UBS equities heads quit as bank admits mistakes

Wed Oct 5, 2011 4:24pm EDT
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By Sarah White and Catherine Bosley

LONDON/ZURICH (Reuters) -The two heads of the UBS UBSN.VX (UBS.N: Quote) division that caused a $2.3 billion loss stepped down on Wednesday as an internal investigation into the trading scandal showed risk systems had detected unauthorized activity but failed to respond.

Caretaker chief executive Sergio Ermotti, who took over 11 days ago after Oswald Gruebel quit over the losses, said it was "simply not acceptable" that unauthorized activity was not sufficiently investigated and controls not properly enforced.

"We have to be straight with ourselves. In no circumstances should something like this ever occur," Ermotti said in a memo seen by Reuters. "The fact that it did is evidence of a failure to exercise appropriate controls."

London-based trader Kweku Adoboli has been accused of the rogue trading, and his lawyer told a court last month he was "appalled at the scale of the consequences of his disastrous miscalculations."

Ermotti said the bank had accepted the resignation of the two co-heads of global equities, Francois Gouws and Yassine Bouhara, over the unauthorized trades and said disciplinary action against other members of staff was pending.

Mike Stewart, who only joined UBS from Bank of America Merrill Lynch (BAC.N: Quote) two days ago where he had been global co-head of equities, will become sole head of equities, UBS said.

In July, UBS said Stewart would become co-head of global equities with Gouws, while Bouhara -- who joined UBS in 2010 from Deutsche Bank (DBKGn.DE: Quote) -- had been due to take on the newly created role of running emerging markets.


<p>The logo of Swiss bank UBS is seen at the company's office at the Bahnhofstrasse in Zurich in this July 1, 2009 file photo. REUTERS/Arnd Wiegmann/Files</p>