£1.3 Billion in Fraudulent Trades Made by UBS Employee

City of London Police have arrested Kweku Adoboli, a 31-year-old UBS trader in connection to fraudulent trades totaling £1.3 billion.

The Ghanaian born banker changed his Facebook status to “I need a miracle” just before authorities arrested him at his desk. This latest banking scandal knocked £4 billion from the value of share in UBS, affecting thousands of investors.

Adoboli is a market maker who advises clients on the prices at which they should buy and sell shares and assets. He is a 2003 graduate of the University of Nottingham, where he studied computer science and management. London papers report that Adoboli’s neighbors noticed he was working long hours, often late at night.

The loss is a huge blow to the bank who recently cut 3,500 jobs in an effort to save an amount similar to what was lost. UBS says none of its clients lost money as a result of the fraudulent trades.

In a statement on Wednesday the bank said that the illegal trades may result in a loss reported in their 3rd quarter.

Some financial experts say this latest scandal has a silver lining and may help speed up the Vickers regulations. Dr. Sonia Falconieri from the Faculty of Finance at Cass Business School, had this to say: “The timing of yet another episode of rogue trading is fortunate in a sense as it will hopefully accelerate the implementation of the Vickers regulation because it leaves the banking lobby with very poor arguments against the need for ringfencing and separation of activities. While the separation of investment and commercial banking will prevent this kind of episode from impacting on depositors, it will not prevent further incidents from happening. Compensation packages with excessive bonuses and unrealistic targets are the reasons for excessive risk taking among traders, particularly at a moment of high financial instability that makes difficult to achieve the required targets. This together with a loose internal control system makes investment banks vulnerable to rogue trading.”

“The news that a trader at UBS has been able to blow £1.3bn is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to. This is a frightening level of wrongdoing in a bank that was held up as the world class example of good risk management before the crisis,” said Professor Chris Roebuck, Visiting Professor at Cass Business School.

UBS is among the banks that had to be bailed out by the Swiss government in 2008 because of poor practices. That same year the FBI accused UBS of assisting clients in evading taxes. They paid a $780 million fine. Sixty-five thousand people work for UBS, 6,000 of them are in the UK.