When the news broke yesterday that a London-based UBS employee had been arrested in connection with unauthorized trades that cost the Swiss bank $2 billion, much of the early coverage focused on digging up as much information as possible on the 31-year-old suspect, Kweku Adoboli. With details slow to emerge about Adoboli's case, the coverage has shifted today to what responsibility UBS itself should shoulder for the fraud. John Gapper at The Financial Times presaged the debate yesterday by asking whether UBS was in fact an accident-prone "rogue bank."
In the wake of Thursday's revelations, Reuters notes, the three major credit-rating agencies--Standard & Poor's, Fitch, and Moody's--have all put UBS's credit rating on negative watch because of concerns about risk management. Reuters describes the rogue trader scandal as "the final nail in the coffin" for UBS, which nearly collapsed during the financial crisis in 2008 and is now coming under pressure from shareholders and Swiss regulators to scale back its investment bank business and announce a major restructuring that could involve the loss of thousands of jobs. A $2 billion will also wipe out the first year of savings from the bank's recently-announced cost-cutting plan, Reuters adds. The FT says that thousands of UBS bankers could receive no bonuses this year because the $2 billion hit, while not large enough to fell the bank as a whole, "could effectively wipe out any profits from its investment banking operations for 2011."