UBS: 'Unauthorized' trades cost us $2 billion

@CNNMoney September 15, 2011: 9:12 AM ET
UBS bank unauthorized trading

UBS announced that unauthorized trading has cost the bank $2 billion.

ATLANTA (CNN) -- Swiss banking giant UBS discovered that unauthorized trading has cost it an estimated $2 billion, it announced Thursday.

The "unauthorized trading by a trader in its investment bank" could cause the bank to record a loss in the third quarter of this year, it said.

The unauthorized trading could mean the bank reports a loss this quarter. The loss would potentially be among the largest cost ever to a bank in unauthorized trading.

A loss of $2 billion would be "completely unheard of," market analyst Ralph Silva told CNN.

"We have only had three or four other situations in the billions," he said.

Silva outlined three possible ways a loss that large could take place: "basic stupidity" in trading strategy, "fat fingers" typing an extra zero by accident on a share purchase, or intentional fraud.

Police in London arrested a 31-year-old man in that city's banking district shortly after the announcement. But police would not confirm whether the arrest is connected to UBS or name the suspect.

Rogue trader Jerome Kerviel cost his bank, Societe Generale, almost $6 billion, and was sentenced to three years in prison last year.

UBS said no client positions were affected by the loss announced Thursday, which is still being investigated.

UBS to cut 3,500 jobs

It declined to tell CNN where the trading occurred.

The bank made a pre-tax profit of about $1.9 billion in the second quarter of this year, it announced in July, down from about $2.5 billion the quarter before that.

UBS shares were down about 10% two hours after the $2 billion loss was announced.

Rogue trader Jerome Kerviel cost his bank, Societe Generale, almost $6 billion, and was sentenced to three years in prison last year. To top of page

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