By Megan Murphy, Martha Gill and Sharlene Goff in London

Who and what are to blame for the $2bn in ?unauthorised? trading losses that have hit UBS, the latest in a line of rogue trading scandals to rock the investment banking industry?

Was it lax risk management and controls across the Swiss group, whose once-sterling reputation was all but destroyed during the crisis by $50bn in toxic writedowns and a bruising investigation into whether it helped wealthy clients to evade US tax?

Was it a failure of senior UBS executives to understand the complexity of some of the trades being made by relatively junior employees such as Kweku Adoboli, 31, the director who was remanded in custody on Friday after being charged with fraud and false accounting in connection with the losses?

Or was it the industry?s failure to overhaul its culture and its winner-take-all pay structure, a structure that still prompts people to take extraordinary risks in pursuit of extraordinary profit, three years after the collapse of Lehman Brothers?

A self-destructive combination of all three was the general consensus on Friday among politicians, analysts and even senior bankers as the industry was once again forced to confront its failings.

?You can?t always eliminate these kinds of events, no matter what you do,? said a senior executive at a rival bank. ?It?s like however much you improve safety controls on a plane, airlines can still occasionally crash.?

On Wednesday morning, Carsten Kengeter, the head of UBS?s investment bank, was voicing concerns about the impact of a UK plan to ?ringfence? retail banking operations from investment banking activities, telling peers at a breakfast hosted by the Financial Times that the industry may not be able to bear further regulatory costs.

Just hours later, he was struggling to get up to speed with one of the largest alleged rogue trading scandals ever to hit the industry, and what many people have called the perfect example of why investment banks should be wholly separated from ?utility? banking functions, such as taking retail deposits.

Mr Adoboli?s now notorious Delta One desk was part of a fast-growing but shadowy corner of investment banking that involves trading securities that track an underlying asset, such as shares or silver, as closely as possible.

Frequently associated with exchange traded funds (ETFs) and swaps, it is an area most banking professionals have little familiarity with, in spite of the risks involved.

?I?m a bank analyst and to me Delta One was a US airline,? said one analyst. ?And I wouldn?t be surprised if that applied to senior management and regulators as well.?

Bank analysts admitted they were mystified as to how such a large loss could have been made without setting off alarm bells at UBS. Specifically, they said that they would be shocked if it emerged that the group?s internal controls – which, like those of other banks should be far stronger now than before the crisis – had not picked up the presumably high levels of upfront collateral required to support Delta One trades.

Mr Adoboli was charged on Friday with false accounting offences dating back to October 2008, the height of the crisis, a revelation that is likely to spur intense criticism of UBS?s management.

?This will confirm any existing public prejudices about ?casino? banking, and provide increased support for retail ringfencing, or even tougher solutions,? said Ronit Ghose, an analyst at Citigroup.

Senior executives at UBS, including Mr Kengeter, are enraged at how the alleged actions of one employee could single-handedly undo three years of work bringing the group back from the brink of collapse.

Rebuilding the bank?s reputation has been a painstaking process, and senior executives are worried that this latest scandal will have drastic repercussions among top corporate clients, as well as its bread-and-butter private banking clients.

While UBS as a group has sufficient capital to withstand the financial impact of a $2bn trading hit, the loss could also in effect wipe out any profits from its investment banking operations for 2011. Over the first half of the year, the division earned SFr1.2bn ($1.4bn) in pre-tax profit, $630m less than the

projected loss.

That means that the 17,775 employees across the business will be taking home substantially lower pay cheques this year, as the loss filters through to their annual bonus pot.

Analysts speculated that those bankers whose bonus is linked to the investment bank?s overall profits could be left with no bonus for 2011.

Among the politicians and economists who have pushed for a much more profound overhaul of how bankers and traders are paid, that will be seen as the right result.

Banks? model of paying huge sums to employees who generate huge revenues is still largely unchanged across the sector, in spite of complaints that it is perceived as the main incentive for traders to take excessive or unauthorised risks. Instead, regulators have tinkered around the edges of banks? pay structures, forcing banks to pay staff higher salaries and lower cash bonuses, for example, or to stagger bonus pay-outs over several years.

A former senior compliance official of one European bank said that those changes have not been nearly enough to change bankers? and traders? attitudes to the prospect of easy money in the City – or their impulse to do anything and everything possible to cover themselves when things go wrong.

?This is going to happen, of course it will. They just can?t help themselves, can they??

? The Financial Times Limited 2011