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UBS Hit Hard by a Regulatory Crackdown

UBS AG took center stage in a regulatory crackdown, as entities in both the UK and Switzerland announced punitive damages following the trading scandal

November 26, 2012 – On Monday, UBS AG took center stage in a regulatory crackdown, as entities in both the UK and Switzerland announced punitive damages following the trading scandal that created losses for the bank of up to $2.3 billion.

Finma, the financial market regulator in Switzerland said it was keeping a close eye on the investment bank at UBS for the near future and might ask the bank to raise new capital following its investigation into the failures that made it easier for Kweku Adoboli, the trader based in London to make trades that were unauthorized.

In addition, the UK Financial Authority fined the bank $47.6 million. Adoboli was convicted last week of fraud and received a seven year sentence.

Finma also ordered measures that included capital restrictions as well as a ban on acquisitions. Any new initiatives for new business must get prior approval of Finma, said regulators.

The Finnish regulatory is also deciding whether the bank should increase its capital backing because of its operational risks. Finma, to make sure that the new corrective measures have been introduced by the bank, is appointing a third party. An audit will be organized to ensure the steps taken by UBS. No decision was given as to when the increase in capital would be introduced, but the regulatory agency said it would be in a few months time not years.

The bank, based in Zurich, said it had cooperated fully with the investigation by Finma and had accepted the regulators findings and the penalties incurred. The FSA in the UK said that controls and systems failings revealed a serious weakness in the bank.

The regulator in Switzerland noted that the bank had, since the trading loss discovery over 14 months ago, put into place a number of important organizational measures aimed at strengthening the control capabilities and risk management.

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