$2 Billion-Dollar Loss

Swiss banking giant UBS discovered that a series of unauthorized trades has cost the international power an estimated $2 billion. The unauthorized trading (conducted by an unidentified trader in its investment banking branch) could wind-up costing the bank a record loss in the third quarter of this year.

A loss of this magnitude is unheard of; only three or four other situations have sparked such a widespread loss in the history of trading.

Market analyst, Ralph Silva, outlined three possible ways a loss that significant could take place: “basic stupidity” in trading strategy, intentional fraud, or what the industry calls “fat fingers”, which means typing the wrong numbers by accident.

Perhaps the trader threw in a few extra zeros—instead of purchasing a million shares he or she bought a hundred million. 

UBS says that no client positions are affected by the loss, which is currently under an intense investigation. 

In perhaps a related story, Police in London arrested a man in the early hours of Thursday morning on suspicion of fraud. Officials revealed the arrest of the 31-year-old-man in London, the British capital’s banking district, shortly after the bank announced its historic loss. Although officials have declined to confirm whether the arrest was linked to the Swiss bank’s loss, many close to the situation believe the incidents are related. 

UBS declined to comment on the arrest.

The loss would be among the largest costs ever to a bank conducting unauthorized trades. Rogue trader Jerome Kerviel cost his French institution, Societe General, almost $6 billion last year—Kerviel was sentenced to three years in prison. 

Shares of UBS were down roughly 8.5% about five hours after the loss was announced