Rogue trader suspected in $2 billion loss at UBS

Swiss banking giant UBS says a rogue trader has caused it an estimated loss of $2 billion, The Associated Press reports, stunning a beleaguered banking industry that has proven vulnerable to unauthorized trades. Police in London say they arrested a 31-year-old UBS trader, Kweku Adoboli, in the alleged fraud. UBS, however, declined to confirm the trader’s name. Switzerland’s largest bank warned it could report a loss for the entire third quarter as a result of the rogue trade, while shares in UBS AG plummeted 8.7% to 9.98 francs ($11.41) on the Zurich exchange upon release of the news. The case immediately evoked memories of Jerome Kerviel, the trader at French bank Société Générale, who secretly gambled away $6.7 billion in 2006 and 2007. The scale of that fraud rocked the global financial industry and prompted banks to tighten oversight rules to ensure such large sums couldn’t be traded unnoticed. The Swiss banking regulator Finma says it was in contact with UBS about the incident, which was discovered late Wednesday. “From the scale of this case you can be sure that it’s the biggest we’ve ever seen for a Swiss bank,” Finma spokesman Tobias Lux says.