Thousands of jobs at risk at UBS after ‘rogue trading’ arrest

UBS is expected to scale back its investment banking business as it races to protect its reputation following the arrest of one-time star trader Kweku Adoboli Thousands of jobs could be on the line at UBS as the Swiss bank is expected to scale back its investment banking business in response to the alleged rogue trading incident that it fears could cost it as much €2bn (£1.3bn). Kweku Adoboli, the 31-year-old one-time star trader, is still in custody at Bishopsgate police station on the edge of the financial district, while executives from the Swiss bank are continuing their analysis of what went wrong. More information is expected later on Friday as pressure mounts on chief executive Oswald Grübel to explain the latest crisis. British-educated Adoboli, who is of Ghanaian descent, is understood to have hired Kingsley Napley, the firm of lawyers that represented Nick Leeson when his £800m rogue trading caused the collapse of Barings in 1995. While the allegations surrounding Adoboli are not expected to sink UBS financially, they are expected to cause an overhaul of the business as the bank races to protect its reputation in Switzerland and around the world. Insiders also fear their bonuses for 2011 will be scaled back as result of the losses, which are being incurred during a difficult time on the financial markets. The bank last month announced plans to cut 3,500 jobs to save £1.5bn – a similar amount to the losses the bank now fears it faces from the alleged “unauthorised trading”. Analysts believe more cuts are likely. “We are making further cuts in our 2012 profit estimates, as we believe that UBS is set to announce a more streamlined investment banking business strategy in November, with certain business units being closed and additional jobs being lost. This is part of the bank’s efforts to address the long-term structural issues within the financial services industry,” said Christopher Wheeler, an analyst at Mediobanca. Ratings agencies warned that the admission of the potential loss could lead to a downgrade of the bank’s credit rating. Standard & Poor’s placed the bank on its Creditwatch list citing a number of factors including the “setback to UBS’s efforts to rebuild its reputation and demonstrate strengthened risk management following its weak performance in 2007-2009″ when it almost collapsed during the credit crunch. Adoboli worked on the Delta One trading desk on the heart of the third floor of UBS’s headquarters in London near Liverpool Street. But his registration with the Financial Services Authority was switched to “inactive” on Friday at the request of the firm – indicating that he is no longer performing that role. He was thought to trade exchange traded funds (ETFs), new financial instruments that mimic market movements and which have been a cause of anxiety for regulators in recent months. In June, the Financial Policy Committee, the new regulator responsible for financial stability inside the Bank of England, warned about the “opacity and complexity” of the products . The market has grown rapidly to a size of around $300bn (£190bn) and after the first FPC meeting, Bank of England governor Sir Mervyn King, described ETFs as a “contributory factor” to the “tangled web” that interconnects risks in the financial system. By hiring lawyers at Kingsley Napley, Adoboli has found experts in the world of fraud. Michael Caplan is one of the lawyers thought to be among those advising him. He is best known for successfully defending Henry Sweetbaum, former chairman and chief executive of DIY chain Wickes, in a £40m case brought by the Serious Fraud Office. After a 10-month trial he was acquitted in 2002 after claiming he had not known about a £20m accounting fraud conducted by those beneath him at the company. Caplan persuaded the jury there was no evidence on which to convict him. Kweku Adoboli UBS Banking European banks Jill Treanor Simon Bowers guardian.co.uk

Posted by on September 16, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.