Rogue trader causes $2 billion loss at UBS

UBS AG said Thursday that a rogue trader has caused an estimated loss of $2 billion to the Swiss bank, and warned that it could report a loss for the entire third quarter as a result, according to AP. The announcement sent UBS shares plummetting more than 8 percent in early trading on the Zurich exchange. By mid-morning shares were down 5 percent at 10.38 Swiss francs ($11.83). The bank provided little information on the incident, saying it was still under investigation. But it said no customer money was affected. "UBS has discovered a loss due to unauthorized trading by a trader in its investment bank," it said in a statement before markets opened. "UBS's current estimate of the loss on the trades is in the range of $2 billion," it added. "It is possible that this could lead UBS to report a loss for the third quarter of 2011." A spokesman, Yves Kaufmann, declined to say where the unidentified trader was based, and whether the bank had pressed criminal charges against its employee. Peter Thorne, a London-based equities analyst at Helvea, said the loss was financially manageable for UBS, Switzerland's biggest bank. But he said it was a blow to the reputation of UBS and its management, which oversaw heavy subprime losses during the financial crisis and an embarassing U.S. tax evasion case in recent years. UBS isn't the first to be hit by a massive loss allegedly caused by a single rogue trader. Societe Generale, France's second-largest bank, stunned investors in 2008 when it revealed that one of its staff had lost the bank ?4.9 billion ($6.7 billion) through a complex scheme of unauthorized trades. The trader, Jerome Kerviel, was convicted in October 2010 on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly ?50 billion between late 2007 and early 2008. He was also banned for life from working in the financial industry and ordered to pay back the vast amount he had caused his employer to lose.