September 15th, 2011
08:12 PM GMT
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(CNN) - UBS stands for the Union Bank of Switzerland. Yet this week's discovery of a $2 billion loss by an alleged rogue trader gave this most conservative of financial institutions the dubious honor of being dubbed the ‘Unauthorized’ Bank of Switzerland across many a dealing room in London.

The trader allegedly responsible has been identified. Police have made an arrest and the bank’s head of risk management will likely be engaged in some serious conversations. All the while, banking sector analysts are furiously adjusting their next earnings forecasts for the company.

In a memo to staff, UBS Chief Executive Oswald Grueber reportedly told staff that management would get to the bottom of the matter as soon as possible.

However, people familiar with the matter tell me Thursday's event may lead to some profound changes for the 157-year-old finance house.

Switzerland's largest bank has long been a beast with two heads: an investment bank, which booked billions of losses during the credit crunch, and a solid wealth management division, making billions from managing mega-rich money.

A former board member of UBS says its top brass have often debated the merits of keeping the two units combined.

"They believe the investment bank has all the value because of the research it produces and products and services it offers but if you look at other private banks without such divisions versus pure investment banks, the wealth managers are more highly valued.

"I think we all agree the glory days of investment banking are gone," said the source, who wished to remain anonymous.

UBS has spent the past two years trying to revive its fortunes, increasing risk-taking to boost earnings on trades.

After taking eye-watering hits during the credit crunch, the company had to raise $46 billion (including a hefty injection from the Swiss government) to shore up its capital.

Thursday's news won't help. Worse, it comes at a time when lawmakers in Switzerland and elsewhere in Europe are considering splitting risky banking operations from retail services.

"UBS isn't likely to collapse," says Lex van Dam, who helps run a $700 million hedge fund and family office. But there is a "much higher chance that this bank will now be broken up to reduce clients' exposure to investment banking losses."

These days, "the banks are too large," van Dam said.

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Filed under: BankingBusinessCrime


soundoff (10 Responses)
  1. John

    UBS hasn't stood for "Union Bank of Switzerland" since 1998.

    September 16, 2011 at 12:11 am |
  2. John

    It was never "United Bank of Switzerland".

    September 16, 2011 at 12:12 am |
  3. Willy

    Please employ a business savoy person who at least knows the names of the world's largest banks to write these articles.

    September 16, 2011 at 12:43 am |
  4. Mike

    Gotta agree with the others here, when the first line is inaccurate (and well known at that) it makes me question whether I even want to read the rest of the article.

    September 16, 2011 at 1:02 pm |
  5. Canuck Report

    RIM rapidly losing market share ... http://canuckreport.ca

    September 16, 2011 at 2:40 pm |
  6. Mary

    Focus! Focus! Forget what UBS stands for – it is still a big bank and it is about the fact that after all the controversy about rogue trading in the past years, that it can still be an issue. Where are the management checks! Where are the regulators! etc, etc.

    By the way Willy it is 'business savvy – savoy is a cabbage.

    September 16, 2011 at 2:48 pm |
  7. Mike 2

    at 38 seconds into the video doesn't it say Union Bank Of Switzerland on the plaque outside the bank? Isn’t that the first line of the article?

    September 16, 2011 at 2:49 pm |
  8. Thiuri Kiuri

    Sounds like UBS responded to one of those "... the central bank of Nigeria wants to transfer 300 trillion naeras whose owner died in a tragic road accident and the bank is unable to trace his next of kin.....". UBS you're not the only one, the're numerous people who end up where you've ended, it's only the magnitude of the figure that varies. You at least have hopes of recovering unlike many who go down that route, so play it cool. Good luck though.

    September 16, 2011 at 3:09 pm |
  9. marc

    The name of the UBS CEO is also incorrect in this article!

    September 18, 2011 at 9:59 am |
  10. Carl van Zijll de Jong

    “Rogue traders” and “bank robbers” may do society a favour! Rogue traders take fake money of the records preventing inflation, and bank robbers bring real money into circulation for people to earn their livelihood. But in real terms they are lowering the general moral development of the nation. For your information Google “The World Monetary Order”.

    September 21, 2011 at 4:35 am |

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