The bank’s share price fell more than 10 percent on Sept. 15, 2011, the day the loss was announced, and employee morale suffered, Naratil testified today at the London trial of Kweku Adoboli, the trader accused of causing the loss.
“We did have layoffs that continued in the period following the unauthorized trading incident,” Naratil said via video link from New York, with most of the cuts coming in November and December. Naratil is the most-senior UBS official to give evidence in the case so far.
Prosecutors have said Adoboli, who is on trial for fraud and false accounting, hid the risk of his futures and ETF trades by booking fictitious hedges. He is also accused of creating a secret internal account known as the umbrella while working on the bank’s ETF desk in London where he parked trading profits to cover future losses. Adoboli, 32, has pleaded not guilty.
Charles Sherrard, a lawyer for Adoboli, said the bank’s share price rallied after the loss and UBS had already announced a month before the loss that it would cut staff by 3,500.
“To interpret any staff reductions to be caused by Mr. Adoboli would be unfair,” Sherrard said.
While Naratil said he hadn’t stated the cuts were a direct result of Adoboli, he added that “certainly a loss of $2.3 billion would affect staffing levels.”
Bonuses at the investment bank were also reduced by about 60 percent after the loss. The unauthorized trading “was one of the factors, but it wouldn’t be the sole factor” that resulted in that reduction, Naratil said.
Sherrard said that UBS’s share price had already fallen significantly prior to Adoboli’s arrest, from just under 50 Swiss francs at the beginning of 2008 to 10.9 Swiss francs on the day before the loss was announced. It fell again the following day, he said.
Naratil said the bank’s losses as a result of subprime were around $50 billion.
Ruwan Weerasekera, chief operating officer of securities at UBS’s investment bank, testified last week that Adoboli booked tens of thousands of real and fake trades during the summer of 2011 that exposed UBS AG to losses that could have reached $12 billion within weeks.