UBS Reports a $2 Billion Loss by a Rogue Equities Trader

Kweku Adoboli, a 31-year-old trader at UBS (UBS), was arrested in London. Adoboli was accused of costing UBS $2.3 billion by making unauthorized trades. An Oct. 20 Bloomberg story noted that "the trading losses prosecutors claim he was responsible for led to the departures of Chief Executive Officer Oswald Gruebel and the co-heads of the Swiss bank's global equities business."

A 31-year-old man who works for Switzerland’s largest bank was arrested Thursday in London on suspicion of fraud.

UBS said on Thursday that a rogue trader in its investment bank had lost $2 billion, delivering a fresh blow to the beleaguered Swiss bank.

The police in London have arrested a European equities trader, Kweku Adoboli (left), in connection with the case, according to a person with direct knowledge of the situation who was not authorized to speak publicly.

The incident raises questions about the bank’s management and risk policies at time when it is trying to rebuild its operations and bolster its flagging client base. The case could also bolster the efforts of regulators who have been pushing in some countries to separate trading from private banking and other less risky businesses.

The revelation about the rogue trader comes as the bank tries to regain its financial footing. Last month, UBS announced it would shed 3,500 jobs, following poor second-quarter results. In an internal memo, the bank said the unauthorized trading could drag down earnings in the third quarter to a loss, adding that “no client positions” were involved in the “unauthorized trading.”