As the world's top investment banks grapple with a changing regulatory landscape that is hitting returns and driving up costs, one factor remains constant: their susceptibility to rogue traders. Swiss banking giant UBS shocked investors and staff in September when it made public an unauthorized trading incident that forced it to take a write-down of Sf 1.9 billion ($2.17 billion). UBS had revamped the risk controls in its fixed-income division following subprime losses of $50 billion during 2008 and 2009.The loss on its Delta One trading desk, part of the equities unit, came as a shock to investors, but risk consultants and rival traders were less surprised. "Banks put young people under huge pressure to perform, and when it goes wrong, their instinct is to hide their losses — from peers and from management," says a former UBS trader, who declined to be named.
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