UBS fined €36m over rogue trader
Swiss banking giant UBS has been fined €36.3m by the UK's City watchdog for failings which allowed convicted rogue trader Kweku Adoboli to lose €1.72bn.
The Financial Services Authority (FSA) said procedures, management systems and internal controls at the bank’s London branch were “seriously defective”.
Adoboli was sentenced to seven years in prison last week after he was convicted of two counts of fraud by abuse of position.
Tracey McDermott, FSA director of enforcement and financial crime, said: ``UBS's systems and controls were seriously defective.''
She went on: “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.”
UBS became aware on September 14 last year that unauthorised trading had taken place on the Exchange Traded Funds Desk in the Global Synthetic Equities (GSE) trading division in London.
Adoboli disguised the underlying positions by the use of late bookings of real trades and the booking of fictitious trades.
The FSA, in an investigation with the Swiss Financial Market Supervisory Authority (Finma), uncovered several “particularly serious” failings which put wider market confidence at risk and allowed Adoboli to commit financial crime.
The computerised system operated by UBS to assist in risk management was not effective, the regulators said, while its trade capture and processing system had “significant deficiencies”.
Inadequate front office supervision was discovered including poorly executed and ineffective supervision arrangements within the GSE division.
