'Rogue trading' costs UBS $2bn

Less than two months after UBS CEO Oswald Gruebel said the bank had “one of the best” risk management units in the industry, his firm posted a $2 billion loss from alleged 'unauthorised trading', writes The Economic Times.

The disclosure exposed flaws in the bank's risk controls that may prompt regulators to restrain lenders from making bets with their own capital, academics and analysts said.

Britain's Financial Services Authority and its Swiss counterpart on Saturday said they would also investigate the UBS trading losses.

Meanwhile, Swiss lawmakers in the lower house of parliament approved proposals to curb risk-taking at UBS and Credit Suisse Group AG, the country's biggest banks, reports Bloomberg.

Swiss rule-makers are running ahead of counterparts in the US and Europe to make sure UBS and rival Credit Suisse cut risks and hoard capital to avert the type of banking collapse that hobbled Iceland's economy. The decision paves the way for final approval by both houses of parliament next week.

“The decision stresses the solidity of Switzerland and its banking sector,” says Stefan Brupbacher, secretary-general of the Swiss Liberals. “It shows that our country is a frontrunner when it comes to regulation in times where other countries are backtracking on curbing bank risks.”

SF Gate reveals that bonuses at UBS' investment bank may be at risk after the company suffered the loss.

Switzerland's largest bank says it may be unprofitable in the third quarter as a result of the loss, which exceeds the 1.21 billion Swiss francs ($1.4 billion) in pre-tax profit from the investment bank in the first half.