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Rogue Trader Loses UBS $2 Billion

Cliff D'Arcy, Fool U.K.
September 15, 2011

This article has been adapted from our sister site across the pond, Fool U.K.

With French banks taking a beating on fears of their exposure to eurozone debt, and the European Central Bank reporting a sharp rise in emergency funding this week, the last thing the banking sector needs is another rogue-trading scandal.

Oh, no, not again!
Unfortunately, UBS (NYSE: UBS  ) , the biggest bank in Switzerland, this morning admitted that a single rogue trader has run up an "unauthorized loss" of $2 billion (1.3 billion pounds). At 3.30am on Thursday, City of London police arrested a 31-year-old man on suspicion of "fraud by abuse of position."

As a result of this blow-out at its investment bank, UBS has warned that it could make a loss in the third quarter of 2011. What's more, this is only an estimated figure, so the final loss could be even higher.

Although no customer accounts were affected by this illicit trading, UBS shares are down 6% to 10.3 Swiss Francs as I write. In mid-February, UBS shares were around CHF19, so they have nearly halved (down 46%) in the past seven months.

A long line of rogue traders
Of course, this isn't the first time a European bank has been hammered by uno