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FSA fines UBS over trading scandal

Former UBS trader Kweku Adoboli arriving at Southwark Crown Court in London. Photo: Reuters

Former UBS trader Kweku Adoboli arriving at Southwark Crown Court in London. Photo: Reuters

UBS was fined £30 million by Britain’s financial watchdog and put under extra scrutiny by its Swiss counterpart over failings that allowed a rogue trader to lose $2.3 billion.

Announcing the fine yesterday, the director of enforcement at Britain’s Financial Services Authority said the Swiss bank’s risk control systems were “seriously defective”.

Kweku Adoboli, a trader on UBS‘s Exchange Traded Funds desk in London, was jailed for seven years last week after admitting trading far in excess of authorised limits in the biggest fraud in British history.

“Failures of this type in firms of the size and standing of UBS not only damage the firms concerned but also wider confidence in the integrity of the markets and the financial system,” the FSA’s Tracey McDermott said.

In a separate announcement, the Swiss financial regulator Finma said it was examining whether UBS should increase capital to back its operational risks. A Finma spokesman declined to elaborate.

Espirito Santo Investment Bank analyst Andrew Lim doubted whether the Swiss regulator would push UBS to raise more capital because the bank was already in a strong position.

“The fine is immaterial and the steps on the capital front are also immaterial because they are so well capitalised,” Lim said.

“Finma is just doing a ‘belt and braces’ approach and showing they are at the forefront on being tough on regulation,” he added.

Since the Government bailed out UBS during the 2008 financial crisis, Switzerland has drawn up tough new capital standards for its two global banks – UBS and Credit Suisse – that go beyond the new Basel III global rules.

UBS said yesterday it had made progress over the past year “reinforcing our position as one of the most financially sound global banks”.

The Swiss regulator yesterday said it is appointing an independent investigator to see whether the action is taking to put things right after last year’s scandal is proving effective.

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