Trader quizzed over €1.48bn deals

A suspected rogue trader was being questioned today after Swiss banking giant UBS discovered €1.48bn worth of unauthorised deals.

The 31-year-old man, named by sources as Kweku Adoboli, was arrested at his desk by City of London Police at 3.30am yesterday on suspicion of fraud by abuse of position and remains in custody.

UBS, which has 6,000 staff in the UK, saw its shares slide 10% after it warned the activity could have tipped the bank to a third-quarter loss.

Oswald Gruebel, UBS chief executive, called the loss “distressing” and said he “will spare no effort to establish how it happened”.

City of London Police commander Ian Dyson said the force was tipped off by UBS at 1am after the alleged rogue trade surfaced.

Adoboli is listed as director of Exchange Traded Funds (ETF) and Delta-1 Trading at UBS Investment Bank in his profile on LinkedIn, the social networking site for professionals.

He graduated from the University of Nottingham with a BSc (Hons) in e-commerce and digital business in 2003 and, according to the Financial Services Authority register, started with UBS in 2006 as a trainee investment adviser.

Speaking from the family home in Tema, Ghana, his father John Adoboli, a former United Nations staff officer, told reporters the “god-fearing” family was “heartbroken because fraud is not our way of life”.

He added: “I am hoping he’d be granted bail soon so that I can hear his side of the story.”

Adoboli is reported to have posted a message on his Facebook page last week which read: “Need a miracle.”

Philip Octave, Adoboli’s former landlord, said the trader previously lived in a £1,000-a-week flat in Shoreditch, east London, and was “well spoken and dressed very smartly”.

ETFs are an investment fund traded on stock exchanges, much like stocks, which holds assets such as stocks, commodities, or bonds.

Louise Cooper, markets analyst at BGC Partners, said the arrest will call UBS’s risk management into question and an unexpected trading loss could do “significant reputational damage” to the bank.

She said: “Rich people tend not to want to do business with a bank where there are questions over risk control.

“UBS needs to do a good job in explaining what went wrong and assuring its clients that it will not affect them.”

A memo issued to UBS staff early yesterday morning by Mr Gruebel revealed the alleged rogue trading was discovered in the last 24 hours.

UBS, which has its main office in Finsbury Avenue, in the heart of the City, would not comment further on the arrest.

In a short statement, the bank said: “UBS has discovered a loss due to unauthorised trading by a trader in its investment bank.

“The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of two billion US dollars.

“It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.”

UBS, which has three keys in its logo symbolising “confidence, security and discretion”, said no client funds were affected by the incident.

The bank has been hit by global growth fears and last month said it would reduce its headcount by 3,500 as part of a move to save two billion Swiss francs by the end of 2013.

UBS was one of a number of banking giants to take a government bailout after the financial crisis.

The firm transferred 60 billion US dollars in toxic debts to a fund owned by the Swiss National Bank (SNB).

The arrest comes three years after Jerome Kerviel lost French bank Societe Generale around €4.9bn through rogue trading.

Kerviel was sentenced last year to three years in prison, although this is subject to appeal. He claimed the bank knew about the risk-taking.

The scandal topped the losses involved in the infamous “rogue trader” case in 1995, which saw Briton Nick Leeson cause the collapse of Barings bank after costing the group €914m.

Elsewhere, Yasuo “Mr Copper” Hamanaka was sentenced to eight years in prison for billions of pounds of unauthorised copper trading. His activity triggered losses of 285 billion yen.

Adoboli was arrested on the third anniversary of the collapse of US investment bank Lehman Brothers.

Lehman filed for the biggest bankruptcy claim in US history on September 15 2008 after years of risky investments and high levels of borrowing.