UBS trader masked risk exposure of $12 billion, court told

Tue Oct 9, 2012 1:02pm EDT
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By Estelle Shirbon

LONDON (Reuters) - Alleged rogue trader Kweku Adoboli exposed Swiss bank UBS UBSN.VX to billions of dollars of hidden market risk for weeks on end, peaking at nearly $12 billion on August 8 last year, a London court heard on Tuesday.

Adoboli disguised his true trading position with fictitious hedging trades that made it look as though the apparent risk to the bank that day was only $2.3 million, according to evidence heard at Southwark Crown Court.

"This level of risk-taking is completely out of proportion with anything that would have been countenanced," said Ruwan Weerasekera, chief operating officer of securities at UBS's investment banking arm.

Adoboli, 32, was arrested on September 15, 2011, and is on trial accused of fraud and false accounting that cost the Swiss bank $2.3 billion. He has pleaded not guilty.

Appearing as a prosecution witness, Weerasekera answered questions about an in-house investigation into the Adoboli affair, which he headed.

He said its three main findings were that Adoboli had conducted real trades exposing UBS to levels of risk that went well beyond his authorized limits, that he had booked tens of thousands of fake transactions that masked his true positions, and that he had booked many deals late or inaccurately.

The jury were shown tables of figures and graphs produced by Weerasekera that he said showed Adoboli's true trading positions alongside the inaccurate figures he had booked in the bank's systems at the time.

The figures showed that the sums involved in his real trading increased dramatically over the summer of 2011 just as worries about the euro zone debt crisis were building up and markets became increasingly jumpy.   Continued...

Former UBS trader Kweku Adoboli arrives at Southwark Crown Court in London September 27, 2012. REUTERS/Stefan Wermuth