Regulators in the UK and Switzerland have launched an investigation into the alleged $2 billion fraud at Swiss bank UBS.
The UK's Financial Services Authority said it would carry out the probe with the Swiss Financial Market Supervisory Authority.
This afternoon, rogue trader suspect Kweku Adoboli was charged with fraud over the $2 billion worth of unauthorised deals.
Adoboli, 31, appeared at City of London Magistrates' Court this afternoon. He was remanded in custody until September 22.
He is accused of one count of fraud and two of false accounting, one of which dates back to 2008, the court heard.
UBS is now expected to shrink its investment bank business - source of the $2 billion rogue trading loss - and could fire senior executives as it tries to retain worried private clients and avert a ratings downgrade.
Analysts said the massive loss, announced yesterday, was the final nail in the coffin for UBS' investment bank which has struggled, like others in the industry, against falling markets and tough new regulation as well as the soaring Swiss franc.
The Tages-Anzeiger newspaper, citing UBS insiders, said the bank would announce a major restructuring, to include thousands more job cuts, at a planned investor day on November 17. A UBS spokesman declined to comment.
Moody's said yesterday it had placed the bank's long-term debt and deposit ratings on review for a possible downgrade, a further blow to the bank. "The losses call into question the group's ability to successfully complete the rebuilding of its investment banking operations," it said.
Ratings agency Standard & Poor's (S&P) also said today it may cut UBS's long-term debt rating. The agency said it has placed the bank's long term debt grade A+ on watch "with negative implications".
The $2 billion that UBS said had been lost by a London-based trader in rogue dealing effectively cancelled out the first year of savings from a recently-announced cost-cutting plan involving the loss of 3,500 jobs. It had hoped to make an annual 2 billion Swiss franc ($2.3 billion) saving under the scheme detailed last month.
The bank had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank. The bank has had a history of major risk management glitches followed by repeated pledges to fix risk systems.
Chief executive Oswald Gruebel, himself a former trader who was brought out of retirement in 2009 to try to turn UBS around, is reviewing the size and structure of the investment bank, particularly its fixed income division, after he was forced to pull back from ambitious profit targets.
Gruebel had aggressively expanded the investment bank to almost 18,000 staff from 16,500 a year ago before global financial crises hit. In a Sunday newspaper interview before the scandal broke, Gruebel said how the bank would be restructured depended on how Swiss regulators planned to implement tough new capital standards that parliament is expected to approve next week.
"What is clear is that we must become more efficient. That will prompt major criticism because of reductions, offshoring, outsourcing of jobs and activities," he said.
Shares in UBS fell 10.8% yesterday to end at its lowest close since March 2009.
New losses in UBS's investment bank risk scaring rich clients and prompting a further flight from its huge private bank, the core of its business that used to be the world's biggest wealth manager but has slipped to third place.
UBS rogue trade suspect popular with colleagues
The man charged by British police today over massive rogue trading at Swiss banking giant UBS was an "up and coming" trader who was well liked by his colleagues, reports said.
The man named in media reports as Kweku Adoboli, 31, was arrested at his desk at UBS's offices in central London yesterday morning. Adoboli, of Ghanaian descent, is being blamed for losing the bank $2 billion (€1.46 billion) through unauthorised trading.
He is listed as director of Exchange Traded Funds (ETF) and Delta-1 Trading at UBS Investment Bank in his profile on LinkedIn, the social networking site for professionals.
ETFs are shares that can be traded and that track movements in other indexes, meaning they are susceptible to short-term volatility in prices.
Adoboli was educated at a £20,000 a year boarding school in northern England. He then graduated from the University of Nottingham in central England with a degree in computer science in 2003 and, according to the Financial Services Authority (FSA) watchdog, joined UBS in 2006 as a trainee investment adviser.
The trader's family said they were "heartbroken" over his arrest.
Adoboli's account at social networking site Facebook account revealed clues to the impending crisis. One recent status update read "I need a miracle", while several other posts documented his deep concern over the state of the world's financial markets.
Many accounts described Adoboli, who earned an estimated salary of £300,000 a year, as a confident man who enjoyed flaunting his wealth with lavish parties at his former flat in the trendy Shoreditch area of east London.
