The Economist alleged that Lim Ho Kee, head of the Singapore branch, was allowed to run his office as a quasi-independent entity. As a result, James Loh, Mr Lim's right-hand man, was "not monitored by UBS's central risk-management department". Mr Loh is alleged to have built up substantial positions in foreign exchange, interest rates and equities.
UBS insiders told The Independent that Mr Lim was "a bit of a maverick" who, unlike most other regional heads, "was never seen in the London office".
It is not the first time the bank - which yesterday defended its risk management procedures - has faced allegations of lax credit control. Earlier this year, amid intense media speculation, the bank admitted it lost almost pounds 200m on equity derivative and proprietary equity trading during 1997.
The bank's global equities derivatives (GED) group - again alleged to have been a "quasi-independent entity" - was at the root of these particular trading difficulties. The precise amount lost by the GED group has never been disclosed, although it has been variously estimated at between $440m and $700m.
In December, when UBS announced it was to merge with rival SBC, some commentators speculated that UBS's equity derivative losses allowed SBC to take the upper hand in the deal.
Both banks have denied the losses impacted upon the merger in any way, and Marcel Ospel, SBC's chief executive and chief executive-designate of the new bank, recently said he knew of the losses before the merger was announced.
"It would be interesting to know whether Mr Ospel was aware of the situation in Singapore too," remarked one UBS source.
In a statement yesterday, UBS said it had "always been fully committed to high standards in all areas of its business, especially in its risk- management process". The bank went on: "UBS rejects this false reporting which seriously hurts its reputation. In addition, the report negatively affects the reputation of the bank's key professionals in Singapore and elsewhere."
The bank said its Singapore branch reported a profit after tax of S$29m (pounds 11m) in 1997. It admitted that "as a consequence of the worsening environment in Asia in the first months of 1998, provisions for credit risks have been increased. However, the operating profit of the region continues to be satisfactory".Reuse content