UBS has been fined £30m by the UK's Financial Services Authority – and could see its investment banking activities hampered by the Swiss regulator – after its former trader Kweku Adoboli was jailed for fraud.
Both regulators criticised the Swiss bank for serious weakness in its systems which allowed Adoboli to rack up eventual losses of over £1.5bn during three years of secretive, off-the-books trades.
"The systems and controls failings revealed serious weaknesses in the firm's procedures, management systems and internal controls," the FSA said on Monday.
The Swiss financial market supervisory authority (Finma) also reprimanded the bank, saying: "The fraudulent transactions executed by the rogue trader would have been detected sooner if these deficiencies had not existed."
As part of a series of measures to limit UBS's risk taking, Finma has imposed capital restrictions and an acquisition ban on the investment bank. It will appoint an independent third party to "ensure that corrective measures are successfully implemented".
The regulator – which didn't have the power to fine UBS – hinted at further sanctions, saying it continued to investigate whether UBS should increase the levels of capital it holds.
Adoboli, a relatively junior City trader who almost destroyed UBS through increasingly reckless illicit deals, was jailed last week for seven years after being convicted of what police describe as the biggest fraud in UK history.
He was acquitted on four separate charges of false accounting.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: "UBS's systems and controls were seriously defective.
UBS failed to question the increasing revenue of the desk and failed to ensure that there was a corresponding increase in the controls in place over the desk.
As a result Adoboli, a relatively junior trader, was allowed to take vast and risky market positions, and UBS failed to manage the risks around that properly.
We know from past experience that failures to manage risk properly can cause firms to fail and cause systemic harm."
guardian.co.uk
Both regulators criticised the Swiss bank for serious weakness in its systems which allowed Adoboli to rack up eventual losses of over £1.5bn during three years of secretive, off-the-books trades.
"The systems and controls failings revealed serious weaknesses in the firm's procedures, management systems and internal controls," the FSA said on Monday.
The Swiss financial market supervisory authority (Finma) also reprimanded the bank, saying: "The fraudulent transactions executed by the rogue trader would have been detected sooner if these deficiencies had not existed."
As part of a series of measures to limit UBS's risk taking, Finma has imposed capital restrictions and an acquisition ban on the investment bank. It will appoint an independent third party to "ensure that corrective measures are successfully implemented".
The regulator – which didn't have the power to fine UBS – hinted at further sanctions, saying it continued to investigate whether UBS should increase the levels of capital it holds.
Adoboli, a relatively junior City trader who almost destroyed UBS through increasingly reckless illicit deals, was jailed last week for seven years after being convicted of what police describe as the biggest fraud in UK history.
He was acquitted on four separate charges of false accounting.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: "UBS's systems and controls were seriously defective.
UBS failed to question the increasing revenue of the desk and failed to ensure that there was a corresponding increase in the controls in place over the desk.
As a result Adoboli, a relatively junior trader, was allowed to take vast and risky market positions, and UBS failed to manage the risks around that properly.
We know from past experience that failures to manage risk properly can cause firms to fail and cause systemic harm."
guardian.co.uk
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