Fourteen months after the largest loss from unauthorized trading in British history, UBS is accelerating a retreat from risk taking.
Bloomberg reports that the actions of Kweku Adoboli, the 32-year-old former trader found guilty of fraud in a London court Tuesday, hastened a strategic review that culminated in a decision to eliminate 10,000 jobs and dismantle portions of an investment bank UBS spent more than a decade building.
The $2.3bn loss exposed faults in UBS’s risk controls three years after the Zurich-based bank had to be rescued by the state because of record losses tied to U.S. subprime mortgage securities. Oswald Gruebel, the former bond trader who joined as CEO in 2009, exited after saying he was shocked that one trader could inflict so much damage. Sergio Ermotti, his replacement, deepened and broadened an overhaul at the investment bank Gruebel had begun.
'The trading loss accelerated and maybe gave the necessary internal political impetus to implement the resulting structural changes', said Florian Esterer, a fund manager at MainFirst Schweiz AG in Zurich. 'But they would have happened anyway'.
Adoboli, who joined the bank in 2003, initially said in an e-mail to a UBS accountant that he had booked fake hedges to hide the risk of his actions. He argued at trial that he was encouraged by superiors to exceed risk limits as he made profits from unauthorized trades. He said nothing he did was dishonest and he intended to make money for the bank.
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