A 31-year-old staffer was arrested in the early hours of Thursday for causing a $2-billion loss to Swiss investment banking giant UBS on account of unauthorised trading at the bank's London office.
In a statement issued on Thursday, the Zurich-based bank said, "UBS has discovered a loss due to unauthorised 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 $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."
Though the name of the rogue trader has not been revealed either by the bank or the police, it has been reported that his name is Kweku Adoboli. who worked in the UBS' investment banking office in the City.
This loss of $2 billion comes at a time when UBS is struggling hard to put its house in order. The bank had last month announced plans to axe 3,500 jobs to save £1.35 billion ($2 billion).
Simon Ballard, senior credit strategist at RBS capital markets, said the trading loss would add to public concern over the banking sector.
"At a time of greater regulation, it will raise questions about regulatory capital and whether ringfences are in place to stop this happening," Ballard told Bloomberg TV.
UK's Financial Services Authority (FSA) refused to comment on this development. Sources within FSA, however, said it was a distressing development and they would be looking into it seriously.
It is in close touch with its Swiss counterpart, FINMA. The Swiss regulator has not made any official statement.
It is unclear if the rogue trade happened at UBS' London incorporated bank or its separate Swiss branch in London. The lead investigator would be decided based on where the rogue trade was carried out.
Kweku Adoboli is for now held by the metropolitan police for questioning. Adoboli had joined UBS as a trainee trader in March 2006.
UBS employs6,000 people in the UK and 65,000 worldwide, operating from 40 countries, has some presence in India as well.
The bank's Mumbai branch offers products across financial markets, institutional banking, corporate banking and retail banking.