City of London detectives on Friday questioned the equities trader suspected of losing $2 billion at UBS as reports said he had alerted the Swiss bank to the unauthorised deals himself.
Kweku Adoboli, the 31-year-old son of a retired Ghanaian United Nations official, remained in custody for a second day as police and bank officials tried to unpick a complex web of trades.
UBS’s internal systems failed to detect the massive losses allegedly run up by Adoboli, but he himself informed the bank he had engaged in unauthorised trades, the BBC reported.
The massive losses could force UBS to reduce the size of its investment banking unit and carry out sweeping job cuts, according to reports in Switzerland.
The bank, which had to be bailed out by the Swiss state after it was badly hit by the subprime crisis in 2007-2008, had been hoping to reap the benefits of 3,500 job cuts it announced last month.
But thousands more jobs could now be slashed from its global workforce of 65,000, newspapers said.
Having plummeted by more than 10 percent when the losses were revealed on Thursday, UBS shares rallied in early trading on Friday, rising almost 3.5 percent to 10.09 Swiss francs at 1215 GMT.
Adoboli is believed to have worked as a director of Exchange Traded Funds (ETFs) in the equities department of the bank’s London offices.
ETFs are shares that can be traded and that track movements in other indexes, meaning they are highly susceptible to short-term volatility in prices.
Britain’s Serious Fraud Office said it had recently warned about the “inherent dangers” of ETFs “because they are not transparent”.
Adoboli reportedly amassed $2.0 billion (1.46 billion euros) in losses by betting on share prices and currency exchange rates.
The Times reported that he had lost heavily after the Swiss Central Bank’s decision last week to devalue the Swiss currency.
A picture emerged as a fiercely ambitious man who often worked nights in the office but masked the pressures of his job with an amiable personality and a penchant for parties at his trendy bachelor flat.
Adoboli was born in Africa but educated at a £20,000-per-year ($31,500) boarding school in Yorkshire, northern England, where he was head boy.
He graduated from the University of Nottingham in central England with a degree in e-commerce and digital business in 2003.
According to the Financial Services Authority (FSA) watchdog, he joined UBS in 2006 as a trainee investment adviser.
The trader’s family said they were “heartbroken” over his arrest.
“From what the reports are saying, it could be that he made a mistake or wrongful judgment,” said his father John Adoboli, a former UN staff officer who lives in the port city of Tema in Ghana.
“The family is heartbroken because fraud is not our way of life,” he added. “I brought them up to be God-fearing and to appreciate decency.”
In a clue to the mounting losses, Adoboli is said to have posted “I need a miracle” on his Facebook page last week.
The arrest comes three years after trader Jerome Kerviel ran up losses of 4.9 billion euros at French bank Societe Generale through a similar type of trading to the transactions in which Adoboli specialised.
Adoboli is being represented by Kingsley Napley, the law firm which acted for Nick Leeson, the British trader whose losses brought down Barings bank in 1995, a spokeswoman for the firm said.
The latest case of ‘rogue trading’ has raised questions over the level of regulation of the financial sector in Britain, which was tightened following the Kerviel affair.
“I don’t think it’s a breakdown of the whole financial system,” said Manoj Ladwa, a senior trader at ETX Capital.
“The problem is within UBS because their risk management systems weren’t quick enough to pick up that this trader had built very big positions within a very short period of time,” he told AFP.
Following the arrest, ratings agency Moody’s said it was considering lowering UBS’s credit rating.
Moody’s said its review of the rating will focus on “ongoing weaknesses in the group’s risk management and controls that have become evident again.”