UBS, the Swiss investment bank, was hit hard on Monday in a crackdown by regulators, as both Swiss and UK regulators announced large punitive damages that follow the trading scandal where huge losses were created for UBS that reached over $2.3 billion.
Switzerland’s financial regulator Finma, said it would maintain a close eye on UBS for the time being and could ask the bank to increase capital following the regulator’s investigation into the bank’s failure’s that made it much easier for the rogue trader Kweku Adoboli, who was based in London, to make trades that had not been authorized.
On top of that, a fine of $47.6 million was levied against the bank by the UK Financial Authority. Last week, Adoboli was convicted and sentenced to seven years for fraud.
In addition, Finma has ordered the bank to follow capital restrictions and it is banned from any acquisitions. If new initiatives are proposed, the bank first must receive prior Finma approval.
The regulatory agency is also deciding if the bank has to increase its amount of capital because of ongoing operational risks. In order to ensure that the new measures are being introduced, Finma has appointed a third party to monitor them. An audit is to be organized that will track steps taken by the investment bank implementing the new procedures.
As of yet, no decision has been given for when the capital increase might be needed, but Finma did say it would take place over the next few months, but in less than a year.
Finma did praise the important organizational measures the bank has put into place since the discovery, more than 14 months ago of the trading fraud.