(Image Source: Info-Swiss)

BY WEN YAN

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A rogue trader cost Swiss largest bank UBS as much as $2 billion dollars and led to an 8 percent drop in its shares. CBS explains.

“Swiss banking giant UBS announced this morning an unauthorized trade by an employee has caused an estimated loss of $2 billion. The banks says no customers' money was affected but the announcement caused its shares to plunge in overseas trading.”

Thursday’s media reports named Kweku Adoboli as the rogue trader -- and used pictures of from his Facebook like this one. But UBS has not confirmed. (Financial Times)

UBS will likely report a loss for the third quarter of 2011 because of the fraud. But the impact isn’t limited to a short-term problem. CNBC has more.

“The long term implications regarding UBS strategies are much much bigger and serious. You'v got the serious questions about the future and the size of investment banking and of course, the sustainability of private banking inflows."

2 billion dollars is undoubtedly a huge figure. But what would be a bigger loss in this case? A market analyst told euronews it's confidence.

“Of course, banks in 2009, all of the banks across the world, people lost the confidence in them, the government had to bail them out. Now when we just start to think maybe some of the banks are regaining the confidence, we had to work hard to get this back, something like this happened." 

UBS is not the only bank who will possibly suffer from the hit to customers' confidence. A World Spreads trader told Bloomberg the loss could trigger a ripple of distrust.

“But if it was a sequence of trades, then it really calls into question, (A) the ability of one trader to manipulate the internal system that they have and, (B) the fear that there will be others out there doing exactly the same thing.”
 

An analyst from another Swiss Bank told The New York Times  the WHEN is just as important as the WHY and HOW.

“It’s more about the timing  given current discussions in the Swiss Parliament on the ‘too big to fail’ problem of systemically relevant banks and reputational issues.”

As for stopping future incidents like this -- a professor at Cass Business School tells the BBC  a determined individual can’t be stopped. 

“This latest breach is a staggering demonstration that all the clever systems that the banks now have still cannot stop a determined individual getting round them if they want to."

Still, a CNN reporter doesn’t expect this to be the end for UBS.

“$2 billion is of course a huge loss. But its percentage of UBS market capital is not going to break the bank. If you look at when Jérôme Kerviel lost about 6 billion dollars, it managed to sustain the hit and keep going."



Transcript by Newsy.