The young trader who rocked Swiss banking titan UBS by allegedly gambling away $2 billion was charged Friday with fraud and false accounting dating back to 2008, as his bank came under a storm of criticism for failing to catch the massive loss.
Kweku Adoboli wiped his eyes and sniffled during a brief court hearing, but did not enter a plea. He will be held until another appearance on Sept. 22, presiding magistrate Carolyn Wagstaff said.
Wearing a light blue sweater and a white shirt, the 31-year-old Adoboli stared at the ceiling as the proceeding got under way. Smiling occasionally, he spoke only to confirm his name, birth date and address in a swanky east London apartment building. His lawyers made no comment to waiting reporters as they left the City of London Magistrates' Court.
In financial circles, questions continued to swirl.
Some commentators and politicians called for senior managers at UBS to take responsibility for the loss, which the bank said could put its third-quarter results in the red. Ratings agency Moody's placed UBS's credit grade on review for possible downgrade, citing worries over the future of its London-based investment unit.
"Until UBS has explained in detail how such a significant loss due to unauthorized trading could happen, and how the problem will be solved, confidence will remain impaired," said Andreas Venditti, an analyst at Zuercher Kantonalbank.
Switzerland's Social Democratic Party, which has two representatives in the country's seven-member government, accused UBS on Friday of "arrogance and greed" for failing to curb its business practices in the wake of the 2008 banking crisis.
In a statement, the party leadership called for consequences, including the replacement of "egomaniacal, arrogant and irresponsible managers;" a ban on proprietary trading for key banks; and a response from UBS to the rumors that the rogue trade was connected to the Swiss National Bank's decision last week to set a minimum price for euro to Swiss franc exchanges.
The young trader, who was arrested Thursday, had been employed by UBS on an equities desk known as Delta One and worked with exchange-traded funds, which track different types of stocks or commodities such as precious metals.
British prosecutors said one of the alleged offenses dated back to 2008, and indicated that Adoboli is alleged to have made efforts to cover his tracks following unsuccessful trades.
"He involved himself with trades which were highly dangerous for the bank," prosecutor David Levy told the court.
Adoboli was represented by law firm Kingsley Napley, who previously appeared on behalf of Nick Leeson _ the trader who brought down British bank Barings in 1995 after he made around $1.4 billion of losses in unauthorized trades.
Manuel Ammann, a professor of finance at the University of St. Gallen, said it would be difficult for UBS to sell the investment unit in the current depressed financial climate, though some shareholders might prefer it to be split off.
"From a risk point of view there are good grounds for separating the classic credit and payment business from the investment banking, because there's a danger of cross-infection," Ammann said. "Shareholders would prefer to have two shares of two focused companies than a single share for a conglomerate."
UBS stock was up 5.1 percent at 10.25 francs ($11.72) on Friday afternoon. Shares had slumped 10 percent the day before, after the bank said a lone employee had caused the loss with unauthorized trades.
The bank refused to comment on BBC reports that it was Adoboli himself who alerted managers to the loss.
UBS spokesman Andreas Kern also declined to comment on a report in Swiss newspaper Tages-Anzeiger Friday that said the entire trading team in London where the alleged unauthorized deals took place had been suspended.
But Kern said the paper's report of new job cuts at the investment bank, to be announced at an investors meeting Nov. 17, referred to a reduction of about 1,600 posts already announced last month as part of a plan to save about $2.3 billion (2 billion francs) over the next two years.
The international banking industry has been trying to put stricter controls on its traders in the wake of a 2008 scandal at France's Societe Generale, when trader Jerome Kerviel gambled away $6.7 billion (euro4.9 billion), and the infamous Leeson case.
UBS chief executive Oswald Gruebel was brought in two years ago to rehabilitate the bank's damaged reputation after a series of missteps that included huge losses in the subprime mortgage market and an embarrassing U.S. tax evasion case.
Ammann, who has observed the Swiss banking industry undergo massive changes over the past decade, said UBS would likely survive the latest scandal. "The financial loss can be stomached and the reputational loss can be repaired," he said.
David Stringer and Robert Barr in London contributed to this report.