Loading ...The specter of rogue trading has once again come to haunt the corporate financial world. Clearly, this seems to have become a trend with one scam after another tumbling out of the coffers of major banking corporations. Rogue traders seem to be having a field day! UBS has now admitted it was caught napping when rogue trader Kweku Adoboli allegedly caused the bank to run up losses of $2 billion on its derivatives desk. UBS claims there were problems with its control mechanism.
UBS has managed to pinpoint two controls that were overlooked around December 2010 when Abodoli made his rather expensive faux pas.
In fact chief executive Sergio Ermotti admitted in a memo that the bank’s IT sector was aware of the rogue activity but that “this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced”.
In a statement, UBS said: “Following the discovery of the unauthorized trading activities that UBS announced in September, management has determined that certain internal controls were not effective on December 31, 2010, but at the same time has reconfirmed the reliability of the financial statements included in UBS’s 2010 annual report.”
Numerous issues cropped up; a monitoring tool which checks the issue of cancelled trades had become ineffectual, while a control which kept a record of the firm’s trade with other parties, had gone on the blink. “We have taken and are taking measures to address these control deficiencies,” the bank said.
The bank is taking measures to make sure such activities don’t happen again. The bank has mentioned about the rogue trading activity in its third quarter 2011 financial report.
Despite the enormous loss caused by the rogue trading fiasco, it said it had reported a pre-tax profit of CHF 1 billion during that period.
