UBS AG was fined £30-million ($48-million U.S.) 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 on Monday, Tracey McDermott, director of enforcement at Britain’s Financial Services Authority (FSA), 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.
“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,” Ms. 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.
UBS said it had made progress over the past year “reinforcing our position as one of the most financially sound global banks.”
The Swiss regulator said it is appointing an independent investigator to see whether the action UBS is taking to put things right after last year’s trading scandal is proving effective.
UBS said it accepted the regulators’ findings and the penalties, adding it was pleased that the regulators had acknowledged the steps the bank has taken including disciplinary action against staff.
UBS Chief Executive Sergio Ermotti, installed after Oswald Gruebel stepped down over the scandal, announced a major restructuring last month to wind down large, risky parts of its investment bank.
Finma said the bank’s control functions had been based too much on trust and that it had sent misleading signals by awarding bonuses and pay rises to Adoboli, even though he had breached the rules.
UBS said last month its total capital requirements under the Basel III global rules are expected to decline to 17.5 per cent from 19 per cent as it cuts risk-weighted assets and its balance sheet over the coming years.