UBS was forced to admit yesterday that it has lost $300m (£190m) more from the actions of a “rogue” trader than it previously thought.
The revision sees the cost of the incident swell to $2.3bn, equivalent to more than 90 per cent of the maximum annual cost-savings the bank had hoped to make by laying off 3,500 staff.
Switzerland’s biggest lender also suggested yesterday that the trades in question involved “unauthorised speculative” bets on various S&P 500, Dax and Eurostoxx index futures, rather than on the Swiss franc, as some had thought.
The bank said that although the trades were “within the normal business flow” of its equities operation, “the true magnitude of the risk exposure was distorted” because the hedges that traders are required to put in place had been fabricated.
UBS claims that the non-existent hedges entered into its records were “fictitious, forward-settling, cash ETF [exchange-traded fund] positions”, trades that had never actually been executed.
It says that the irregularities came to light last Wednesday during a review of Kweku Adoboli’s trading book, which it has now unwound. Adoboli is then alleged to have “revealed” the extent of his trading activity.
On Friday police brought charges against Adoboli: the 31-year-old trader is accused of “fraud by abuse of position” by the bank.