It wasn’t bad enough that a rogue trader at Swiss bank UBS AG managed to lose $2 billion in unauthorized transactions. And it was ironic that the loss was announced on the third anniversary of the Lehman Brothers collapse. The same day the loss hit the news, the firm was placed on review by Moody’s Investors Service for possible downgrade over its risk control measures.
As previously reported by AdvisorOne, a UBS employee, Kweku Adoboli, was arrested in the wee hours of Thursday morning in London on suspicion of fraud by use of position. The losses had been discovered late Wednesday. Bloomberg reported late Thursday that Moody’s took the action preparatory to an examination that, according to a company statement, “will center on ongoing weaknesses in the group’s risk management and controls that have become evident again.”
Moody’s analysts, led by Robert Thomas, added that the loss “would be manageable for the group given its sound liquidity and capital position.” The review is aimed, according Moody’s, at UBS’s standalone financial strength rating and long-term debt and deposit ratings; it will also look at the impact on the company’s private bank and wealth management businesses.