Risk-control officers at UBS AG discovered unauthorized trades allegedly made by bank employee Kweku Adoboli, who in turn admitted to having made the trades, according to a person familiar with the situation.
UBS disclosed Thursday that a rogue trader racked up about $2 billion in losses stemming from unauthorized trades. A person has been arrested by London police for fraud. A person familiar with the situation said that the trader is Mr. Adoboli, a 31-year-old who worked on a UBS desk in London dealing with exchange-traded funds.
UBS discovered the loss late Wednesday, although it isn't clear when the bank's risk-control department first became suspicious about the trades, according to a person familiar with the matter. On Wednesday, risk-control officers began questioning Mr. Adoboli, who then left UBS's London office for his home.
From there, this person said, Mr. Adoboli sent an email to managers at the bank admitting that he had made the unauthorized trades. He was arrested in London at 3:30 a.m. local time on Thursday and remains in custody. He hasn't been charged.
Since the news broke, questions have emerged about the efficacy of UBS's risk-management and risk-control systems, which were overhauled in the three years since the Swiss bank had to write down $50 billion in securities trades. The loss is a major embarrassment for a bank that was still working to win back client confidence following its near-collapse at the height of the financial crisis in 2008. Swiss regulators have closely watched developments at the bank since then, with a keen eye on how it revamped its risk-management systems.
UBS shares, which lost nearly 11% on Thursday in Zurich trading, were up 0.5% in midmorning.
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