UBS rogue loss hammers risk efforts, new risk boss

$2 billion rogue trading hit at UBS deals an early blow to its new chief risk officer, previously head of risk at Lehman Brothers, and undermines claims by the Swiss bank and the industry that such events are a thing of the past. Maureen Miskovic took over as chief risk officer at UBS at the start of the year. She arrived from U.S.-based financial services group State Street with a strong reputation and has shaken up risk management at the bank, according to one industry source. So news on Thursday that a single trader had lost UBS around $2 billion in unauthorized deals, and the arrest of 31-year-old Kweku Adoboli in London in connection with the case, stunned the market and sent shares skidding. "It's astonishing given the technology, the systems, the emphasis on risk. UBS has been focusing on it, post-crisis they've put more focus on it than a lot of other banks," the industry source said. "I'm surprised that this many years after (previous rogue trader) Nick Leeson there are still the Jerome Kerviels of the world and now this one. How does a 31-year-old rack up a $2.0 billion loss without anybody noticing?" Others said the crisis showed lax supervision at UBS and threw the spotlight on an industry that will always compel some staff to take excessive risks to keep ahead of rivals. "No rogue trader works in a vacuum, and UBS's management must have taken its eye off the ball to allow a trader to operate on this scale without sufficient supervision and without the systems to monitor his trades," said Simon Morris, a partner at UK law firm CMS Cameron McKenna. "They, and the shareholders, must now pay the bill for this laxness." Miskovic, who is based in Zurich and directly reports to Chief Executive Oswald Gruebel, had been head of risk at State Street from 2008 to 2010. From 1996-2002, she was chief risk officer at Lehman Brothers, the U.S. investment bank that collapsed three years ago today. Before that she worked at Morgan Stanley. She replaced Philip Lofts, a UBS veteran who was promoted to head UBS Americas. UBS, which is struggling to regain investor confidence and rebuild its credibility after years of crises, warned it might post a loss in the third quarter after the latest blow that threatens the future of its investment bank.