UBS fined £29.7m for ‘gambling’

UBS is paying some relatively minor consequences for dereliction of duty in upper management and failure to learn from the past. The Swiss investment bank, recently named by Euromoney magazine as best bank and global wealth manager in Switzerland, has been fined by the Financial Services Authority to the tune of £29.7m, basically for allowing gambling to go on unchecked until huge losses became apparent.

Kweku Adoboli, one the UBS’ City traders, was arrested in September 2011 after questions about his trading practices prompted an internal investigation. He ‘came clean’ with the chief questioner, William Steward, in an e-mail admitting to unauthorized trades. During his court appearances, Adoboli said his high-risk trades were mostly due to pressure from his superiors to make bigger profits. Losses to the bank through his risky trading amounted to at least £1.4 billion.

Southwark Crown Court found Adoboli guilty on two counts of fraud and last Tuesday he was sentenced to seven years in prison, but even before his conviction the repercussions were being felt throughout UBS’ entire structure.

Oswald Grueber was Chief Executive of UBS when word of the rogue trader’s transgressions came out; he resigned during the uproar that ensued and was replaced by Sergio Ermotti, who is now undertaking a major overhaul of the bank’s structure and its regulatory practices. A number of other high-echelon executives have resigned or been fired, and more than 10,000 employees laid off in branches that are deemed non-profitable and/or redundant.

The FSA said that UBS was guilty of “system and control failings” that enabled Adoboli to make huge gambles with the bank’s (clients’) money, long after he began losing large amounts of that money on trades that went far beyond the limits of prudence and responsibility to clients and shareholders. It was FSA’s conclusion that both the bank and the individual trader were at fault.