UBS Lost $2 Billion in Unauthorized Trading

UBS LogoSwiss bank UBS announced today that it lost $2 billion in unauthorized trading. The company released the following brief statement.
UBS has discovered a loss due to unauthorized trading by a trader in its Investment Bank. The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of USD 2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
Bloomberg reports that UBS shares fell as much as 9.6% in Swiss trading. The shares recovered some in later trading, but were still down 6.3%.

Investors are going to need a better explanation for a $2 billion loss than the one given by UBS. Details will be needed as to how an employee was able to blow $2 billion and what UBS is doing to prevent this from ever happening again.

Reuters has provided a good roundup here of past trading losses by major banks, such as the Barings collapse in 1995 after a future traders lost $1.4 billion in derivatives trading.

Posted on September 15, 2011

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