UBS hit by £29.7m rogue trader fine and warned over capital levels

UBS was yesterday hit with a £29.7m fine for failing to spot and stop rogue trader Kweku Adoboli, who was jailed for fraud last week, and told it may need to raise its capital levels.

The Financial Services Authority (FSA), who imposed the fine, said there had been "serious weaknesses" in the bank's procedures, management systems and internal controls.

If UBS had not agreed to settle early, the fine would have been even larger at £42.4m, based on 15 per cent of the annual revenues of its global synthetic equities trading division where Adoboli worked.

Meanwhile, Swiss financial regulator Finma announced it was looking at the possibility of UBS needing to up its capital levels to back its operational risks.

"UBS failed to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk-management systems, and failed to conduct its business from the London branch with due skill, care and diligence," said the FSA.

The City watchdog also said UBS had failed to learn lessons after it was fined £8m for failed controls and systems in its wealth-management business three years ago. UBS has punished staff by clawing back over £34m through reclaiming bonuses and withholding an average of 50 per cent of deferred pay from many executives.

It was also revealed UBS has spent £16m engaging an independent firm to investigate the trading scandal.

Adoboli was jailed for seven years last week on two counts of fraud after running up losses of £1.4bn.

Tracy McDermott, director of enforcement and financial crime at the FSA, said: "UBS's systems and controls were seriously defective. UBS failed to question the increasing revenue of the desk and failed to ensure that there was a corresponding increase in the controls in place over the desk."

The punishment for UBS brings the total fines imposed by the FSA this year to a record-breaking £150m.

UBS said that it had undertaken "extensive remedial action" since Adoboli's losses came to light.

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