The bank was quick to assure its customers that ‘no client positions had been affected’ by the loss – although it has caused analysts to speculate that UBS has a ‘problem with risk management’, as ZKB trading analyst Claude Zehnder put it. Fair enough: while there’s no question this is going to have a devastating effect on its finances, its reputation is also going to take a rather hefty kicking. It’s taken the bank a long time to regain the trust of investors after it was bailed out by the Swiss state in 2008 after it made huge losses on toxic assets. As recently as last month, it announced another 3,500 job cuts.
Whoever the mystery rogue trader is (UBS merely says it’s ‘still investigating’, although at the time of writing, there are rumours they’ve arrested a 31-year-old man in London in connection with the loss), his/her/its timing couldn’t have been much worse. Although the FTSE 100 started the morning with a rally after the French and German leaders put on show of unity viz. the Greek issue, the chances that it’ll go on for much longer are looking slim.
The FTSE 100 gained more than 1% in early trading this morning, following a trend set by markets on Wall Street and in Asia last night. But with a Greek default now almost certainly on the cards, many traders don’t expect this positive mood to continue. Some have pointed out that the past three days have been ‘nothing more than a relief rally’.
All eyes for the next few days will be on countries like Italy and Spain, which could well be the next ones to be hit by a crisis. On Tuesday, Italy was officially paying the highest bond yields in the eurozone, suggesting it’s seen as the riskiest investment, while Spain is expected to pay a high premium on €4bn (£3.5bn) worth of bond issues it’s planning to make today.