In 2008, UBS lost $38 billion on credit derivatives and sub-prime debt; while it may have learned some lessons about the importance of internal controls from the episode, it was in the news again in 2009 when the US government showed UBS bankers were colluding with US nationals to avoid taxes and fined it $780 million. Even that, however, didn’t seem to help change the control systems in UBS since, in 2011, it was paying a 29.7 million pound fine to the UK Financial Services Authority (FSA) for “significant control breakdowns” that allowed Kweku Adoboli to lose $2.3 billion through a series of rogue trades. And the bank has just been fined $1.5 billion (that’s 46% of FY11 pre-tax profits) for its role in manipulating Libor rates on the basis of which $300 trillion worth of transactions are transacted each year. Given the likely suits from customers and others, UBS has said it expects to suffer a loss of $2-2.5 billion in Q4 on account of the provisions it needs to make for possible litigation and other regulatory action—UBS is under scrutiny for possible manipulation of Hong Kong rates as well.
If that doesn’t put to rest the arguments by the anti-Dodd-Frank lot who argue financial regulation is getting stifling, nothing ever will since the flagrant and repeated violations by UBS make it clear regulations, to the extent they were in place, were easily circumvented. As for oversight within the bank, the Libor investigations show UBS traders were regularly paying brokers