Newspaper article The Evening Standard (London, England)

UBS's [Pounds Sterling]29.7m Penalty for Failing to Stop Rogue Trader

Newspaper article The Evening Standard (London, England)

UBS's [Pounds Sterling]29.7m Penalty for Failing to Stop Rogue Trader

Article excerpt

Byline: Nick Goodway

ONE of the City's biggest banks, UBS, was today fined [pounds sterling]29.7 million by the FSA for failing to spot and stop rogue trader Kweku Adoboli who was jailed for fraud last week.

The City regulator said there had been "serious weaknesses" in the bank's procedures, management systems and internal controls. If UBS had not agreed to settle early the fine would have been even larger at [pounds sterling]42.4 million. That was based on 15% of the annual revenues of its global synthetic equities trading division in London where Adoboli worked.

UBS has also punished staff by clawing back bonuses and has withheld on average 50% of deferred pay from many executives in the investment bank worth a total of [pounds sterling]34 million.

It was also revealed that UBS has spent [pounds sterling]16 million engaging an independent firm to investigate the trading scandal.

"UBS failed to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk-management systems, and failed to conduct its business from the London branch with due skill, care and diligence," said the FSA.

The regulator also said UBS had failed to learn lessons after it was fined [pounds sterling]8 million for failed controls and systems in its wealth-management business three years ago.

Adoboli was jailed for seven years last week on two counts of fraud in which he ran up losses of [pounds sterling]1.4 billion.

Tracy McDermott, director of enforcement and financial crime at the FSA, said: "UBS's systems and controls were seriously defective. UBS failed to question the increasing revenue of the desk and failed to ensure that there was a corresponding increase in the controls in place over the desk. As a result Adoboli, a relatively junior trader, was allowed to take vast and risky market positions, and UBS failed to manage the risks around that properly. We know from past experience that failures to manage risk properly can cause firms to fail and cause systemic harm. …

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