crown Prosecution Service are also involved in investigating the case, the City of London Police statement said.

The bank declined to comment on the arrest. Shares in UBS rose slightly in early trading in Europe Friday after falling about 10% the day before.

The bank is large enough to take a $2 billion hit, experts said, but the size of the loss it reported is almost unprecedented.

Credit rating agency Moody's has said it is looking at UBS for a possible downgrade.

Its review of UBS will focus on "ongoing weaknesses in the group's risk management and controls" as revealed by the reported loss, Moody's said in a statement.

Moody's downgraded two French banks earlier this week amid questions over their exposure to debt.

UBS said no client positions were affected by the loss.

But the "unauthorized trading by a trader in its investment bank" could cause UBS to post a loss in the third quarter of this year, it said.

The loss would potentially be among the largest costs ever to a bank in unauthorized trading.

Rogue trader Jerome Kerviel cost his French bank, Societe Generale, almost $6 billion and was sentenced to three years in prison last year.

Yasuo Hamanaka cost Sumitomo Corporation $2.6 billion in the global copper market and was sent to prison for eight years over fraud and forgery in 1997.

Nick Leeson, the subject of the Ewan McGregor movie "Rogue Trader," lost about $1.3 billion for his bank, Barings, in 1995, forcing it to close.

UBS made a pre-tax profit of about $1.9 billion in the second quarter of this year, it announced in July, down from about $2.5 billion the quarter before that.

CNN's David Wilkinson contributed to this report.