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7th October 2011

UBS heads roll - rogue trading warnings ignored

Sergio Ermotti, UBS interim CEO issued an internal memo this week in which he explains some of the facts around the rogue trading incident. Specifically he discloses that internal control report warnings were not investigated properly and links this to the two further resignations.

". . .We have to be straight with ourselves. In no circumstances should something like this ever occur. The fact that it did is evidence of a failure to exercise appropriate controls. Our internal investigation indicates that risk and operational systems did detect unauthorized or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced.

"This is simply not acceptable. We all have signed our Code of Business Conduct & Ethics, we all know what is expected of us and we know what the consequences of failing to abide by this Code are. UBS will not tolerate any misconduct that damages the bank’s reputation. This is what we owe the vast majority of you who diligently uphold our principles and values and it is the only way to build a strong culture with our values uncompromisingly at the core.

"Today we have accepted the resignations of the co-heads of Global Equities. Firm disciplinary action will be taken against further individuals in Equities and across other responsible functions. We have also taken specific steps to address the failures identified."

Mike Stewart replaces the two as head of Global Equities. He was formerly with Bank of America Merrill Lynch.


Despite the $2.3bn charge for the rogue trading cost the bank may report a small profit for Q3. This is because the significant share price slide has significantly reduced the cost of its own debt.